CITY OF LONDON–A loophole in Irish rules around the land registry database and mortgage securitization may be used by money launderers, Edmund Honahan, retired Master of the High Court in Ireland, said in an interview.

Honahan has long been campaigning for reforms in how Ireland handles changes to land registry entries. He has warned for years that the equivalence in the eyes of Irish law of a deed of title to a mere order of possession is problematic for multiple reasons. Now, for the first time in a media report, he elaborates on the specific money laundering risk.

In a letter he wrote to Irish parliamentarians, seen by reporter.london, Honohan warned of multiple risks arising from this situation, including that money launderers could take advantage of the inherent ambiguities.

“The troubling possibility arises that a cash purchaser operating in the niche market for money laundering deals will be keen to acquire such a [vacant possession] title, no questions asked or answered,” Honohan wrote in a letter to Irish MPs in 2024, seen by reporter.london. In a separate letter to an Irish financial regulator he also warned that “the integrity of land registration is of systemic importance and is threatened when there are unanswered questions.”

Before retiring, Honohan has had a multi-decade career presiding over cases involving banking, mortgages and securitization. Contacted by reporter.london to explain his views, he said:

“It’s quite complicated, but in the end, the ownership of the security or collateral is obscured to the point where nobody’s really quite sure.” The issue arises due to “multiple layers of securitization” which are not reflected on the land registry, Honohan said.

“When collateral for a distressed loan is being traded off market, a quick sale by a credit servicer may conceal classic money laundering. Banking checks are in the rear view mirror at that point.”

For the convenience of those involved in property market securitization, chiefly foreign investment funds, Irish courts have adopted some practices that Honohan believes are risky, such as allowing a so-called “credit servicer” to hold the place of the rightful owner of the financial charge against the property in legal proceedings.

Numerous international funds entered the property market in Ireland following the financial crash which saw banks being bailed out and their assets sold, sometimes at steep discounts. Most of these assets were mortgages, and the economy made a full recovery in large part thanks to the speed with which the banking system was purified of non-performing loans. For this speed to be achieved, corners were cut in the way the legal system deal with properties and mortgages changing hands, according to Honohan.

“Streamlining decisions have been made with the thought that you’re dealing with honest actors,” he said, but warned this is not always the case, and people with ties to organized crime have been found to dabble in property business in Ireland by taking advantage of this situation.

“Properties are being sold as if the order for possession is the title document,” he said. “It’s a concerning matter because there are so many orders for possession in Ireland at the moment, which haven’t been executed.” This is an opportunity for ruthless actors to pose as legitimate agents or investors to launder money through the property market, or fraudulently take ownership of properties when borrowers die, he said.

Honahan has caused controversy in Ireland for his strong views regarding this issue, with some newspapers suggesting he had a personal grudge against foreign financial institutions.

However, he told reporter.london that he did not have an issue with foreign investment, and indeed welcomed it. He said he believed Ireland was “a mature economy now and we have to square up to the fact that mortgages have to be paid and rent has to be paid.”

At the same time, Honohan said that the uncertainty around the land registry he is highlighting could one day cause foreign investors to rethink their allocations of funds to Ireland.

“Into the future if there’s a problem with title, you can imagine that the New York or American funds will be somewhat more scant at promoting investment in such mortgages and it therefore could push up the cost of funding to the loan originators and the banks. You could have a situation where there’s reluctance in the marketplace, the international marketplace.”

reporter.london asked the Irish finance ministry to comment, as well as the departments of justice and business. The finance ministry declined to comment and the others did not respond in time for publication. If they do respond, the article will be promptly updated with their views.

reporter.london has previously covered allegations of bank fraud in Northern Ireland’s Ulster Bank.