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An t-eolas is déanaí
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Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020
Second Stage – Dáil Éireann
Check against delivery
[I move that second stage be taken now.]
Leas Ceann Comhairle, Deputies
I move that the Bill be read a second time.
I am pleased to introduce this important Bill to the House. The purpose of this legislation is to transpose the criminal justice elements of the Fifth EU Anti-Money Laundering Directive, Directive 2018/843.
Targeting money laundering is central to fighting organised crime. Those who commit crimes such as drug trafficking, human trafficking and fraud depend on hiding and converting the proceeds of those crimes. By pursuing those proceeds we can bring those responsible to justice and meaningfully reduce the incentive to commit the crimes in the first place.
Part of that effort is through the work of the Criminal Assets Bureau and the Garda National Economic Crime Bureau. However, preventative measures are also essential. In the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, and before that in the Criminal Justice Act 1994, the Oireachtas both criminalised money laundering activities, and required those whose business activities can be used to facilitate money laundering to help prevent it.
On a practical level, this means knowing your customers and doing appropriate due diligence before starting a business relationship. It means having proper processes in place to deal with suspicious transactions. And it means reporting suspicious transactions to the appropriate authorities.
Money laundering and terrorist financing are global issues. Criminals routinely move the proceeds of crime from one country to another and exploit inconsistencies and weak links. Accordingly, a coherent global approach is needed and the EU has long had legislation in the area. Internationally, the recommendations of the Financial Action Task Force, or FATF as it is known, are applied by 37 member jurisdictions and inform the global approach. FATF monitors and evaluates compliance by those 37 members.
The EU legislation and the FATF recommendations are frequently being updated to reflect new developments and to ensure they are still relevant. This process of continuous improvement is a feature of the regime. The Bill before the house, which amends the 2010 Act in line with the Fifth Directive, is the second significant amendment of that Act.
In 2018, the Act was amended to give effect to the Fourth Anti-Money Laundering Directive. The new regime adopted a more risk-based approach, where entities must take steps within a defined framework to identify and manage the risks in individual business relationships. It also adopted an increased focus on transparency of beneficial ownership, which has been further developed in the Fifth Directive.
Other enhancements in 2018 included a fitness and probity regime for the owners of private members’ gaming clubs, new provisions in respect of Customer Due Diligence, new powers for the Financial Intelligence Unit and more stringent requirements around politically exposed persons.
The Fifth Directive, implemented by this Bill, continues this process:
The measures specific to the criminal justice system in the Fifth Directive are primarily implemented in the Bill before the House. However, a very significant element of the Fifth Directive is improving the transparency of beneficial ownership of corporate and other legal entities to help address the use of complex legal structures for money laundering and terrorist financing. It also provides for the establishment of a national bank account register. This important ongoing work is the responsibility of my colleague, the Minister for Finance, and my department works closely with the Department of Finance on these and other non-criminal justice measures.
Enacting this Bill will enhance the range of measures countering money laundering by reflecting modern developments. It will also help to bring us in line with our EU obligations. Members of the House may be aware that Ireland is late in transposing this Directive, the deadline for which was January of this year. The European Commission commenced the first stage of an infringement process, the issuing of a Letter of Formal Notice in May of this year. While this Bill is not the only element of the transposition, enacting the Bill before the house is an essential step in bringing our regime up-to-date, and ensuring that Ireland is in full compliance.
I do expect, however, that this area of law will continue to evolve as crime becomes increasingly sophisticated. Ireland has opted in to Directive 2019/1153 which enhances the use of financial information by giving law-enforcement authorities direct access to information about the identity of bank-account holders contained in national centralised registries. In addition, it gives law enforcement the possibility to access certain information from national Financial Intelligence Units (FIUs) – including data on financial transactions – and also improves the information exchange between FIUs as well as their access to law enforcement information necessary for the performance of their tasks. These measures will speed up criminal investigations and enable authorities to combat cross-border crime more effectively.
As members will be aware, there are already robust and extensive anti-money laundering laws in place in Ireland.
The existing Act (as amended) runs to almost 150 sections, with the majority of those sections concerning designated persons and their obligations.
However, at its heart is the offence defined in Section 7(1) of the 2010 Act. A person commits a money laundering offence if they, among other things, use, conceal, disguise, transfer, acquire, convert or remove from the State, the proceeds of crime. This applies if the person knows or believes that they are handling the proceeds of crime, or is reckless as to whether they are doing so. It is important to bear this offence in mind. While the other aspects of the regime support the prevention and detection of money laundering, and apply in a differentiated way to specific cases, it is open to no-one to recklessly facilitate money laundering.
This legislative framework is supported by a strong operational capability. There is a range of bodies active in combatting money laundering and terrorist financing, including An Garda Síochána’s National Economic Crime Bureau, the Criminal Assets Bureau, the Central Bank, and my own department. The Anti-Money Laundering Steering Committee brings together the relevant departments and agencies to coordinate the national response to risks relating to money laundering and terrorist financing. In its most recent evaluation report for Ireland, the FATF found that Ireland has a generally sound and substantially effective legal and institutional anti-money laundering framework. This new legislation will update and enhance that framework, and will address many of the remaining gaps identified in the evaluation.
I will now briefly set out the key points of the Bill by section.
