Making Ireland Fully Compliant

The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (the ‘Act’) was signed into Irish law by the President on 5 May 2010 and will become effective as and from 15 July 2010.

The Act represents a significant transformation and strengthening of Ireland’s current anti-money laundering legislation.[1] It imposes additional requirements and obligations on persons and firms in the manner in which they approach the threat of money laundering and terrorist financing under the current legislation.

The principal aims of the Act can be defined as follows:            

• to transpose the terms of the Third EU Money Laundering Directive (2005/60/EC) into domestic Irish legislation;
•  to consolidate the existing money laundering legislation in a single statute; and
•  to ensure compliance with the recommendations of the Financial Action Task Force (FATF), and in particular the provisions of its mutual evaluation report conducted in 2006 on Ireland’s attempts to combat money laundering.

Money laundering offence

The offence of money laundering is relatively unchanged from the definition contained in the Criminal Justice Act 1994.

Section 7 provides that a person will commit an offence of money laundering if he knowingly or recklessly engages in certain activities as set out in that section in relation to property that is the proceeds of criminal conduct. Such activities include concealing or disguising the true nature, source, location, disposition, movement or ownership of the property, converting or transferring the property or bringing the property to or from the State.

However, a significant amendment is the insertion of a new definition of ‘criminal conduct’ in Section 6 of the Act, which is defined as follows: conduct that constitutes an offence; or conduct occurring in a place outside the State that constitutes an offence under the law of the place and would constitute an offence if it were to occur in the State.

This is a more expansive definition than in the Criminal Justice Act 1994 which focused on serious conduct of an indictable nature. Therefore any conduct which constitutes an offence, however serious, may be subsumed within the remit of the Act.

This illustrates a strengthened approach to combating money laundering and removes any potential challenges as to whether an offence is deemed sufficiently serious to fall under the legislation.

Designated persons

Section 25 of the Act contains a definition of ‘designated persons’ to whom the provisions of the Act apply. Under this definition credit institutions, financial institutions, auditors, external accountants, tax advisers, solicitors, barristers, trust or company service providers and others are ’designated persons‘ under the Act.

The Minister for Finance, the Central Bank and Financial Services Authority of Ireland and the National Treasury Management Agency are specifically excluded from the scope of the definition.[2] 

The Act places obligations on ‘designated persons’ in relation to money laundering and terrorist financing controls.

The Act obliges ‘designated persons’ to:

• identify customers and to undertake customer due diligence in business dealings;
• to report suspicious transactions to An Garda Síochána and the Revenue Commissioners; and
• to have procedures in place for the prevention of money laundering and terrorist financing including record keeping, staff training and the maintenance of appropriate controls.

Section 60 of the Act provides for the monitoring of designated persons by competent authorities to ensure compliance with the anti-money laundering requirements. The Law Society of Ireland is formally identified as the competent authority for solicitors in Ireland, whilst the Central Bank and Financial Services Authority of Ireland are responsible for credit institutions and financial institutions.

Due diligence and risk-based approach

One of the principal changes introduced by the Act is the introduction of a risk based approach to the threat of money laundering and terrorist financing offences.  

Under Section 33, client identification obligations will be applicable in the following set of circumstances:

1. prior to the establishment of the business relationship with the customer;

1. prior to carrying out an occasional transaction with, for or on behalf of the customer or assisting the customer to carry out such an occasional transaction;

1. prior to carrying out any transaction for the customer, if there are reasonable grounds to believe that there is a real risk that the customer is involved in money laundering or terrorist financing offences; or

1. prior to carrying out any service for the customer where there reasonable grounds to doubt the veracity or adequacy of documentation previously obtained in order to verify the accuracy of the customer’s identification.

The designated persons will be required to adopt due diligence procedures in relation to the identification of customers depending on the assessment of the level of risk involved.   A two tier approach will operate with simple due diligence where there is a low risk of money laundering offences and enhanced due diligence where there is a high risk of such offences.

The Act also introduces new obligations on designated persons to take steps to identify any beneficial owners of the named customer (eg, companies, trusts and estates of deceased persons). The definitions of beneficial owners are contained in Sections 26 to 30 of the Act.

Trust or company service providers

The Act introduces an authorisation requirement to carry on the business of a trust or company service provider (TCSP). Applications for authorisation must be made by the 15 July 2010 on an official form. It will be an offence to carry on the business of a trust or company service provider without an authorisation from the Minister. An application fee will apply.Trust or company service provider services are defined in the Act as:

1. forming companies or other bodies corporate;
2. acting as a director or secretary of a company under an arrangement with a person other than the company;
3. arranging for another person to act as a director or secretary of a company;
4. acting, or arranging for a person to act, as a partner of a partnership;
5. providing a registered office, business address, correspondence or administrative address or other related services for a body corporate or partnership;
6. acting, or arranging for another person to act, as a trustee of a trust
7. acting, or arranging for another person to act, as a nominee shareholder for a person other than a company whose securities are listed on a regulated market.

This authorisation requirement does not apply to persons whose TCSP activities are already subject to supervision or regulation by the Financial Regulator, a designated accountancy body, the Law Society of Ireland or the General Council of the Bar of Ireland.The Minister is granted significant powers in relation to the granting, amending and revoking of authorisations. However, certain specified decisions of the Minister are appealable under Section 100. Section 106 requires the holders of authorisations to keep certain records, and a failure to do so will result in the committing of an offence.

Full compliance

The Act puts in place specific procedures on a legislative basis to provide for the prevention of money-laundering and terrorist financing.

While Ireland already had effective anti-money-laundering and anti-terrorist-financing legislation in place, the Act is designed to ensure full compliance with all of the requirements of the Third EU Money Laundering Directive and with the recommendations of the FATF.

[1] Principally contained in the Criminal Justice Act 1994 and supplemented by the Criminal Justice (Terrorist Offences) Act 2005.

[2] The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, Section 25(3).

Cormac Brennan
Cormac Brennan is a solicitor and tax advisor, and a Partner in O’Connell Brennan Solicitors, Dublin. O’Connell Brennan is a boutique private client law firm, established in 2012 by Susan O’Connell and Cormac Brennan following the demerger of the private client practice of McCann FitzGerald Solicitors.