Written answers

Tuesday, 14 June 2022

Photo of Jim O'CallaghanJim O'Callaghan (Dublin Bay South, Fianna Fail)
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389. To ask the Minister for Finance if his Department is in full compliance with the Commission Recommendation (EU) 2022/554 of 5 April 2022 on the recognition of qualifications for people fleeing Russia’s invasion of Ukraine; if he will set out a list of the professional qualifications or professions recognised under the aegis of his Department; if Ukrainian qualifications are now recognised in each case; if electronic applications can be made for such recognition; the web address or email address to which such applications should be sent, or if physical application is necessary; and the exact procedures and address for such applications. [29978/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I wish to advise the Deputy that my Department does not recruit directly, recruitment into my Department is conducted through the Public Appointments Service (PAS). PAS is the central body with responsibility for recruitment into the Civil Service and wider Public Service, and as part of the recruitment process undertakes the responsibility to ensure qualifications meet the education requirements of specific competitions.

Competitions held by the PAS are advertised on the PAS website www.publicjobs.ie and all representations received by my Department relating to recruitment into the Department are advised to visit this website. Potential candidates can register their interest in a position on the PAS website and candidates are automatically notified by email when the relevant competitions are announced.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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390. To ask the Minister for Finance if registered companies in Ireland availing of section 110 tax arrangements with connections to Russia and whose administrative functions are being undertaken by corporate service providers are compliant with all aspects of the law and Central Bank regulations; if the Revenue Commissioners have audited these firms; if so, the period of time and the numbers audited; if he will provide details of the tax benefits that accrue to Russian companies registered in this way; and if he will make a statement on the matter. [30014/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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Section 110 of the Taxes Consolidation Act 1997 is the section of the corporate tax code which creates a tax neutral regime for bona-fide securitisation and structured finance purposes. Ireland is not unique in having a specific regime for securitisations. The importance of securitisation has been recognised by the European Commission through their work on the Capital Markets Union. This is a European Commission initiative to mobilise capital in Europe, a main objective of which is to build a sustainable securitisation regime across the European Union.

Securitisation involves the creation of tradeable securities out of an income stream or projected future income stream generated by financial assets. Securitisation allows banks to raise capital and to share risk and, by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing. Such financing is useful for the productive economy as it can underpin the supply of finance to industries and companies in Ireland, Europe and further afield.

It is important to note that there is nothing specific in the Section 110 framework that is of particular relevance to Russian investors or originators and such vehicles are a common feature of financial service centres.

In relation to Central Bank regulations, certain section 110 companies may be required to publish a prospectus under Regulation (EU) 2017/1129 (the “Prospectus Regulation”), where an issuance of securities fall under its scope. The Prospectus Regulation applies to persons:

- Seeking admission of securities to trading on an EEA regulated market, including the Irish Stock Exchange plc, trading as Euronext Dublin, or

- Making an offer of securities to the public within the EEA, albeit not seeking admission to trading on an EEA regulated market.

The Prospectus Regulation harmonises requirements for the drawing up, approval and distribution of the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market. The objective of the Prospectus Regulation is to ensure investor protection and market efficiency, in accordance with high regulatory standards. The Central Bank is the Competent Authority in Ireland with responsibility for the scrutiny and approval of prospectus documents under the Prospectus Regulation. The Central Bank scrutinises the prospectus to ensure it meets all of the disclosure requirements set out in the legislation and must approve the prospectus prior to commencement of the listing or offer of the securities to the public.

Separately, Special Purpose Entities (SPEs) that carry out activities listed under Schedule 2 – a comprehensive list of financial activities of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 - are subject to supervision by the Central Bank for Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) purposes. Such firms are referred to as “Schedule 2 firms”. Firms obligated to register include those which participate in securities issues and the provision of services relating to such issues. An SPE is required to report to the Central Bank if it is an SPE which predominantly engages in securisations, and if it avails of the tax provisions of section 110.

Schedule 2 firms are subject to the Central Bank’s minimum engagement model and are supervised in accordance with this model. During the course of this supervision, where weaknesses in the AML/CFT frameworks are identified in Schedule 2 firms, the supervisors issue findings that the Schedule 2 firms are required to implement. The Central Bank conducts supervisory activities to ensure that Schedule 2 firms are complying with their statutory obligations. These activities include:

- Conducting on-site inspections and other supervisory engagements across the financial sector to effectively monitor that there is compliance and effective implementation of the relevant statutory obligations;

- Ensuring compliance with the requirements under the Criminal Justice Act 2010 to adopt and implement policies and procedures for the assessment and management of risks of money laundering and terrorist financing;

- Inspection of policies and procedures, and confirmation that senior management (including boards of directors) can demonstrate full awareness of their responsibilities;

Separately, where an SPE is linked to an investment fund resident in Ireland, it is subject to the relevant investment fund regulations and requirements.

