Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2018

10 May 2018



A Cheann Chomhairle

I move that the Bill be read a second time.

I am pleased to introduce this Bill to the House. The purpose of this important piece of legislation is to transpose in large part the Fourth EU Money Laundering Directive. It will also bring Irish law into line with the recommendations of the Financial Action Task Force, an international standard-setting body.

We know that by targeting the proceeds of crime we can remove the incentive for the commission of acts of serious and organised crime. Crime such as human trafficking, drug trafficking and fraud. That is why we make it a crime to help to disguise or transfer the origin of illegal gains. That is why we have set up bodies like CAB to freeze monies obtained through criminal activity. We know that these measures are very effective.

But internationally it is recognised that preventative measures also play an important role. In the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 and before that in the Criminal Justice Act 1994, we have required gatekeepers such as banks and other businesses which can be used for money laundering or terrorist financing to take certain actions.

They have to know their customers. They have to monitor their transactions for suspicious activity. And when they do see something suspicious, they have to report it.

Money laundering and terrorist financing are cross-border phenomena. We have a globalised, open economy and criminals will exploit this to move proceeds from one country to another. For this reason the European Union has long had legislation in this area. Internationally, the recommendations of the Financial Action Task Force are applied by 35 member jurisdictions. The FATF monitors and evaluates compliance by those members.

The EU legislation and the FATF recommendations are frequently being updated to reflect new trends and ensure they are still relevant. It is the Fourth Directive, Directive 2015/849, that is being transposed by this Bill. The Bill amends the 2010 Act to bring it in line with the new Directive.

I would emphasise that there is already robust and extensive anti-money laundering laws in place in Ireland. The existing 2010 Act runs to 122 sections, with 82 of those sections concerning designated persons and their obligations. 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, the Criminal Assets Bureau, the Central Bank, and my own Department. The Anti-Money Laundering Steering Committee brings together 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.

As well as ensuring that Ireland fulfils its EU and international obligations, this Government is committed to tackling white collar crime in all its forms. This Bill forms part of the package of measures announced last November that I, together with the Ministers for Finance and Business, Enterprise and Innovation, are working on to combat white collar crime.

Indeed, the Minister for Finance and his officials share responsibility for the transposition of this Directive. As well as its role in preventing crime, anti-money laundering legislation is aimed at protecting the integrity of the financial system. The Department of Finance has been working closely with my officials on this Bill and are drawing up their own legislation to transpose provisions of the Directive on beneficial ownership of trusts and bodies corporate.

Before turning the individual provisions of the Bill, which is complex and multi-faceted, I would like to give a general overview of its contents.

The main change brought about by the Bill is a more pronounced switch to a risk-based approach. This means, first of all, that the businesses concerned (which the legislation calls designated persons), must assess the risks of money laundering and terrorist financing involved in carrying out their business. They must have policies and procedures in place to mitigate these risks. They must determine the risk attaching to each customer or transaction, on a case-by-case basis, taking into account relevant factors. And they must then carry out whatever due diligence measures are warranted by that level of risk. This represents a more targeted and therefore more effective application of measures by the designated person.

The proposed law also recognises the reality that many businesses today operate in group structures across borders. It makes a number of amendments in this regard.  The Bill expands on requirements on Irish companies to ensure that their subsidiaries overseas apply high anti-money laundering standards. If a group implements policies and procedures properly, its subsidiaries are not subject to some restrictions that normally apply in respect of high-risk third countries.

The amendments made by the Bill also extend the scope of existing obligations in other ways. For example, some measures which previously only applied to banks will now apply to other financial institutions. There are extra measures that must be applied to the beneficiaries of life assurance policies. Measures applying to politically exposed persons will now apply to those resident in Ireland as well as those resident abroad.

Of great importance in the global fight against money laundering and terrorist financing is the role of the financial intelligence unit. The financial intelligence unit in Ireland is part of An Garda Síochána. It is responsible for receiving suspicious transaction reports from designated persons and analysing them, so that it can be used to combat crime. The Directive expands the remit of the financial intelligence units. It requires them to have access to all of the information they need to carry out their functions. Taking into account the transnational nature of money laundering, it emphasises cooperation and information sharing between the financial intelligence units of different Member States. All of this is provided for in the Bill.

Turning now to the individual provisions of the Bill:

Sections 1 and 2 contain the usual provisions setting out the short title and commencement provisions and the interpretation section.

