Fintan O’Toole: Why is the Government stonewalling on Russian money at the IFSC?

There is €34 billion held by opaque Russian-linked shell companies registered at the International Financial Services Centre (IFSC) in Dublin. On Wednesday, just before the Russian invasion of Ukraine, Mairéad Farrell of Sinn Féin raised this urgent issue with Micheál Martin in the Dáil.

The Taoiseach replied: “In respect of the IFSC, special purpose vehicles have been established there that are used in securitisations and structured finance transactions. That includes services that have been provided to some Russian entities.”

He said that the Government has strengthened anti-money laundering legislation and “introduced the authorised OECD [Organisation for Economic Co-operation and Development] approach for the transfer pricing of branches and it contains the process of introducing new tax transparency measures.” This was pre-baked gobbledygook, straight from the oven of obfuscation.

The Taoiseach's verbiage cannot have been improvised. It had to be concocted in the bureaucracy

He was no more forthcoming when Labour leader Alan Kelly raised the same issue. Specifically, he did not respond to Kelly's question about whether the Government supported Brendan Howlin's Bill to allow for seizure of assets of foreign human rights abusers.

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The Taoiseach’s verbiage cannot have been improvised. It had to be concocted in the bureaucracy and fed up the line for ministerial regurgitation. This deliberate stonewalling has been going on for nearly 18 months now. Why?

In September 2020, Colm Keena revealed in The Irish Times that a network of bank accounts was being used to move vast amounts of money out of Russia into the West. Some of these accounts were "in the name of UK entities provided by a company services group established by a businessman who operated from a house in Ranelagh, Dublin".

Around the same time, Jim Stewart and Cillian Doyle published the research I highlighted last week, showing that €118 billion had been funnelled between 2005 and 2017 by Russian entities through so-called section 110 trusts based at the IFSC.

On September 23rd, 2020, Mairéad Farrell raised these revelations in the Dáil, focusing on the nub of the issue: the opaque nature of the beneficial ownership of these entities.

She was fobbed off by James Browne, Minister for State at the Department of Justice, with: “That will be a matter for the Minister for Finance to address further.”

So, on May 6th, 2021, Farrell asked Paschal Donohoe face-to-face at the Oireachtas finance committee about when he intended to deal with the way these Russian entities can avoid paying tax in Ireland by deducting interest from their profits. He replied: "I will have to revert to the Deputy with an answer to her question regarding when the issue of deductibility will be dealt with. I am not in a position to give her a detailed answer to such a detailed question now."

He added that: “She does not have to wait and hope concerning when I will respond to her. I will get back to her with an answer.” But he didn’t. This cannot have been a mere oversight – he had to decide not to produce the information he had undertaken to produce.

On May 27th, 2021, Farrell wrote to Donohoe referring back to this promise to respond and asking him about this tax deductibility and “Russian connected companies’ use of section 110 for potentially illicit purposes”. According to Sinn Féin, she received no reply.

Over 18 months, therefore, three Government departments – Justice, Finance and the Taoiseach – have effectively refused to address the IFSC’s Russian connection. So far as I can trace, no Government source has placed in the public domain any substantial information on the operation of these entities and flow of money through them.

At the domestic level, this is a disgrace to democracy – parliamentary accountability is being flouted to help conceal the operation of foreign entities. At the international level, solidarity with Ukraine demands that Ireland is completely open about its role in sheltering the money of Putin and the oligarchs. How otherwise can we play our part in implementing European Union sanctions?

If the Government is confident that Dublin will not be used to allow Putin and his cronies to hide their money, it should say so

So why this strategy of silence and obfuscation? My guess is that opening up what has gone on with these Russian companies would shine too much light on Dublin’s much larger “shadow banking” business.

Ireland is home to the world’s fifth-largest shadow banking industry, with an astonishing €3.45 trillion of assets held here in 2020. That’s 17 times the size of the real Irish economy.

Much of this money is entirely legitimate, but the Central Bank has repeatedly expressed anxieties about the risk it poses to the stability of the entire banking system. A significant portion of the money, moreover, is in unregulated special purpose vehicles like the ones used by the Russians.

A lot of Irish corporate lawyers and tax advisers make succulent fees from the facilitation of this business. The Government’s instinct in relation to this vast ocean of dark money is: don’t ask, don’t tell. And if you are asked, really, really don’t tell.

Russian president Vladimir Putin has imposed a moral obligation, not just to ask and tell, but to act. If the Government is confident that Dublin will not be used to allow Putin and his cronies to hide their money, it should say so – and explain why. If it is not, we owe it to the people huddling in bomb shelters to shut down these money shelters now.