The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 (the "Act") has been signed into law by the President and is expected to be commenced shortly. The Act transposes the Fifth Anti-Money Laundering Directive (Directive (EU) 2018/843) ("5AMLD") into Irish law, by amending the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 as amended (the "CJA 2010"). The Act effects the following key changes to Irish anti-money laundering and counter-financing of terrorism ("AML/CFT") law and impacted firms should act now to ensure that they comply with the new obligations.
Virtual Asset Service Providers ("VASPs")
AML/CFT requirements will apply to a range of VASP businesses for the first time and VASPs will be required to register with the Central Bank of Ireland ("CBI"). A firm that is currently authorised by the CBI for prudential and/or conduct of business services which is currently providing, or plans to provide, virtual asset services is obliged to register with the CBI in relation to these activities. In order for the CBI to approve an application for AML/CFT registration, the CBI must be satisfied that the firm's AML/CFT policies and procedures are effective in combatting the money laundering and terrorist financing (ML/ TF) risks associated with its business model and the firm's management and beneficial owners are fit and proper. For a more in-depth analysis of the VASP regime, please read our previous advisory, here.
Beneficial Ownership Checks
The Act imposes obligations on designated persons regarding the verification of the beneficial ownership of customers that are subject to beneficial ownership disclosure requirements. Prior to the establishment of a business relationship with a customer to which beneficial ownership disclosure requirements apply, a designated person will be required to ascertain whether information concerning the beneficial ownership of the customer is entered in the relevant beneficial ownership register. Where the designated person is a financial institution, it may open an account for the customer before conducting these checks, but it cannot carry out any transactions for the customer.
Verification of Identity of Senior Managing Officials
The Act requires that where a beneficial owner is a senior managing official, a designated person shall take the necessary measures to verify the identity of that person and shall keep records of the actions taken to verify the person's identity including any difficulties encountered in the verification process.
Prescribed Actions for Enhanced CDD for Customers in High-Risk Third Countries
The Act elaborates on designated persons' enhanced CDD obligations in respect of customers in high-risk non-EEA jurisdictions. Designated persons must obtain additional information on the customer and beneficial owner (including source of funds and source of wealth), the intended nature of the business relationship and reasons for the intended or performed transactions. Designated persons must also obtain senior management approval for establishing or continuing the business relationship, and must conduct enhanced monitoring of the business relationship by increasing the number and timing of controls applied, in addition to selecting patterns of transactions that need further examination. These obligations are expected to come into further focus as the European Commission designates additional high-risk third countries in response to the FATF expanding its list of monitored jurisdictions.
Relaxation of Requirement to Examine the Background to Certain Transactions
The Act introduces a degree of comfort for designated persons in respect of their existing obligations under the CJA 2010 to examine the background and purpose of all complex or unusually large transactions. Under the Act, designated persons will discharge their obligations in this respect where they undertake these obligations "as far as possible."
Amendments to Politically Exposed Person Requirements
Designated persons will be required to monitor any politically exposed person ("PEP") for as long as is reasonably required to take into account the continuing risk posed by that person and until such time as that person is deemed to pose no further risk specific to PEPs.
The Act also expands the definition of PEP to include "any individual performing a prescribed function" and allows for the Minister for Justice to issue guidelines to the competent authorities, to which competent authorities must have regard, in respect of functions in the State that may be considered to be prominent public functions.
Feedback on Suspicious Transaction Reports
The Act requires the Financial Intelligence Unit operated by An Garda Síochána (Irish police), where practicable, to provide timely feedback to designated persons who have submitted a suspicious transaction report. This should prove to be a helpful development as historically there was limited feedback on the majority of such reports.
Intra-Group Tipping off Defence
The Act amends the defence to tipping off under the CJA 2010 to make provision for the sharing of information relating to suspicious transactions in group situations.
Breach Reporting Mechanisms to Competent Authorities
The Act adds a new provision to the CJA 2010 requiring competent authorities to establish effective and reliable mechanisms to encourage reporting of potential and actual breaches of the CJA 2010, including one or more secure communication channels. These communication channels must also be available for persons to report any threats or retaliatory or hostile actions to which they are subjected for reporting suspected breaches of the CJA 2010.
Amendments to Risk Factors
The Act makes certain amendments to the low and high risk factors scheduled to the CJA 2010.
Next Steps for Impacted Firms
Firms that are providing or intending to provide virtual asset services should review and/or prepare their AML/CFT frameworks now, to ensure that they are in a position to comply with the new obligations. Once the Act is commenced, all applicants for registration will be required to submit a pre-registration information form to the CBI.
All other impacted firms should assess the impact of the Act on their business and update their AML/CFT policies and procedures to meet the new requirements.
How Can Walkers Help?
Walkers is ready to assist VASPs with the design of bespoke AML/CFT frameworks and to assist currently in-scope designated persons with updating of AML/CFT policies and procedures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.