I now refer to section 110 company’s compliance with EU sanctions. All natural and legal persons in the State are obliged to ensure compliance with EU sanctions. This includes section 110 companies. A breach of financial sanction is a criminal offence. The Central Bank of Ireland, as the competent authority for financial sanctions, is undertaking work in relation to firms with links to Russia. Should the Central Bank identify, or have a suspicion of, a breach of sanctions it will report that to An Garda Síochána, as the investigative authority.

I am advised by Revenue that it carries out a programme of risk focused compliance interventions on section 110 companies, to monitor the regime and to satisfy itself as to the accuracy or otherwise of tax returns filed by these companies and to ensure they continue to meet all qualifying conditions. In line with its overall tax compliance monitoring programme, Revenue has a multi-faceted approach to tackling non-compliance. Compliance interventions range from non-audit compliance Interventions, such as appraisals, aspect queries, and profile interviews, to audits and investigations. As with all tax compliance interventions, Revenue will take appropriate action, including making assessments and seeking penalties and interest, where evidence of non-compliance is found to exist.

I am advised that Revenue has taken appropriate steps to identify section 110 companies subject to or linked to individuals, groups or entities subject to EU sanctions on Russia and Belarus in connection with Ukraine. Revenue has the necessary procedures and processes in place to ensure full adherence with its obligations under EU sanctions rules.

As respects section 110 companies identified as possibly linked to entities/individuals on the EU sanctions list, there have been 37 compliance interventions and 65 risk appraisals closed in respect of such companies in the last 5 years (none of which were formal audits). One compliance intervention is ongoing in respect of such a company.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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391. To ask the Minister for Finance the total value of assets held by special purpose entities in each of the past five years; the total number of these entities; the number that are connected to Russia; and if he will make a statement on the matter. [30017/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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Reviews undertaken by the Central Bank of Ireland have identified just under 2% of the 3,000 Special Purpose Entities (SPEs) in Ireland as having links to Russia. It is currently estimated that about one in three of those (that is, 17 SPEs, being 0.5% of the total SPE population) is directly linked to individuals in scope of the sanctions regime.

A Central Bank statistical release on the direct financial links to Russia by economic sector, issued on 4th March and incorporating the latest available data on financial services sectors, stated that, at end-2021, SPEs had holdings of €37.1 billion of Russian-issued assets. There were 33 Russian sponsored SPEs identified with total assets of €35.5 billion, accounting for 8% of the non-securitisation SPE sector.

Year Total Assets in €bns No. SPEs No. Russian Connected SPEs
2017 732.3 2,092 73
2018 734.5 2,356 65
2019 872 2,631 64
2020 942.1 2,862 62
2021 1031.8 3,133 59

For the purposes of the above table, the Central Bank has classified an entity as a Russian Connected SPE if they meet any of the following criteria: The entity is ultimately controlled by a Russian company or individual; The entity has assets with a Russian counterparty or issued by a Russian counterparty; the entity owes money to a Russian counterparty.

Irish SPEs are fully in scope of the sanctions regime. A breach of financial sanction is a criminal offence. Accounts, funds or other assets must be frozen without delay so that they cannot be made available, directly or indirectly, to the sanctioned person, entity or body. In the Central Bank of Ireland’s role as Competent Authority for the administration of financial sanctions, the Central Bank is engaging closely with a number of SPEs with links to Russia. Where the Central Bank suspects a breach of a sanction, the Central Bank reports such suspicions to An Garda Síochána.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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392. To ask the Minister for Finance the value of the funds raised by section 110 firms connected to Russia in each of the past five years; if there is a similar figure for the same period relative to funds raised on the Dublin Euronext; if funds raised in this way or through banks was for the purpose of investment in Russian Railways or the Russian military; if he intends to freeze or confiscate any assets held by these firms that are connected to Russia; and if he will make a statement on the matter. [30025/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I am informed by the Central Bank that Section 110 firms connected to Russia are estimated to have raised the following funds (sum of all issuances over a year):

Year Funds Issued in € Billions
2017 11.10
2018 2.62
2019 6.28
2020 4.27
2021 9.79

For the purposes of the above table, the Central Bank has classified an entity as a Russian Connected SPE if they meet any of the following criteria: The entity is ultimately controlled by a Russian company or individual; The entity has assets with a Russian counterparty or issued by a Russian counterparty; the entity owes money to a Russian counterparty.

The Central Bank has also advised that they are unable to provide this detail in relation to Euronext Dublin for the last 5 years as this information is not readily available.

On an aggregate basis, the primary activities of these Russian linked vehicles is to raise financing for Russian companies and banks. The Central Bank does not systematically identify nor monitor the use of proceeds of the fundraising by section 110 vehicles. However, I am informed by the Central Bank that while it considers that there may be some limited linkages to the Russian railway industry it is not aware of any section 110 vehicles, at this point, directly financing the Russian military.

