merrion street

A Cheann Chomhairle,

I am pleased to present the Criminal Justice (Money Laundering and

Terrorist Financing) (Amendment) Bill 2013 to the House today.

Introduction

The primary purpose of this Bill is to amend the Criminal Justice (Money

Laundering and Terrorist Financing) Act 2010 so as to align certain

provisions more closely with international standards, in particular those

contained in the recommendations of the Financial Action Task Force (FATF).

The Bill also aims to amend other provisions to reflect the experience

gained from the operation of the Act since 2010. The legislation which we

have in place to tackle money laundering and terrorist financing is already

robust, effective and of the highest standards. This Bill will merely

strengthen some of these provisions. I would ask the House for its

co-operation in ensuring the speedy passage of this Bill so that it may

become law by the middle of June. This will allow us to inform FATF at its

June Plenary of the legislative changes which have been made to the

existing statutory framework. It will also enable the introduction of

other necessary legislative measures which I intend to bring as amendments

to the Bill at subsequent stages of our deliberations.

The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010

which came into operation in July of that year represented a radical

overhaul of the system that was then in place. The Act responded to

changes in how crime is committed and how the proceeds of crime are

laundered. We all know that some criminals are quite sophisticated in the

way that they operate and adept at recognising opportunities for exploiting

financial systems for their own benefit. Money laundering by its nature

can be a quite complex crime; it happens in countries throughout the world

and does not respect national boundaries. It is a global phenomenon which

can only be addressed in any meaningful way with by an international

response.

Background to Changes Being Introduced

On both the European and wider international stage significant work has

been, and continues to be, carried out with the objective of preventing and

tackling money laundering. The Financial Action Task Force (FATF) is an

inter-governmental body whose purpose is the development and promotion of

policies to combat money laundering and terrorist financing. The FATF

standards (known formally as recommendations) are applied by its 36

members. Over 180 countries participate in its efforts through a global

network of regional bodies. As part of its mandate FATF carries out

evaluations of Member States’ compliance with its recommendations. Ireland

was evaluated in 2006 and placed in what is known as the regular “follow-up

process”. FATF reviewed the 2010 Act after its enactment and have suggested

a number of technical changes to it. In February 2011 the Department of

Finance (which represents Ireland at FATF) submitted an Action Plan to FATF

identifying action to be taken, including legislative amendments, to

resolve these issues. The amendments to the 2010 Act in the Bill are, in

the main, aimed at giving effect to those technical changes so that Ireland

can be removed from the “follow-up process” at FATF’s plenary in June.

This is an important step in protecting Ireland’s reputation as a good

place to do business and a country which enforces international standards

in preventing and tackling money laundering.

While the current Bill is essentially a technical tidying-up exercise I

would also like to mention the ongoing work at FATF and EU level which will

require us to revisit this area in the coming years.

In February, 2012 FATF revised its standards with the aim of strengthening

and protecting the systems in place to deal with money laundering and

terrorist financing. The European Commission has recently adopted a

proposal for the 4th EU Money Laundering Directive which, in the normal

way, will be the subject of discussions with Member States with a view to

adoption by the European Parliament and the Council of Ministers. The

purpose of this proposal is to replace the 3rd EU Money Laundering

Directive, strengthen the EU’s defences against money laundering, and to

give effect to the revised FATF recommendations.

Indeed the first meeting of the Council Working Group to consider the

proposal takes place next week under the Irish Presidency. I would like to

wish the Department of Finance officials involved every success in their

work.

Need for a Bill at this Time

The Bill under consideration today addresses FATF concerns with the current

legislation as evaluated under the old FATF recommendations. While it

would be preferable to legislate for the new recommendations now; that can

not be done until the final shape of the 4th EU Directive is known as it is

the 4th Directive which will give effect in EU law to the new FATF

recommendations. Neither can we afford to postpone making the amendments to

the 2010 Act contained in the current Bill. I am advised by the Department

of Finance that any prolongation of Ireland’s stay in the FATF “follow up

process” beyond June of this year could have negative consequences for our

international standing. This Bill is therefore an interim measure. It

provides for some technical adjustments to the 2010 Act to enhance our

compliance with current international standards, but we will have to review

the systems we have in place once the proposed 4th EU Directive is enacted.

Further Changes to Come

I would like, nonetheless, to mention some of the key elements of the

revised FATF recommendations and the EU proposals. They include a more

focused risk-based approach – this will require countries to understand the

money laundering risks they face and ensure the right systems are in place

to respond to them. It will necessitate the focused use of enhanced

Customer Due Diligence measures where there is higher risk.

