Due to its low level of corporation tax, Ireland has already been an attractive location for a lot of financial services companies, such as fund administrators and asset management companies, for many years. However, with the increase in the number of financial institutions moving to Ireland, the country is going to be more susceptible to being used for money laundering and firms will need to implement tougher safeguards in order to protect against illicit activities.
Ireland has a chequered history when it comes to terrorist financing and money laundering, and in recent times these issues have started to reappear. In 2016 over 23,000 suspicious activities relating to money laundering were reported to the Irish authorities by financial institutions. This resulted in 20 large scale police investigations being carried out – some of which were related to drug trafficking and other gang-related activities and resulted in over €4,000,000 being seized.
The facts speak for themselves – Ireland is an attractive jurisdiction for financial institutions and is, therefore, an attractive jurisdiction for money laundering. Money Laundering and Terrorist Financing has the real risk of increasing with more firms moving their operations to the country.
The Irish authorities are taking these risks seriously and are starting to sanction financial institutions who fail to protect against money laundering. In 2017 to date, two major financial institutions have been fined by the Irish regulator for Anti-Money Laundering failings: Bank of Ireland was fined €3.15m for “significant failures” in its AML and Counter Terrorist Financing controls, whilst Allied Irish Bank was fined €2m for compliance failures which resulted in 6 breaches of the law.
It is not just the banks which are at risk of being used to launder money in Ireland. The first National Risk Assessment on Money Laundering and Terrorist Financing published by the Irish Government in 2016 highlighted a number of other industries which are at considerable risk of being used for money laundering and terrorist financing. These included fund administrators, investment firms and Property Service Providers – including real estate agents.
In order to protect against these risks, firms should review and test the controls and infrastructure relating to AML. This could include establishing a risk profile of the type of client and business activity they wish to deal with, ensuring all policies and procedures are in line with the current AML regulations as well as reviewing the technology infrastructure related to transaction monitoring and customer identification programmes. Ensuring staff are adequately trained to be able to identify suspicious activity and other red flags related to money laundering and terrorist financing is also a key way to address the risk of money laundering.
With more financial institutions moving to Ireland, the local work force which will benefit from these new jobs will need to be suitably upskilled to ensure they can conform to, and apply the controls needed to protect the firms they will be working for from money laundering and related illicit activity.
As Ireland is on its way to increasing its foothold as an international financial centre, firms need to be prepared to invest in infrastructure and resourcing requirements relating to Anti-Money Laundering in order to protect themselves as well as reducing the illegal activity which the Irish Government sees as a growing threat.
Lysis has recently opened an office in Dublin and established Lysis Operations (Ireland) Limited. Lysis specialises in expert governance, risk and compliance consulting, AML managed services and AML, governance, risk and compliance training.