Department of Finance told sanctions to prevent Russian money-laundering 'unenforceable'

A briefing for Finance Minister Michael McGrath said: 'It should be noted that many countries across the EU and globally have implementation challenges with sanctions.' Picture: Gareth Chaney/Collins

The Department of Finance tried to downplay comments made by one of its senior officials about how ineffective sanctions had been in stopping the flow of Russian money through Ireland.

In a series of briefings, ministers were advised to say while international sanctions were a “complex and dynamic area”, there had been no reported issues with enforcement in this country.

The briefings also said there had been four cases of breaches of financial sanctions against Russia reported to the gardaí for investigation.

If they were asked about whether gardaí had sufficient powers, ministers were advised to say work was ongoing on whether the level of penalties involved was “sufficiently effective, proportionate and dissuasive”.

The briefings followed comments by the head of the Department of Finance’s anti-money laundering unit Brenda McVeigh, who said sanctions were often “unenforceable” in practice.

Speaking on a panel discussion last October, Ms McVeigh was reported to have said: “Our legislation doesn’t work but we are all supposed to keep very quiet about that.” 

She added: “I can say actually that they don’t work and the way that we do them doesn’t work.” 

Three separate briefings were prepared early last November for the minister, minister of state, and secretary general at the Department of Finance on foot of the comments to prepare them for questions about how well sanctions against Russia were working.

The documents referred to a cross-departmental committee that monitored, reviewed, and coordinated the implementation of international sanctions measures.

A briefing for Finance Minister Michael McGrath said: “It should be noted that many countries across the EU and globally have implementation challenges with sanctions.

“This is a very complex and dynamic area where sanctions have to cover national and international legal and regulatory systems, while also endeavouring to fully cover the constantly evolving width and depth of transactions covered by sanctions in an increasingly complicated global network that underpins modern business practices.” 

If asked about whether breaches of financial sections were occurring, ministers were briefed to say enforcement was the responsibility of the Central Bank.

They could then add detail on how the Central Bank had in 2022 written to so-called Special Purpose Entities (SPEs) “with potential Russian links” seeking confirmation they were sticking to sanctions rules.

“The Central Bank engaged further with these identified firms to seek confirmation of the specific steps they had taken to ensure compliance with financial sanctions and restrictive measures while reminding them of their ongoing obligations in this regard,” the briefing added.

It said the Central Bank had been satisfied with the responses it received and it did not uncover “any actual or suspected breaches”.

The departmental briefings also said the bank had asked “a very significant number of firms” to submit extensive information on their controls for dealing with financial sanctions.

If asked about when the minister was made aware of issues around the enforcement of sanctions, officials wrote that then finance minister Paschal Donohoe had in April 2022 been notified “that a concern has been raised”.

The document said this related to whether adequate enforcement powers were in place to effectively implement EU sanctions on Russia.

Other sections of the briefings have been redacted, partly on the basis  the information could be used by individuals or entities to facilitate the breach or circumvention of sanctions-related offences in Ireland.