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Irish money laundering valued at E3bn

Thursday, March 27 10:58:50

The level of money laundering activity in Ireland is estimated to be at least E3bn according to a new report published today by business advisory firm Grant Thornton.

The report - "Illicit Trade: an Irish and Global Challenge" - argues that while the 2010 Criminal Justice Act has improved the regulatory environment, money laundering activity remains a threat to Ireland's reputation as a financial centre and is benefiting criminal gangs.

Globally the IMF estimates the aggregate size of money laundering at between 2pc and 5pc of the gross domestic product, which in Ireland means a low end estimate of E3.1bn up to E7.8bn at the high end of the range. The costs incurred to the economy from money laundering includes the loss of government revenue from taxation on counterfeit fuel, alcohol and tobacco and the cost of enforcement of legislation through money spent on Gardai and regulatory bodies.

Report author and Grant Thornton Partner Brendan Foster said: "Our research estimates that illicit trade in fuel and tobacco alone is as much as E337m, with much of this going into criminals' pockets. Money laundering allows these illegal proceeds to penetrate the legitimate financial system. New threats such as the unregulated nature of payments with virtual currencies such as Bitcoin also pose new challenges to controlling what is a global problem."

The report builds on a similar study conducted last year which found that illicit trade in in the retail sector was costing the Irish economy as much as E1.48bn per year. A limited government response and continued weak penalties for violations of the law have meant losses have increased 3pc in this year's estimate to E1.53bn. The E1.53bn costs comprise of E587m in lost revenue to rights holders and retailers through sale of illegal and counterfeit fuel, tobacco, pharmaceuticals and digital products such as music and video games. A further E946m is estimated to be lost to the Exchequer in lost tax revenue. The 2014 report broadens the investigation to consider money laundering activity, cybercrime and the importance of protection of intellectual property rights in controlling illicit activity.

The report argues that the defense of the intellectual property rights that underpin industries like the entertainment and pharmaceutical sectors should be at the heart of the government's reform strategy. 23pc of employment in Ireland comes from industries which rely on the legal protection of patents and trademarks and 50pc of GDP (compared to an EU average of 37pc). Recent government proposals to remove all branding from tobacco products could potentially send a negative signal about Ireland's commitment to intellectual property rights protection.

Report author Brendan Foster continues: "Digital piracy of movies, production of counterfeit CDs, smuggling of illicit tobacco and alcohol are all examples of IP abuse that hurt the Irish economy. With Ireland's high dependence on IP intensive industries, a strong national framework of IP protection is vital. We recommend that a committee be established of both industry and state interests which would have direct responsibility for tackling the issue of illicit trade and IP protection."

Research for the report also polled the views of consumers and retailers on the issue of illicit trade in the retail sector and found widespread recognition that it is a growing problem.

It found that 77pc of consumers said that it was easy to buy illegal tobacco; 1 in 3 consumers have knowingly acquired a pirated product; 74pc of retailers believe organised crime is involved in fuel laundering and 72pc of retailers think the government response to the threat of illicit trade has been too little.