UPDATE ON IRA MONEY-LAUNDERING INVESTIGATION

C O N F I D E N T I A L SECTION 01 OF 03 DUBLIN 000936

SIPDIS

LONDON FOR POL AND LEGATT

E.O. 12958: DECL: 01/31/2015
TAGS: PREL EFIN SOCI KCRM EI NIPP
SUBJECT: UPDATE ON IRA MONEY-LAUNDERING INVESTIGATION

REF: A. STATE 104288


B. DUBLIN 210

C. SOFIA 1108

Classified By: Deputy Chief of Mission Jonathan S. Benton; Reasons 1.4
(B) and (D).


1. (C) Summary: Irish criminal justice officials are
convinced that pound sterling notes seized in Dublin and Cork
in mid-February in an apparent IRA-tied money-laundering
scheme was money stolen from Belfast's Northern Bank. Police
are attempting to establish forensic links between the
seizures and robbery in order to bring charges by late 2005,
with a court case to follow a year later. Irish
investigators continue to pursue a possible Bulgarian link to
the money-laundering scheme, but are reluctant to provide
details on exchanges with Bulgarian counterparts. The
Bulgarian Ambassador in Dublin denies any Bulgarian
involvement and wishes that Ireland would close off this line
of inquiry publicly. Irish officials, more generally, remain
concerned that IRA funds acquired through sophisticated
investments are seeping into resources available for Sinn
Fein's political activities in the Republic of Ireland. Post
expects that Irish officials will remain reticent on details
of the money-laundering investigation until charges are
filed. End summary.

Linking the Bank Robbery and Money Seizures
--------------


2. (C) The roughly STG 3 million seized in Dublin and Cork
the week of February 14 (ref B) is "beyond doubt" a portion
of the STG 26.5 million stolen from Belfast's Northern Bank
on December 20, 2004, according to Ken O'Leary and Michael
Walsh, Assistant Secretary and Northern Ireland Section
Chief, respectively, of the Department of Justice, Equality,
and Law Reform (DOJ). O'Leary related to Emboff the GOI's
belief that up to 16 individuals questioned by Garda (police)
in connection with the seizures were attempting to launder
the stolen proceeds on behalf of the Provisional IRA (PIRA).
This belief was based on information provided by Garda
intelligence assets and by "walk-ins" who, in some instances,
voluntarily turned over cash that they had been asked to hide
(STG 300,000 in one case). While intelligence pointed
clearly to a money-laundering operation, the challenge was to
build forensic ties between the money seized and the stolen
Northern Bank notes in order to support a court conviction.
O'Leary said that Garda, led by the Criminal Assets Bureau,
were still attempting to establish forensic links through the
tracking system used by the Northern Bank for bank note
bundles in its possession at the time of December robbery.


3. (C) If such ties could be established before autumn, the
Director of Public Prosecutions (DPP),James Hamilton, would
be in a position to bring money-laundering charges by late
2005 against a number of those questioned, said O'Leary. (To
date, no one has been charged, except a Don Bullman, who was
charged with membership in the IRA, an illegal organization.
Bullman was arrested while passing cash hidden in a laundry
detergent box to alleged IRA members on February 17, and,
technically, his case could go to court independently of the
wider money-laundering case.) Once charges are brought, it
would likely take a year to begin the court case. O'Leary
noted that Hamilton could possibly opt for a special non-jury
criminal court consisting of three judges, an option that was
sometimes used for cases involving unlawful organizations
like the IRA. When Emboff asked who would likely face
charges, O'Leary replied that, of those brought in for Garda
questioning, no one had been ruled out as beyond suspicion
(including, by implication, Phil Flynn, a friend of Prime
Minister (Taoiseach) Bertie Ahern and former chairman of the
Bank of Scotland (Ireland)). He added that the operative
legislation in the case would likely be the Proceeds of Crime
Act of 1997, rather than the Criminal Justice Act of 2005,
since the latter focused primarily on terrorism.


4. (C) In separate discussions with the Ambassador, DCM, and
Emboffs, Assistant Garda Commissioner Joe Egan said that
investigations into the money-laundering case could still
take several months, as police used DNA and other scientific
techniques to pursue a connection to the Northern Bank raid.
He commented that the money-laundering operation had been
poorly conducted, due most likely to the unexpected size of
the bank haul. Investigators were focused primarily on Ted
Cunningham and Tom Hanlon, a one-time Sinn Fein candidate for
the Cork County Council, whom Garda believed may have held
STG 1.5 million of the stolen bank notes. Hanlon had in turn
distributed part of this sum to several republican
supporters, including one who was apprehended while burning
the cash in his home.

A Bulgarian Connection?
--------------


5. (C) A possible Bulgarian connection in the case remains a
strong point of interest, according to O'Leary and Walsh of
the Irish DOJ. (As noted in Irish media reporting and ref C,
Phil Flynn and Ted Cunningham, a Cork-based money lender in
whose home Garda found STG 2.3 million, traveled to Sofia in
late January to open bank accounts with the purported aim of
registering three companies in Bulgaria. The suspicion is
that Flynn and Cunningham were creating money-laundering
vehicles.) Walsh confirmed that, in February, the Bulgarian
Embassy in Dublin arranged for him to meet a visiting
Bulgarian security agent, who offered to act as a point of
contact for law enforcement exchanges on the case. Walsh
said that he was not "fully aware" of whether the Garda had
subsequently sent investigators to Bulgaria. (Comment: This
claim is not credible, since Walsh would definitely have
known of Garda visits documented in ref C.) O'Leary remarked
that while there might not yet be firm evidence of wrongdoing
in Bulgaria, the line of inquiry into the possible
involvement of corrupt Bulgarian individuals/enterprises
remained open.


