A Bill which will transpose most of the Fourth Money Laundering
Directive (MLD4) into Irish law has been published by the Minister for Justice.
MLD4 was due to be transposed into Irish law by 26 June 2017. Parts of Article 30 (dealing with the beneficial ownership of corporates) were already transposed in November 2016 (read our briefing: New rules on information about the beneficial ownership of corporates by individuals). The remaining parts of MLD4 dealing with beneficial ownership are being managed separately by the Department of Finance.
The Bill (the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2018) will, when enacted, amend the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 and the Criminal Justice Act 2013 (which transposed the Third Money Laundering Directive into Irish law).
Together with the Criminal Justice (Corruption Offences) Bill, it forms part of the Government's white collar crime package (read our Corporate Crime Group's briefing on that package here: New White Collar Crime Package).
This Briefing summarises the key provisions of the Bill, which reflect the targeted risk-based approach to combating money laundering/terrorist
financing (ML/TF) which underpins MLD4.
» Conducting Risk Assessments
Designated persons must assess the ML/TF risk involved in a person's business. Various specified factors must be taken into account, together with any additional risk factors prescribed by the Minister from time to time, any guidance issued by the relevant competent authority, the National Risk Assessment and any guidelines issued by the European Supervisory Authorities. The assessment must be approved by senior management, and must
generally be documented.
» What should be assessed?
The designated person will have to assess the ML/TF risk presented by the customer/transaction by reference to a number of factors, including the presence of any factor indicating a potentially lower, or a potentially higher, risk. The Bill sets out non-exhaustive lists of factors that might suggest lower, or higher, risk:
- factors suggesting lower risk include the customer being listed on a stock exchange and subject to disclosure requirements;
- factors suggesting higher risk include non-resident customers, the use of nominee shareholders, the use of bearer shares, the use of personal asset-holding vehicles, new products and business practices, and non-face-to-face transactions.
In addition to the requirement under the 2010 Act that customer due diligence (CDD) be carried out at particular times, the Bill proposes that CDD be carried out at any time that the ML/TF risk warrants it.
» Acting on behalf of Customer
Where a person purports to act on behalf of a customer, a designated person will be obliged to verify (a) the identity of that person, and (b) that they are authorised to so act.
» Simplified Customer Due Diligence (SDD)
Reflecting the risk-based approach underpinning MLD4, designated persons will be allowed to carry out SDD where the customer or business area is considered to be low risk. If a designated person decides to apply SDD, it must keep a record of how it reached that decision, and continue to monitor the relationship.
A designated person will be required to look into "complex or unusually large" transactions, or "unusual patterns of transactions" in greater detail, and increase monitoring if they appear suspicious.
» Life Assurance Policies
Additional requirements will be imposed regarding the identification of the beneficiaries of life assurance policies and other investment-related assurance policies.
» Account Opening
Under the 2010 Act, banks can open accounts for customers before verifying their identity provided that no transactions are carried out on those accounts until verification has taken place.
Under the Bill, this right will be extended to financial institutions, and to accounts that permit transactions in transferable securities.
» Politically Exposed Persons (PEPS)
Measures that previously applied only to PEPs resident outside of Ireland will now also apply to PEPs resident in Ireland. Specific steps must also be taken where the PEP is a beneficiary of a life assurance policy.
» Enhanced Customer Due Diligence (EDD)
Designated persons will have to carry out EDD when:
- dealing with a customer residing or established in a high-risk third country; or
- a relationship or transaction presents a higher degree of risk.
» Relying on Third Parties
The circumstances in which a designated person can rely on a third party to carry out CDD will be expanded to provide that (if certain conditions are met) a designated person can also rely on a third party established in a third country if it is a branch or majority-owned subsidiary of a designated person established in the EU.
» Electronic Money
A designated person will not be required to carry out various CDD measures in respect of electronic money payment instruments if certain conditions are met.
POLICIES AND PROCEDURES
» Matters to be included
The Bill expands the list of matters which must be included in a designated person's ML/TF policies and procedures, including measures to be taken to prevent risks which may arise from new technologies.
Groups of companies will be required to have group-wide policies and procedures for preventing and detecting ML/TF which must be implemented by any designated person within the group. If an Irish company that is a designated person operates a branch or majority-owned subsidiary, it must adopt and apply group-wide policies and procedures. If it has a subsidiary in another EU Member State, it must comply with the local laws that transpose MLD4. If the subsidiary is in a third country with less strict ML laws, it must apply Irish ML/TF law. If a third country does not allow the group's policies and procedures to be applied, the designated person must ensure that additional measures are applied and notify the competent authority.
Suspicious transaction reports must be shared with the group, subject to the restrictions around tipping-off.
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This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.