Irish politicians are "mindlessly in favour" of growing the International Financial Services Centre (IFSC), according to a former deputy governor of the Central Bank.
Politicians don't recognise the risks involved in its facilitation of massive influxes of cash to companies such as Russian banks and oil giants, says Stefan Gerlach.
Mr Gerlach, who left the regulator in 2015 and is now chief economist at EFG bank in Zurich, says Irish politicians “across the board are too positive about the benefits” of the IFSC, such as employment for lawyers and accountants.
He was responding to research from academics at Trinity College Dublin, which found that more than €100 billion has passed through the IFSC since 2007 to Russian companies, including a Kremlin-linked bank and oil giant Rosneft.
The research was first reported yesterday in the Sunday Business Post.
“The Government needs to think about what the risks are, and decide what risks it is willing to take,” says Mr Gerlach, on allowing Russian companies to funnel cash through the IFSC under Ireland’s so-called “section 110” regime.
Section 110 was designed to encourage companies to use Ireland as a global financing and fundraising hub, but has been used by vulture funds to avoid tax.
“[Irish politicians] don’t recognise sufficiently that it can be risky also. Look at the problems we have seen in Cyprus and Latvia with Russian money. This illustrates it is not always a good thing.”
He says the Central Bank needs to be “appropriately staffed and [have] teeth” to monitor such “opaque” activities.
“It is hard to find out where the money has come from and where it is going,” he says.
Mr Gerlach joined the Central Bank when the regulator was beefed up during the financial crisis in 2011, but did not renew his contract four years later.