In terms of the sanctions regime, a breach of financial sanction is a criminal offence. Accounts, funds or other assets must be frozen without delay so that they cannot be made available, directly or indirectly, to the sanctioned person, entity or body.

The Central Bank has consistently engaged with all relevant firms to ensure compliance with the sanctions regime. There has been a significant focus on Russia/Ukraine related issues in supervisory engagements and supervisors incorporate discussions on financial sanctions compliance into their regular supervisory engagements.

In the Central Banks role as Competent Authority for the administration of financial sanctions, it is engaging closely with a number of SPEs with links to Russia. Where it suspects a breach of a sanction, the Financial Sanctions team reports such suspicions to An Garda Síochána.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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393. To ask the Minister for Finance the reason that the Central Bank has not been empowered to regulate section 110 firms; if it is his intention to regulate the firms in question; if the data collected from the firms by the Central Bank will be published on a regular basis; if he or the Central Bank is concerned in any way by any of the information that has been collected to date; and if he will make a statement on the matter. [30045/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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Section 110 of the Taxes Consolidation Act 1997 creates a tax neutral regime for bona-fide securitisation and structured finance purposes. Ireland is not unique in having a specific regime for securitisations. Indeed the importance of securitisation has been recognised by the European Commission through their work on the Capital Markets Union.

While section 110 companies are not subject to Central Bank authorisation, there are a number of conditions which a company must meet in order to be regarded as a qualifying company for the purposes of section 110 of the Taxes Consolidation Act 1997 (“TCA 1997”).

One of those conditions is that the company notifies Revenue of their intention to be a qualifying company by completing a Form S.110 no later than 8 weeks from the date the company commences its business as a qualifying company for the purposes of section 110 TCA 1997. As it is a requirement of section 110 TCA 1997, it is appropriate that the Form S.110 be submitted to the Revenue Commissioners.

Additionally, the activity of individual section 110 entities by virtue of its structure as a Special Purpose Entity (SPE) might be affected by certain regulations based on specific activities that they carry out. The obligations of SPEs under the relevant regulations are intended to increase transparency on their activities and address specific risks, such as in the areas of investor protection and Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT).

SPEs may be required to publish a prospectus under Regulation (EU) 2017/1129 (the “Prospectus Regulation”), where an issuance of securities fall under its scope. The Central Bank is the Competent Authority in Ireland with responsibility for the scrutiny and approval of prospectus documents under the Prospectus Regulation. Subject to certain exemptions, a prospectus must be produced by all companies (including SPEs) when securities are to be offered to the public and/or admitted to trading on a regulated market in the EEA. The Central Bank scrutinises the prospectus to ensure it meets all of the disclosure requirements set out in the legislation and must approve the prospectus prior to commencement of the listing or offer of the securities to the public.

Additionally, SPEs that carry out activities listed under Schedule 2 – a comprehensive list of financial activities of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 - are subject to supervision by the Central Bank for Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) purposes. Schedule 2 firms are subject to the Central Bank’s minimum engagement model and are supervised in accordance with this model. During the course of this supervision, where weaknesses in the AML/CFT frameworks are identified in Schedule 2 firms, the supervisors issue findings that the Schedule 2 firms are required to implement.

The Central Bank issued a ‘Dear CEO’ letter outlining their expectations of firms in relation to AML/CFT and Financial Sanctions requirements in December 2020. This letter can be accessed through the following link: www.centralbank.ie/docs/default-source/regulation/how-we-regulate/anti-money-laundering-and-countering-the-financing-of-terrorism/legislation/dear-ceo-letter---compliance-by-entities-which-are-required-to-registered-under-section-108a-of-the-criminal-justice.pdf.

Other requirements that may apply to SPEs include relevant investment fund regulations where an SPE is linked to an investment fund resident in Ireland, and an obligation to register with the Companies Registration Office and comply with relevant company law requirements.

In terms of the frequency of the data available on section 110 firms, all securitisation and non-securitisation section 110 SPEs are obliged (either under ECB Statistical Regulations or under the national powers) to report quarterly statistical information to the Central Bank of Ireland for the purpose of monitoring economic and financial developments in Ireland and the euro area. Further information on the reporting requirements of Special Purpose Vehicles and Financial Vehicle Corporations is available at the websites of the Central Bank and the European Central Bank respectively.

Finally, the Deputy may also be aware that the Central Bank has also published analytical work on SPEs including a Central Bank Economic Letter describing the structure and activities of the SPE sector in Ireland: www.centralbank.ie/docs/default-source/publications/economic-letters/vol-2018-no-11-shining-a-light-on-special-purpose-entities-in-ireland-(golden-and-hughes).pdf?sfvrsn=4.

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