This article was first published in the November 2015 Ireland edition of Accounting and Business magazine.

It’s official – if you’ll excuse the expression – the Provisional IRA is still ‘in business’. And that business is a valuable one, with an asset base valued at €200m in 2008 (just before the crash), according to Ed Moloney, author of A Secret History of the IRA.

For years, the organised crime activities of the paramilitaries have been an elephant in the room – informally recognised, but seldom spoken about. Things changed dramatically a few months ago with a single statement from the Police Service of Northern Ireland. Detective superintendent Kevin Geddes is leading the investigation into the murder of former IRA member Kevin McGuigan. ‘One of our major lines of enquiry is that members of the Provisional IRA were involved in this murder,’ Geddes said. The pretence that the IRA had gone away suddenly became unsustainable. 

No one should be surprised that paramilitary groups still operate – though mostly for criminal financial gain rather than political objectives. The Real IRA – which carried out the 1998 Omagh bombing, exacting the highest death toll of any Troubles event – is widely reported to be engaged in extorting money from drugs dealers in Dublin and supplying cocaine and heroin in the city. It is estimated, by Forbes magazine, to have an asset base of €44m. It is only 11 years ago that the Provisional IRA was blamed for the biggest bank robbery in UK history, when £26.5m was stolen from the Northern Bank branch on Donegall Square in Belfast (see box, next page). 

On both sides of the border, fuel laundering has been a serious problem for years, with paramilitaries operating plants that extract the dye from red diesel, which is cheaper and intended only for off-road agricultural use, so that it can be illegally retailed. The ‘factories’ have been destroyed not only in the border counties, but also as far away as Dublin and Waterford. A battle for control of the laundered diesel supply chain may have led to murders in Belfast and Armagh.

At the beginning of this year, the British-Irish Parliamentary Assembly reported on the scale of the problem using figures compiled for it by Grant Thornton. It estimated that the Revenue in Ireland has lost €140m to €260m in tax revenues each year from fuel laundering, while the UK’s HMRC forfeited £80m in the 2012/13 tax year. The current state of the fuel laundering market is unclear, with a new marker added to diesel in the summer that is more difficult to remove. For the gangs, the trade generates annual revenues thought to be in the region of €1bn.

The buttleggers

Tobacco smuggling – also controlled to a large extent by paramilitaries – is almost as much a drain on the two jurisdictions’ tax revenues as fuel laundering is. The Revenue lost between €240m and €575m in 2013, according to Grant Thornton, and the Irish government believes that more than 10% of all cigarettes sold in Ireland are either smuggled or counterfeit.

Much of the crossborder smuggling is associated with Republicanism, including active dissident groups that are (in part) raising funds for continuing violent campaigns as well as former Provisionals, who use the old cell structures for criminal ends. The criminality extends to loyalist paramilitaries, particularly in Belfast and Antrim, who may run protection rackets and control drug sales, prostitution and people trafficking.

The issue of paramilitary crime has suddenly risen up the political agenda as a result of the McGuigan murder. Former justice minister Michael McDowell responded in the Irish Times: ‘Nobody has yet been implicated in the control or disposal of the Provo accumulated war chest of hundreds of millions of euro and pounds,’ adding this is ‘a challenge made no easier by the involvement of not a few household names as fronts for the laundering of those monies’.

Sinn Féin says it is as fed up with paramilitary crime as anyone else and agreed that the UK’s National Crime Agency could extend its operations to Northern Ireland, where paramilitary crime is one of its priorities. Martin McGuinness, the North’s deputy first minister, has urged anyone with knowledge of such activity to report it to the police. 

‘It is difficult to tell how extensive the problem is, but it is fair to assume that there is active paramilitary involvement in money laundering taking place,’ says Anthony Harbinson, Northern Ireland’s director of safer communities and former ACCA president. ‘The political crisis that followed the police assessment that IRA members were involved in recent murders has led to a number of actions. This has included the announcement, by the secretary of state for Northern Ireland, that the UK government has commissioned an independent assessment of paramilitary groups. The chief constable has also recently stated that there are about a dozen or so paramilitary groups in operation here and approximately 150 organised crime groups.’

Professional accomplices

None of the criminal activities by paramilitary groups would be possible without the help of professionals – solicitors, estate agents and, especially, accountants. Harbinson’s advice is clear: ‘Any accountant with any suspicions about a current or prospective client should report these to the relevant authorities, full stop. That is what the law requires and all accountants should be aware of their responsibilities. The department, in conjunction with colleagues in the Organised Crime Taskforce, is involved in arranging and contributing to conferences and training days by and for the financial sector regarding various types of criminality which they may encounter.’

Aidan Clifford, ACCA’s advisory services manager in Ireland, urges accountants to consider carefully how their clients obtained their assets and to take steps to avoid breaching money laundering regulations. ‘I spend a lot of time dealing with money laundering as part of my job,’ he explains. ‘There are lots of examples of crime around the border – fuel smuggling, tobacco smuggling, etc. Money laundering, of course, is taking these funds and putting them into the white economy. 

‘There is no point having millions in illegal cash if you can’t benefit from it. Buying trophy assets to consume or use yourself is the main method of laundering modest-sized criminal proceeds – cars, foreign holidays and conspicuous spending. Other criminals will lend money to “legitimate” businesses, or invest it in them by taking shareholdings.’ 

There is also a risk that institutions with lax controls could be used to launder funds. Western Union was fined earlier this year for weak identification controls, and credit unions were criticised by the Central Bank in May for weak money laundering controls – though deposits are limited to €100,000. 

Clifford adds: ‘Some criminals will use cash to build massive houses or buy other properties or assets in cash. They might carry the cash to a jurisdiction where they can buy foreign property in cash or lodge it in a bank and not get reported. Sometimes an account will be opened offshore, with an ATM card used to make withdrawals in Ireland. Another option is to “smurf” the cash, laundering it through a network of associates, drip-feeding it into bank accounts.

‘There are several other routes to launder proceeds of crime. Some criminals import cars and other vehicles and sell these for “clean cheques”. Financial organisations may unwittingly assist with laundering: insurers may sell a single-premium life assurance policy, which is then cancelled and the premium refunded through a clean cheque. The cash might even be lodged with an accountant or solicitor, placed in a client account and then refunded by cheque.’

This point was underlined in a report published a few years ago by the US State Department: ‘While money laundering occurs via credit institutions such as banks, money has also been laundered through schemes involving remittance companies, solicitors, accountants and second-hand car dealerships.’

The dangers

Clifford admits there are physical dangers for accountants, some of whom will be approached by paramilitaries. It is not always easy to say no. ‘It is very difficult to confirm to an accountant that they must still report the suspicion, even where they or their family are in jeopardy,’ he says. ‘Their “error” was made in implementing lax client acceptance procedures in the first place. The Garda has said that all reports are in confidence, and the name of the person making the report will not be disclosed to the criminal or the paramilitary, and the suspicious transaction report is made to the central AML division in Harcourt Street in Dublin and not a local Garda station. 

‘Paramilitaries tend to use accountants who they know are sympathetic to their cause and are therefore unlikely to report their activities. The accountants chosen are also unlikely to be members of ACCA, but if they are members of ACCA their days as a member would be numbered.’

A wealthy person in Ireland who cannot explain the source of their wealth can be given an ‘unexplained money order’ and those assets seized. Proposals for similar legislation in Northern Ireland and the rest of the UK are under consideration, potentially removing the requirement to prove specific criminal activity for civil recovery of property. Paramilitary gangs will accordingly be in need of more assistance than ever to protect their illegal earnings. Accountants need to step up their vigilance. 

Paul Gosling, journalist