UNCLAS SECTION 01 OF 03 DUBLIN 001823

SIPDIS

FOR INL
EUR/UBI
JUSTICE FOR OIA AND AFMLS, AND TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: KCRM PTER KSEP SNAR KTFN EFIN
SUBJECT: IRELAND: 2004-2005 INTERNATIONAL NARCOTICS CONTROL
STRATEGY REPORT (INSCR) PART II

REF: STATE 254401


1. Please see below outline for post's submission as chapter
for 2004-2005 International Narcotics Control Strategy Report
(INSCR) Part II.

The primary sources of funds laundered in Ireland are
narcotics trafficking, fraud and tax offenses. Money
laundering mostly occurs in financial institutions and
bureaux de change. Additionally, investigations in Ireland
indicate that some business professionals have specialized in
the creation of legal entities, such as shell corporations,
as a means of laundering money. Trusts are also established
as a means of transferring funds from the country of origin
to offshore locations. The use of shell corporations and
trusts makes it more difficult to establish the true
beneficiary of the funds, which makes it difficult to follow
the money trail and establish a link between the funds and
the criminal.

The use of solicitors, accountants, and company formation
agencies in Ireland to create &shell companies8 has been
cited in a number of suspicious transaction reports (STRs),
and in requests for assistance from Financial Action Task
Force (FATF) members. Investigations have disclosed that
these companies are used to provide a series of transactions
connected to money laundering, fraudulent activity, and tax
offenses. The difficulties in establishing the &beneficial
owner8 have been complicated by the fact that the directors
are usually nominees and are often principals of a
solicitors, firm or a company formation agency.

Money laundering relating to narcotics trafficking and other
offenses was criminalized in 1994. Financial institutions
(banks, building societies, the Post Office, stockbrokers,
credit unions, bureaux de change, life insurance companies,
and insurance brokers) are required to report suspicious
transactions and currency transactions exceeding
approximately $15,000. The financial institutions are also
required to implement customer identification procedures, and
retain records of financial transactions In 2003, Ireland

amended its Anti-Money Laundering law to extend the
requirements of customer identification and suspicious
transaction reporting to lawyers, accountants, auditors, real
estate agents, auctioneers, and dealers in high-value goods,
thus aligning its laws with the European Union's Second Money
Laundering Directive of 2001. The Irish Financial Services
Regulatory Authority (IFSRA) supervises the financial
institutions for compliance with money laundering procedures.
In addition to STRs, there are customs reporting requirements
for anyone transporting more than euro 12,700.

Ireland's international banking and financial services sector
is concentrated in Dublin's International Financial Services
Centre (IFSC). In 2004, a 430 international financial
institutions and companies operated in the IFSC. Services
offered include banking, fiscal management, re-insurance,
fund administration, and foreign exchange dealing. The IFSRA
regulates the IFSC companies that conduct banking, insurance,
and fund transactions. Tax privileges for IFSC companies have
been phased out over recent years and will totally expire in

2005.

In 1999, the Corporate Law was amended to address problems
arising from the abuse of Irish-registered nonresident
companies (companies which are incorporated in Ireland, but
do not carry out any activity in the country). The
legislation requires that every company applying for
registration must demonstrate that it intends to carry on an
activity in the country. Companies must maintain at all times
an Irish resident director or post a bond as a surety for
failure to comply with the appropriate company law. In
addition, the number of directorships that any one person can
hold, subject to certain exemptions, is limited to 25. This
is aimed at curbing the use of nominee directors as a means
of disguising beneficial ownership or control.

In August 2001, the Government of Ireland (GOI) enacted the
Company Law Enforcement Act 2001 (Company Act), to deal with
problems associated with shell companies. The legislation
establishes the Office of the Director of Corporate
Enforcement (ODCE), whose responsibility it is to investigate
and enforce the Company Act. The ODCE also has a general
supervisory role in respect of liquidators and receivers.
Under the law, the beneficial directors of a company have to
be named. The Company Act also creates a mandatory reporting
obligation for auditors to report suspicions of breaches of
company law to the ODCE. In 2004, the ODCE had 20
prosecutions resulting in fines of varying amounts.

