Criminals are being given mortgages by financial institutions and then getting tax relief on the 'dirty' money they falsely allege is sourced from tenants, who do not always exist.

"A lot of houses built in Carrickon-Shannon and other places in Leitrim under the Section 23 scheme are being used in this scam, " a source, who did not wish to be named, told the Sunday Tribune.

"Hundreds of houses were built in Leitrim under the scheme and as the rental market is more or less full, a lot of unoccupied houses are bought by criminals as a way of laundering money."

Rogue financial advisers and mortgage lenders are assisting criminals in setting up people to front bogus mortgage applications. Once the properties are bought, they are used to launder 'dirty' money through the Section 23 scheme. The scheme, initiated in the 1990s, offers landlords the incentive of gaining tax credits on their rental income for a period of ten years.

Criminal abuse of the scheme has become the latest extension of what is known as 'mortgage application fraud.' The Criminal Assets Bureau (CAB) and the money laundering unit of the Garda Bureau of Fraud Investigation are understood to be working together to curb the crime.

A spokesman for the garda unit responsible for investigations into money laundering said: "Section 23 fraud is a known method of laundering money and I would not be surprised if some of the major players are involved in it. Many of these major criminal figures can easily get mortgages from financial institutions and then use this as a way of laundering money. It is a very simple way of laundering money and we have come across situations like that in the past."

The Revenue Commissioners have warned that they will follow up any leads on criminals involved in Section 23 fraud. A spokesman said:

"We are not aware of any significant abuses of the so-called Section 23 initiative. However we monitor these schemes as part of the normal course of our business. As always any information received regarding potential abuse is followed up by Revenue and appropriate action will be taken, if warranted."