On September 8, 2020, the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020 was initiated and presented to the house of Dáil Éireann, following the announcement in August that such bill was being prepared. The purpose of the act is to implement certain elements of 5th Anti Money Laundering Directive (5AMLD) into Irish legislation and amend the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, (“the Act”).
Despite the document being an early draft, the AML team has prepared a gap analysis and summary of the upcoming changes in Irish AML framework. Below are the main highlights that will affect the industry:
New Entities in Scope of the Act
The definition of a designated person has now been extended to cover:
- Providers engaged in exchanging services between virtual and fiat currencies;
- Art dealers and persons acting as intermediaries in the trade of works of art, including when carried out in an art gallery, auction house and in free port, but only in respect of transactions of a total value of at least €10,000; and
- Property service providers, now also in relation to letting of immovable property, but only if the monthly rent is at least €10,000; Previously, this definition related only to auctions, buying and selling of immovable property.
Customer Due Diligence (CDD)
Section 33 of the Act, explaining when CDD must be performed, has now been extended and includes a situation when “the designated person is obliged by virtue of any enactment or rule of law (…) to contact a customer for the purposes of reviewing any relevant information relating to the beneficial owner connected with customer”.
It has been confirmed that senior managing officials must now be identified and verified, if they meet the definition of the beneficial owner contained in the 4AMLD (Article 3 (6)(a)(ii)). Records of the actions taken, including any difficulties in gathering such documentation, must be recorded and stored by the designated person.
References to “information from relevant trust services as specified by the Electronic Identification Regulation” have been added throughout the Act, stressing the continued focus of the regulators on this entity type. Information gathered from trust services are now added as acceptable CDD documents in Section 33 (2) (a). In case of relationships based on the third-party reliance letter (‘Section 40 letter’), this information will now have to become part of the testing process (Section 40).
Electronic Payment Instruments (EPI)
CDD does not have to be performed in certain scenarios relating to EPI. Thresholds/limits on EPI (e.g. prepaid bank cards) have been lowered in the Bill –
- For EPI that cannot be used outside of the state and have monthly limit of transactions – limit has been lowered from €250 to €150;
- For EPI with a limit of maximum monetary value that can be stored on the instrument – CDD is not required if maximum limit on the instrument is €150 (previously €250 and €500 for cards that couldn’t be used outside of the state).
Credit and financial institutions are not allowed to accept payments with anonymous prepaid cards issued outside of EU member states, unless they meet criteria specified in the Act (inter alia the above thresholds). Failure to comply with this sub-section will be an offence (summary conviction – fine or imprisonment up to 12 months, conviction on indictment – fine or imprisonment up to five years).
Cross Check of Beneficial Ownership Register
Prior to onboarding a client/investor, the designated persons must ensure that beneficial ownership information is entered in the relevant beneficial ownership register. The designated person who is a credit or financial institution can open the account prior to checking the register, however no transaction can be processed by or on behalf of the client or beneficial owner before ascertaining that information.
Regulations have been added for all entity types, including trusts, companies, industrial provident societies, (ICAVs, credit unions and unit trusts).
Politically Exposed Persons (PEP)
There is a new category of PEP – “individual performing a prescribed function”. In the same section, permission has been given to the minister– to issue “guidelines to the competent authorities in respect of functions in the State that may be considered to be prominent public functions (…)”, therefore the long awaited list containing all public offices and their functions for the purpose of enhanced due diligence can now be created.
An interesting change has been brought about by the amendment in section 37, where a newly added subsection 4A states: “A designated person shall continue to apply the measures referred to in subsection (4) to a politically exposed person 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 politically exposed persons.” It shall be noted that the definition of PEP has not been changed and still notes a person who has been entrusted with a prominent public function at any time in the preceding 12 months. The subsection 4A will make it more difficult to strike off PEP from the PEP log, after being marked as PEP. We would expect that such process will have to be recorded and justified.
Customers From the EU List of High-Risk Third Countries
A prescriptive list of obligations when dealing with customers based in one of the EU high-risk third countries has now been added in the Act. “A designated person shall apply the following measures (…) additional to those specified in this chapter, when dealing with a customer established or residing in a high-risk third country:
- obtaining additional information on the customer and on the beneficial owner;
- obtaining additional information on the intended nature of the business relationship;
- obtaining information on the source of funds and source of wealth of the customer and of the beneficial owner;
- obtaining information on the reasons for the intended or performed transactions;
- obtaining the approval of senior management for establishing or continuing the business relationship;
- conducting enhanced monitoring of the business relationship by increasing the number and timing of controls applied and selecting patterns of transaction that need further examination.”
The Bill must now pass the general debate in the Dáil and the Seanad, who have 90 days to consider it and either pass, reject or return the Bill for amendments. Bearing in mind the technical nature of this document, we do not expect the document to undergo many changes.
Duff & Phelps provides a suite of fund and AML services. If you have any questions, please do not hesitate to get in touch with our specialized team of experienced consultants.