The Bureau of Fraud Investigation (BFI), Ireland's financial
intelligence unit (FIU), analyzes financial disclosures. In
2003, a new Irish legal requirement went into effect,
mandating obligated reporting institutions to file STRs with
the Revenue (Tax) Department in addition to the BFI. Ireland
estimates that up to 95 percent of STRs may involve tax
violations. The Value Added Tax (VAT) fraud scams are the
most prolific and have increased significantly in recent
years. In 2004, the Criminal Assets Bureau took action in a
number of such cases, the details of which are not yet
available.

The number of Suspicious Transactions Received (STRs) by the
Irish national police decreased from 4,398 in 2002 to 4,254
in 2003, a number of which are currently under investigation.
Convictions for money laundering offenses under the Criminal
Justice Act totaled seven in 1999, ten in 2000, four in 2001,
and two in 2002. In 2003, there were three prosecutions
resulting in two convictions, currently awaiting sentencing.
A conviction on charges of money laundering carries a maximum
penalty of 14 years, imprisonment and an unlimited fine.

Under certain circumstances, the High Court can freeze, and
where appropriate, seize the proceeds of crimes. When
criminal activity is suspected, the exchange of information
between police and the Revenue Commissioners is authorized.
The Criminal Assets Bureau (CAB) was established in 1996 to
confiscate the proceeds of crime in cases where there is no
criminal conviction. The CAB includes experts from Police,
Tax, Customs and Social Security Agencies. Under the Proceeds
of Crime Act 1996, specified property may be frozen for a
period of seven years unless the Court is satisfied that all
or part of the property is not the proceeds of crime. Since
1996, the CAB has frozen over euro 50 million of assets, and,
in 2003, collected euro 10 million in taxes against the
proceeds of criminal activity. In 2003, the CAB initiated
criminal prosecutions against a number of persons for
breaches of criminal law and proceeded with successful
investigations/prosecutions for revenue and social welfare
offenses previously not presented before criminal courts.

In 2002, the GOI introduced the Criminal Justice (Terrorist
Offences) Bill targeting fund-raisers for both international
and domestic terrorist organizations. In December 2004, the
Lower House of Irish Parliament approved this Bill, paving
the way for Senate approval in early 2005 and later
ratification of the "UN Convention for the Suppression of the
Financing of Terrorism,8 which will extend the existing
powers of the Government to seize property and/or other
financial assets belonging to groups suspected of involvement
in terrorism financing. The bill will allow the Irish
national police to apply to the courts to freeze assets where
certain evidentiary requirements are met. To date, Ireland
has reported to the European Commission the names of seven
individuals, including one in 2004, who maintained a total of
nine accounts that were frozen in accordance with the
provisions of the EU Anti-Terrorist Legislation. The
aggregate value of the funds frozen was approximately 90,000
euros.

In 2003, a money laundering investigation concerning a bureau
de change operation uncovered evidence of the laundering of
terrorist funds derived from international smuggling.
Substantial cash payments into the bureau de change were not
reflected in the principal books, records, and bank account.
The bureau de change held a large cash reserve that was drawn
upon when necessary by members of the terrorist organization.
The bureau de change remitted payments from its legitimate
bank account to entities in other jurisdictions, on behalf of
the terrorist organization.

In terms of preventing money laundering, the Central Bank
began reporting to the Irish police regarding institutions
under its supervision. The reports consisted of failure to
establish identity of customer, failure to retain evidence of
identification, or failure to adopt measures to prevent and
detect the commission of a money laundering offense.

The Central Bank participated with an Irish parliament
sub-committee in drafting Guidance Notes for regulated
institutions on combating and preventing terrorist financing.
These notes will be finalized and issued to institutions
upon the passing of the pending Criminal Justice (Terrorist
Offenses) Bill of 2002. The Bill is expected to pass into
law in February 2005.

In January of 2001, Ireland and the United States signed a
Mutual Legal Assistance in Criminal Matters Treaty (MLAT);
however, it is not yet in force. An extradition treaty
between Ireland and the United States is in force. Ireland is
a member of the EU, the Council of Europe and the FATF. The
FIU is a member of the Egmont Group. Ireland has signed, but
not yet ratified, the UN International Convention for the
Suppression of the Financing of Terrorism and the UN
Convention against Transnational Organized Crime. Ireland is
a party to the 1988 UN Drug Convention and the Council of
Europe Convention on Laundering, Search, Seizure, and
Confiscation of the Proceeds from Crime.
KENNY