Sections 1 to 3 contain provisions which update various definitions in the principal Act to bring it into line with the definitions used in the Fifth Directive. In particular, section 3 provides for the definitions of the new entities that will be considered ‘designated persons’ under the Act. This includes new definitions of property service provider, virtual asset service provider and custodian wallet provider.
Section 4 amends section 25 of the 2010 Act and brings the new entities under the designated person provisions who are required to apply AML measures in the course of their business. These new designated persons include letting agents, virtual asset service providers and high-value art dealers and intermediaries in that trade.
Section 5 amends section 33 of the 2010 Act and provides for a number of technical amendments including an obligation to carry out Customer Due Diligence (CDD) when required to contact the customer under any other enactment.
Section 6 amends section 33A of the 2010 Act and provides for lowering the value limits for carrying out simplified due diligence on e-money instruments. This means that a person supplying e-money instruments, such as a pre-paid card, will be required to conduct CDD when the value of the requested card is €150 or higher. The existing threshold is €250.
Section 7 amends section 35 of the 2010 Act and provides that where a designated person is entering a business relationship with another entity, they must take steps to obtain the relevant information from the Register of beneficial ownership of trusts, corporate entities or financial vehicles, as appropriate and must not engage in that business relationship until the relevant information is obtained. By way of derogation, a financial institution is allowed to open an account ahead of obtaining the information but cannot allow any transactions on that account.
Section 8 amends section 36A of the 2010 Act to give effect to a technical amendment to the wording of the Directive in respect of which transactions require further examination.
Section 9 amends section 37 of the 2010 Act to provide for the Minister for Justice, with the consent of the Minister for Finance, to issue guidance to competent authorities on the prominent public functions that will give rise to a person being designated as a “politically exposed person” (PEP). The amendments will also allow a designated person to continue to monitor someone who was previously designated a PEP so long as a money laundering risk exists in connection with their previous designation.
Section 10 makes a technical amendment to section 38 of the 2010 Act to more clearly define the relevant relationship.
Section 11 amends section 38A of the 2010 Act and provides for a detailed list of enhanced due diligence measures that the designated person is required to apply when dealing with a customer established, or residing, in a high-risk third country.
Section 12 makes a technical amendment to section 40 of the 2010 Act in respect of information to be received from a relevant third party.
Section 13 places a requirement on the Financial Intelligence Unit (FIU Ireland) to provide, where practicable, feedback in respect of suspicious transaction reports made to them. This reflects existing administrative practice.
Section 14 amends section 51 of the 2010 Act and provides for a defence to proceedings in relation to “tipping-off” where the designated person can prove that the entity to whom the information was disclosed was a specified financial institution, which is connected to the designated person or part of the same group structure.
Section 15 makes a technical amendment to section 55 of the 2010 Act in respect of record-keeping.
Section 16 amends section 58 of the 2010 Act and prohibits credit or financial institutions from creating anonymous safe deposit boxes.
Section 17 amends section 60 of the 2010 Act and assigns the supervising ‘competent authority’ for the new ‘designated persons’ under the amendments to section 25. The amendment also provides for the Legal Services Regulatory Authority to become the competent authority for barristers in the State following an agreement with the Bar Council.
Section 18 amends section 63B of the 2010 Act and provides for additional measures in respect of cooperation between competent authorities in different Member States.
Section 19 amends section 63D of the 2010 Act and updates the provisions relating to the persons employed by competent authorities in line with updates in the Fifth Directive.
Section 20 inserts a new section 63E into the 2010 Act. The new section provides that each competent authority establish effective and reliable mechanisms to encourage the reporting of breaches of the Act. The section also requires a competent authority to provide a secure communication channel for such reporting.
Section 21 amends section 65 of the 2010 Act and provides for additional detail which is to be included in the annual money-laundering reports of self-regulating bodies, for example the Law Society or relevant accounting bodies.
Section 22 makes a technical amendment to section 84 of the 2010 Act.
Section 23 repeals and replaces section 101 of the 2010 Act. The section inserts new provisions for the establishment of a Trust or Company Service Provider Appeal Tribunal. This is designed to establish one permanent Trust or Company Service Provider Appeal Tribunal, improve independence and transparency of the recruitment process for members of the Tribunal and strengthen the independence and impartiality of the Tribunal. The winding down of the current Appeal Tribunal and its replacement with this section will be managed by the commencement of this section, as and when appropriate.
Sections 24 and 25 amend and update the risk factors set out in Schedules 3 and 4 to the 2010 Act. The amendments are to provide for the relevant updates in the Fifth Directive.
Section 26 provides for the short title and commencement provisions of the Act and this is a standard provision.
I note for the information of the House that I may move Committee Stage amendments in respect of certain technical matters. In particular, consideration is currently being given to the appropriate treatment of providers of virtual asset services. This is a fast-moving area and recent recommendations in relation to it have been made by FATF.
In conclusion, this Bill reflects an evolution and an enhancement of the existing AML framework to reflect recent developments and is part of an ongoing process.
It will act as a further tool to combat global organised crime, to protect our financial system, and to ensure that we meet the highest international standards.
Combatting such crime is a government priority and I look forward to hearing Members’ views and to the passage of this legislation through the House.
I commend this Bill to the House.
ENDS