6. (C) Assistant Garda Commissioner Egan said that the Garda
continued to pursue a possible Bulgarian connection, based on
pre-existing evidence of IRA/Sinn Fein-Bulgarian links. For
example, the Garda were aware that IRA members had previously
invited Bulgarian investors to Ireland to consider purchasing
land for a nursing home. The Bulgarian Government had also
kept GOI authorities informed of other Irish attempts to
register questionable companies in Bulgaria even before the
Flynn/Cunningham visit.

The Bulgarian Ambassador: "No Link"
--------------


7. (C) The Bulgarian Ambassador to Ireland, Bisserka
Benisheva, told Emboff that that there was no evidence of
criminal involvement by Bulgarians in the money-laundering
case and that the trip taken by Phil Flynn and Ted Cunningham
to Sofia in late January had been a coincidence. Benisheva
noted that she had arranged for Irish officials to meet with
a Bulgarian security agent in February. She stated, however,
that the Irish had not made any formal requests for
assistance since, and she denied knowledge of follow-up
visits by Irish investigators to Bulgaria, or vice-versa.
(Comment: Given ref C, we doubt her veracity on this point,
but it is possible that, for deniability purposes, the
Ambassador intentionally kept herself out of the loop.) She
confirmed that Bulgarian Deputy Finance Minister Ilia
Lingorsky had received a courtesy call by Flynn and
Cunningham, but only because of their stated interest in the
Bulgarian mortgage market, a sector to which Lingorsky has
worked to draw foreign investment. She emphasized that the
damage to Bulgaria's reputation had been unfair, and she
expressed regret that Ireland had not joined Bulgarian
Interior Minister Georgi Petkanov in publicly denying a
Bulgarian link in the case.

Mixing of IRA and Sinn Fein Funds
--------------


8. (C) More generally, the DOJ and Garda continue to be
concerned that money illegally acquired by the IRA was
"seeping" into resources available for Sinn Finn's political
activities in the Republic of Ireland, said the DOJ's
O'Leary. The difficulty lay in documenting the mixing of
such funds. O'Leary noted that the Standards in Public
Office Commission (SIPO) was similarly concerned that
political donations obtained by Sinn Fein in the United
States and elsewhere overseas were being spent in the South.
(Under a 2002 SIPO ruling, Sinn Fein can accept donations
from non-Irish citizens in foreign countries, but only for
activities outside the Republic of Ireland, i.e., in Northern
Ireland.) He noted that the DOJ would be interested to see
whether and how the IRA might address criminality in its
expected response to Sinn Fein President Gerry Adams' call
for an end to republican paramilitarism. O'Leary added that
the awaited IRA statement would have no bearing on the
money-laundering case or other investigations into possible
IRA crimes committed since the 1998 Good Friday Agreement.


9. (C) Assistant Garda Commissioner Egan commented that IRA
money was constantly moving, flowing from diversified sources
into wide-ranging investments. While the IRA had been
proficient in smuggling, robbery, and racketeering since the
1970s, the Celtic Tiger economic boom of the 1990s had
prompted the IRA to diversify into more sophisticated
business enterprises. IRA investments now included real
estate ventures in Dublin, London, and Spanish resort areas,
handled by apparently respectable businessmen. Egan also
expressed concern about the commingling of ill-gotten IRA
funds with Sinn Fein's political coffers in the Republic of
Ireland. The irony, Egan explained, was that Sinn Fein was
already raising substantial sums for its political activities
in the South through legal avenues. He pointed out, for
example, that Sinn Fein conducted at least 60 fund-raisers in
the South per week for its electoral war chest.

Comment: GOI Reticence
--------------


10. (C) O'Leary, Walsh, and Egan (who retires in August)
made clear to Emboffs that the ongoing investigation into the
money-laundering case constrained their ability to provide
more information, as the lack of detail in their observations
bears out. We expect that GOI officials will remain reticent
until charges are actually filed, a step that may also be
delayed by continuing investigations into the Northern Bank
robbery itself. Garda and DOJ representatives are also
likely to continue to be quiet in public and in discussions
with us regarding funding of Sinn Fein,s activities in the
Republic of Ireland. As a political force in the South, Sinn
Fein has limited reach, but is seen as the most
well-organized and best-funded party. Competing parties,
including the governing Fianna Fail party, are anxious to
ensure that Sinn Fein members/supporters abide by Irish law
and are subject to public scrutiny when they do not. Both
the Garda (traditionally tough on the republican movement
writ large, due to its terrorist connections) and political
levels of the government will be careful to avoid the public
perception that any legal pursuit of Sinn Fein/IRA-tied
personalities in the South is politically connected.
KENNY