Tuesday November 1, 2016
Tuesday November 1, 2016
Britain’s referendum on withdrawal from the European Union sent convulsions across Europe, and the uncertainty that the decision to leave triggered across the continent is felt nowhere more keenly than in Ireland. The Irish National Risk Assessment on Money Laundering (ML) and Terrorist Financing (TF) makes this explicitly clear; Brexit makes up a third of the ML/TF risk-enhancing factors for the Irish state.
It’s easy to see why. The EU is one half of the international framework that supports, promotes and monitors anti money laundering (AML) policy in Ireland, the other half being the Financial Action Task Force (FATF). When your largest trading partner, nearest neighbour and sole border-sharing country plans to leave one half of this framework then ripples from this decision are bound to be felt.
There are many positives to take from the report. This is the Irish government’s first National Risk Assessment (NRA) focusing specifically on ML/TF, published as a collaboration among government departments, in particular the Department of Finance and the Department of Justice and Equality.
EU influence was prevalent throughout the risk assessment. The introduction last year of the Fourth Anti Money Laundering Directive[HW1] (4AMLD), for instance, is based on the 40 FATF recommendations implemented into EU law. Member states must transpose the 4AMLD by June 2017.
The NRA underlined areas where AML measures are strong. Like other nations within the EU, Ireland has centralised institutions – law enforcement, regulators, legislative bodies – that provide consistency, collaboration and communication between different agencies, in different regions within the country.
Much emphasis is placed on the existing mechanisms that combat ML/TF, rightly stressing the governmental organisations already established, such as the Money Laundering Investigation Unit (MLIU) and the Drugs and Organised Crime Bureau (DOCB).
Three key areas were singled out as high risk areas for ML: Retail Banking, Money Remittance Firms and Bureau de Change. However, it is stressed that Ireland faces a similar scale of risk in the first two of these three areas as other European countries of a similar size, with the NRA pointing out that ‘Ireland is rated the easiest country in the EU to pay business taxes, and also the Member State with the second lowest burden of customs procedures in the EU.’
Bureau de Change’s were highlighted in relation to cross-border criminality, with the high number of them located near the UK border posing an increase ‘in the risk of cross-border money laundering or terrorist financing.’ Which brings us to the thorny issue of Brexit and its impact on Ireland.
The EU’s major role in supporting AML initiatives in Ireland is palpable throughout the NRA. Indeed the risk assessment’s very existence ‘has been influenced by and will continue to be influenced by ongoing Supra-National Risk Assessment (SNRA) work at EU level.’ Which leads us naturally to the pertinent question of how the UK and Ireland will collaborate once Brexit is initiated.
British-Irish collaboration was a persistent theme in the NRA. Logically, British exit from the EU is seen as a potentially disruptive element in British-Irish collaboration.
One line in the NRA demonstrates better than any other the shadow that Brexit has the potential to cast on Irish AML procedures. ‘Increasing levels of collaboration between Ireland and other Member States increases the sophistication of parallel investigative techniques employed by Irish law enforcement agencies.’ The implication here is surely that British-Irish parallel investigative techniques will be weakened by Britain’s EU exit.
Given the economic and geographic binds that link Ireland and the UK, the NRA is correct in attempting to measure the harm that Brexit has the potential to cause to ML/TF agencies in Ireland.
Two potential areas in particular are vulnerable in the wake of Brexit: drugs and terrorism. The NRA highlights the fact that drugs are usually brought into Ireland through its sparsely-populated west coast, before being smuggled into the UK and Europe.
Similarly, the report states that domestic terrorism in Ireland is planned and coordinated on a ‘ ‘whole of island’ basis, with activities occurring on both sides of the border’, and issues a reminder that ‘the threat level in Northern Ireland is considered to be ‘severe’ and in Great Britain to be ‘substantial’.’
With the UK’s European exit deal still in its nascent stages, there appears to be concern that Brexit will have a negative impact on these two problem areas and on British-Irish collaboration in general, making AML harder for Irish agencies.
It is clear that the Irish government is committed to combatting ML/TF, and that the UK’s withdrawal from the EU will not diminish that commitment. The NRA underlines the point that ‘Ireland’s close relations with its nearest neighbour and largest trading partner, the UK, has allowed the two countries to collaborate effectively to prevent and disrupt economic cross-border crime.’
Nevertheless, the political and practical repercussions of Brexit are by their very nature difficult to predict. The Irish state has a great deal of infrastructure already established to crack down on ML/TF. Whether Brexit will make this task considerably more difficult for Ireland remains to be seen.
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