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Dublin's IFSC

Opinion How can Ireland really help Ukraine? Stop bankrolling Russia's oligarchs

Economist Brian O’Boyle says Ireland could really help Ukraine but cutting off the flow of Russian money through the country.

IN 2018, RESEARCHERS investigating global tax evasion made a shocking discovery. With less than 0.1 per cent of the world’s population, Ireland was the biggest tax haven on the planet in 2015.

Thomas Tørsløv and his colleagues made this discovery by highlighting an anomaly in the way profits were being declared in the state. Businesses usually announce profits of between 30 to 40% of their wages, but for Ireland, this figure was closer to 800%.

This could only be explained in one of two ways. Either Irish workers were being hired for their superhuman abilities or their employers were funnelling vast profits made by foreign workers through the Irish taxation system. I want to make the case that the second explanation is the correct one.

Ireland’s flawed system

Since the 1980s, Ireland has become one of the world’s most important offshore centres with an estimated €100 billion being moved through the state annually for no other reason than to avoid taxation (these are calculations in our book, Tax Haven Ireland). This has helped to enrich 10 to 15 of the world’s most powerful corporations, but there are wider geopolitical implications that stretch far beyond the avoidance of taxation.

Offshore centres (OFCs) typically provide three strategic benefits for the owners of capital. Globally, it is estimated that they help corporations to avoid $4 trillion in taxes annually. This is equivalent to the entire German economy and this amount could prevent the deaths of millions of children denied public services as a result.

The second key advantage is in the area of regulation. OFCs specialise in undermining the rules that regulate how businesses behave. They have been at the forefront of neoliberal policymaking since the 1980s, undermining workers’ rights and driving a long-term increase in global inequality.

The third key advantage is in the area of secrecy. OFCs specialise in shielding the owners of financial assets from public scrutiny. They help the world’s richest people to avoid control by democratic forces, and in-so-doing, create a grey area of illegality, exploited by those who want to shift resources without proper oversight.

The offshore networks used by the corporate elite are also those used by criminal gangs, and in the case of the International Financial Services Centre (IFSC) – by Russian oligarchs.

Ireland’s shadow banking system

Over the last decade, an enormous shadow banking system has grown up in Dublin. Ireland’s real economy is currently worth €250 billion, but according to the Central Bank, it has a shadow banking system worth €3.45 trillion – the fifth largest on the planet.

‘Shadow banking’ refers to activity that takes place outside the regulatory system operated by the world’s central banks. In the official regime, banks accept financial oversight in return for security from taxpayers’ money. Regulation is meant to target their riskiest operations, and in return, financial organisations can avail of taxpayers’ money, if, and when, they find themselves in trouble.

The Blanket Bank Guarantee Scheme is one example of this taxpayer-funded support. Operating in the shadows means none of this applies, however. Shadow banks can lend with much lower reserve requirements; they can trade without the normal regulatory supervision; they can move assets in ways that are incredibly hard to evaluate.

This has made them attractive to wealthy investors, including a number of prominent Russian companies. Using Special Purpose Vehicles (SPVs) known as Section 110 Companies (named after the legislation that enacted them), Russian investors raised €110 billion through the IFSC in the decade from 2007-2017. This was the second largest source of debt flowing into Russia from international markets and there were a number of characteristics that made these flows suspicious.

Research by Cillian Doyle and Jim Stewart of Trinity College in 2020 showed that there were 121 Russian connected conduits (the technical term for shadow companies that act as intermediaries) operating out of the IFSC during the period in question, although many of them took steps to disguise their beneficial owners.

More than half (66) were operating under charitable status for example, while a number of prospectus documents assured investors that the owners of the debt would not be disclosed on Clearstream (an important data-sharing website).

The brass plates

The vehicles used to borrow this money had no assets or employees and despite the fact that a number of the bonds were never repaid, there were few reports of litigation.

It is strange that creditors never took their debtors to court when they were not repaid, and for this reason, Doyle and Stewart hypothesise that much of this money is involved in a process known as ‘Round Tripping’.

This refers to money moved out of Russia through clandestine routes only to be moved back in again as foreign direct investment. This further suggests that the people making the loans were also those receiving the money, often to avail of stronger property rights in the west, but sometimes for more nefarious reasons.

The report found that seven firms connected with 13 conduits were identified by the Russian Central Bank as being subject to insider trading and market manipulation, while a number of the prospectus documents recognised that funds raised by conduits in the IFSC could be used for money laundering further down the chain.

In other words, it is possible that conduits that were fully compliant under Irish law were being used by cross-border criminal organisations that took advantage of the lax regulation that was provided. There is also evidence that firms using Irish SPVs were able to evade NATO-based sanctions.


One of Russia’s most important energy companies, Rosneft, was placed on a sanctions list following the annexation of Crimea in 2014 for example, but within a month the company had begun to funnel billions into its Russian operation using CBOM Finance Plc – a company operating out of the IFSC.

The Irish government officially supports western sanctions and yet they were willing to tolerate clandestine flows back into Russia, presumably as collateral damage in support of their wider financial objectives.

Doyle and Stewart list six Russian companies that were sanctioned by the Western powers and yet continued to raise money through Dublin. They also list six Russian banks with conduits based in the IFSC that provided finance for companies directly financing Russian military expenditure.

Screen Shot 2022-04-05 at 12.11.49 Brian O'Boyle Brian O'Boyle

There is no suggestion that Dublin based SPVs lent directly to the Russian military, but they did funnel money to banks that lent to the Russian forces. In the wake of Putin’s invasion of Ukraine, the West has imposed biting sanctions on the Russian economy. The most serious have involved freezing the foreign assets of the Russian Central Bank in a bid to collapse the rouble.

This is an extremely blunt instrument that will destroy the lives of ordinary Russians and, in this context, it is worth underlining that the western powers have not yet frozen all of the Russian assets in the western shadow banks.

Establishment voices are increasingly belligerent in their attempt to use the invasion of Ukraine to undermine Ireland’s neutrality. What they won’t tell the public, however, is that the most effective thing that the government could do is to put itself on the side of peace and dismantle the shadow banking system that has helped to enrich US capitalists and Russian oligarchs alike.

Brian O’Boyle lectures in economics at St Angela College, National University of Ireland, Galway. He has published widely on the global economy and is the co-author of Austerity Ireland. His new book, Tax Haven Ireland, co-authored with Kieran Allen, Senior Lecturer in Sociology at University College Dublin is out now.


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