I will digress briefly to explain that Customer Due Diligence refers to the

types of measures which banks and other designated persons must apply to

assure themselves as to the identity of a customer and the nature of their

business. People will be familiar with banks seeking some form of ID, such

as a passport, and proof of address, such as a phone bill, before opening

an account. In relation to commercial customers these measures might

include details of the ownership of a company and information on its

business model. May I apologise now for the use of abbreviations and

acronyms, but I think I will save the House considerable time if I refer to

CDD from now on instead of Customer Due Diligence.

Other aspects of the new FATF recommendations and the EU proposals are:

· More transparency in relation to ownership and control of companies,

trusts and other legal persons;

· Clarification of the rules on CDD to ensure a better knowledge of

customers and a better understanding of their business;

· Expansion of provisions dealing with Politically Exposed Persons to

cover national as well as in international organisations;

· Including tax offences as a predicate offence for money laundering;

and

· More effective international co-operation.

I mention the new EU proposals so the House may be aware of them, but also

because they touch on Politically Exposed Persons (or PEPs if I may be

excused another acronym). The 2010 Act already provides for PEPs who

reside outside of the State. PEPs include senior judges, ministers,

members of parliaments and senior officials. PEPs and their immediate

family members and close associates are subject to a number of additional

CDD measures. These measures include, for example, a requirement to

provide a designated person such as a bank with information on the source

of wealth and funds underpinning transactions. The Mahon Tribunal in its

final report recommended an extension of PEPs controls to domestic PEPs.

In its response to the Mahon Tribunal’s report the Government signalled its

acceptance in principle of the recommendations in this area. However, as

the proposed 4th Directive contains proposals on the extension of controls

to domestic PEPs, any Irish legislation on the issue will have to await the

enactment of the directive to ensure that it is properly compliant with the

finalised Directive.

Outline of Bill

I will now outline the provisions of the Bill which is a short Bill

consisting of only 10 sections.

Section 1 provides that “Act of 2010” means the Criminal Justice (Money

Laundering and Terrorist Financing) Act 2010. As I mentioned earlier the

Bill amends existing legislative provisions in that Act.

Section 2 provides for amendments to the definition of “occasional

transaction” which is contained in section 24 of the Act of 2010. The

current definition provides that an occasional transaction, in relation to

a customer of a designated person, means a single transaction or series of

transactions that are or appear to be linked to each other and the total

amount exceeds €15,000. The rationale for this definition is to ensure

that obligations in the Act such as CDD, which apply when there is a

business relationship, also apply once a transaction or series of

transactions reach this threshold. Section 2 of the Bill provides for the

lowering of this threshold in two situations, one relates to private

members’ gaming clubs where the value concerned in a transaction reaches

€2,000. Lowering the threshold aligns the amount more closely with the

approach taken in the 3rd Money Laundering Directive in relation to

casinos, although I would emphasise that these clubs are not casinos and

such a change does not affect their status.

The second relates to wire transfer funds and section 2 provides for the

application of the definition of “occasional transaction” in such cases

when an amount of €1,000 is reached, this will also apply to beneficial

owners. The current situation is that the threshold for “occasional

transactions” at which customer identification, including identification of

beneficial owners is required is €15,000. While Council Regulation

1781/2006 on information on the payer accompanying transfers of funds

requires money transmitters to obtain information on the sender (name,

address, account or other identification number) for any transmission of

€1,000 or more, this does not include beneficial owners. This amendment

will provide that identification of customers and beneficial owners must be

carried out for amounts of €1,000 or more in the case of wire transfer of

funds.

Section 3 amends section 33(1)(c) of the Act of 2010. Section 33 forms

part of Chapter 3 of Part 4 which deals with Customer Due Diligence (CDD)

and sets out the circumstances when CDD measures must be taken, for

example, when establishing a business relationship with a customer where

existing documentation or information may not be adequate. The purpose of

the amendment in the Bill is to align the wording contained in section 33

(1)(c) more closely to international standards. It will not result in any

substantial changes to obligations in the Act. It provides that CDD

applies prior to carrying out any service for the customer if the

designated person has reasonable grounds to suspect that the customer is

involved in, or the service, transaction or product is for the purpose of

money laundering or terrorist financing.

Sections 4 & 5 amend sections 34 and 36 of the Act of 2010 which relate to

the application of simplified CDD. The Act provides that a designated

person is not required to apply the CDD measures specified in section 33(2)

if the customer or product is a specified customer or specified product, as

defined in section 34. Such customers and products are considered to be at

low risk for money laundering or terrorist financing, hence the approach

that the full range of CDD measures are not required. However, it is

important to note that the monitoring obligations still apply in such cases

and simplified CDD cannot be applied if there is a suspicion of money

laundering or terrorist financing or where there are doubts about the

veracity or adequacy of information or documentation previously obtained.

The purpose of the amendments is to make it explicit in the legislation

that a designated person must take the necessary measures to establish that

the particular customer or product is one to which such provisions can be

applied.

Section 6 amends section 37 of the Act of 2010 which deals with Politically

Exposed Person’s (PEPs). This provision applies to a PEP residing outside

of the State who has been entrusted with a prominent public function at any

time in the preceding 12 months. A designated person is required to apply

enhanced CDD measures to such persons, which includes obtaining approval

from senior management before entering into a business relationship and

determining the source of wealth and funds. The amendments to section 37

contained in section 6 provide that such measures must also be applied to

an existing customer who becomes a PEP. It also explicitly provides that

enhanced ongoing monitoring must be applied to all PEP customers. I

propose to bring forward some drafting and technical amendments at

committee stage to clarify the provision further.

Section 7 amends section 39 of the Act of 2010 which deals with the

application of additional CDD measures, i.e. enhanced CDD, to a customer or

beneficial owner where there is a higher risk of money laundering or

terrorist financing. The current legislative provision provides for the

option of applying enhanced CDD by the designated person. The amendment to

section 39 provides that enhanced CDD must be applied by the designated

person where it has reasonable grounds to believe that there is a

heightened risk of money laundering or terrorist financing. This approach

is also reflected in the amendments contained in section 54 (policies and

procedures).

Section 8 amends section 54 of the Act of 2010 which deals with the

internal policies and procedures that a designated person must put in place

with a view to preventing and detecting money laundering and terrorist

financing. In addition to the general obligations contained in section 54,

certain issues are specifically mentioned in order to highlight their

importance and to ensure that action is taken in relation to them. Section

8 provides for the inclusion of policies and procedures dealing with the

additional measures to be taken in accordance with section 39, i.e.

enhanced CDD and also dealt with in section 7 of this Bill. It also

includes a specific requirement for designated persons to implement

policies and procedures in relation to keeping their customers’

documentation and information up to date and in relation to any potential

risks arising from technological developments.

Section 9 amends section 71 of the Act of 2010 to extend the type of

directions that a “State competent authority” may issue to a designated

person, thereby increasing and improving existing enforcement powers.

Section 71 currently provides that a State competent authority may, by

notice in writing, direct a designated person for whom it is a competent

authority to discontinue or refrain from specified conduct. The new

provision will enable a State competent authority to also issue ‘positive’

directions, i.e. to direct a designated person to take specific actions or

establish specific processes or procedures that in the opinion of the State

competent authority are reasonably necessary for the purposes of complying

with any specified provision in this Part of the Act. The new provision

will also now provide that such directions may be issued to a class of

designated persons. This power will enable State competent authorities to

recognise and cater for the different compliance issues that might arise as

between the different businesses or sectors for which they are responsible.

Proposed Amendments to Bill to be Introduced at Committee and Report Stages

I intend to introduce a number of amendments to deal with the threat to

life and property posed by explosive devices which make use of mobile

communications technology in their construction or activation. As this

issue is not directly related to money laundering, it may necessitate a

change in the title of the Bill to something more general, such as the

Criminal Justice Bill 2013. The purpose of these amendments will be to

allow for a direction to issue to mobile communications service providers

to cease service provision in a limited geographical area in order to

prevent death or damage to property. The provision will contain safeguards

to ensure that any interference with services is limited to the extent

necessary to deal with the threat. As these provisions are outside of the

scope of the current title of the Bill, it will be necessary to amend the

title of the Bill. In order that the full house will have an opportunity

to consider these new elements of the Bill, I am advised that they should

be introduced at Report Stage rather than at the Select Committee.

In addition to those proposed amendments, I hope that it may be possible to

bring forward as committee stage amendments, some provisions which were

contained in the general scheme as published last year. Because of the

pressure on the Office of the Parliamentary Counsel arising from the

increased burden of Troika-related legislation, it was not possible to

include them in the Bill as originally published. Their inclusion in the

list of Committee Stage amendments is still subject to that caveat. These

amendments include:

· a provision to transfer the authorisation and monitoring of Trust or

Company Service Providers (TCSPs) which are subsidiaries of credit

or financial institutions to the Central Bank;

· an amendment to the existing record keeping provisions so that

records may be stored outside the State;

· An amendment to section 17 of the Act of 2010 dealing with court

orders;

· an amendment to section 35 of the Act of 2010 in relation to

monitoring of unusual complex transactions; and

· amendments to sections 104 & 109 dealing with the registers for TCSPs

and Private Members’ Gaming Clubs.

In conclusion, I look forward to hearing the contributions of deputies

during this debate and I hope that the House will support the passage of

the Bill. I commend this Bill to the House.