Sections 3, 4 and 5 amend the definitions in the Act of 2010. For the most part, this is to bring them into alignment with the definitions in the Directive. In many cases, references to financial services legislation are being updated. An important amendment is that which lowers the threshold for the application of the Act to high-value goods dealers. Currently they come within the Act if the value of the goods is over €15,000. This amendment will bring that down to €10,000. There is an amendment in section 5 relating to legal professionals, to make it clear that the Act only applies to them where they are carrying out certain services. This amendment was previously made by the Criminal Justice Act 2013 but was not commenced as a technical change needed to be made.

Sections 6 to 9 amend the definitions of “beneficial owner” to bring them in line with the new Directive. When carrying out customer due diligence, a designated person must also check the identity of any beneficial owner associated with the customer. This includes, for example, a major shareholder in a company or the beneficiary of a trust. The definition of beneficial owner will now be broader than under current law. It will include, for example, the trustee of a trust.

Sections 10 to 19 are the core provisions of the Bill. Section 10 inserts two new sections in the 2010 Act concerning risk. Designated persons will now be explicitly required to carry out an assessment of the risks of money laundering and terrorist financing inherent in carrying out their business. They are also required to assess the risk of money laundering and terrorist financing in relation to a customer or transaction taking into account factors like the purpose of an account or the regularity of transactions. They have to have regard to guidance and the national risk assessment. Sections 11 to 19 concern customer due diligence. Section 33 of the 2010 Act contains the main obligations to identify and verify the identity of customers and beneficial owners. Some small changes are made to that section. For example, there are additional requirements relating to the identification of the beneficiaries of life assurance policies. There is an exception to the rule that designated persons must cease carrying on business with a customer if they cannot carry out customer due diligence, that applies to legal and other professionals in certain circumstances.

Simplified due diligence can be carried out where the customer is considered to be low risk. If simplified due diligence is applied, the designated person must keep a record of the reasons for applying it and carry out sufficient monitoring. There is also a specific exemption for electronic money which applies under certain conditions.

On the other hand, where there are factors suggesting high risk, extra measures must be taken. Customers in what are deemed to be high-risk third countries are one such category. Politically exposed persons are another. As I mentioned, at the moment if a bank or other designated person has a customer who holds certain important public offices, and they are resident abroad, the designated person must take extra precautions. They must get senior management approval for the relationship and check the source of funds and wealth. This also applies to the family members of these people. The need to combat corruption requires paying special attention to these persons. In this Bill, as required by the Directive, these provisions are being extended to politically exposed persons resident in Ireland, so they will also be subject to these checks. This will include, for example, T.D.s and senior judges.

But the need for caution will not stop at these specific categories. Designated persons will have to take an overall view of their customer and apply additional measures if necessary. Failure to do so will now be an offence punishable by an unlimited fine and up to 5 years in prison.

Section 20 of the Bill makes some changes to the circumstances where a designated person can rely on a third party to carry out customer due diligence.

Sections 21 to 23 concern the functions of Ireland’s financial intelligence unit or FIU. The financial intelligence unit is part of An Garda Síochána. These sections place their functions on a statutory footing. They give the FIU the powers to obtain information that it needs to tackle money laundering and terrorist financing. Under this Bill, the FIU can also give information on request to certain bodies. It can share information with FIUs in other Member States. The FIU and the Revenue Commissioners will have the power to obtain additional information from a designated person after the person has reported a suspicious transaction.

Section 24 amends section 51 of the 2010 Act. This concerns the offence of “tipping off”, in other words, telling someone that they are being investigated for money laundering. This alters one of the defences to the offence so that it applies where financial institutions share the information within a group.

Section 26 relates to the policies and procedures that designated persons must put in place to prevent and detect money laundering and terrorist financing. The new section expands on the matters that must be included in these policies. They must, for example, have policies on measures to be taken to prevent the risk which may arise from new technologies.

Sections 27 and 28 concern record keeping. Section 27 allows An Garda Síochána to require that a designated person retain records relating to customer due diligence beyond the current five-year period, if they are required for the investigation or prosecution of money laundering or terrorist financing. Designated persons must delete any personal data held solely for the purposes of this section after the end of the retention period. Section 28 extends an existing requirement in relation to keeping information on business relationships.

Sections 29 and 30 require a group of companies to have common anti-money laundering policies. If an Irish company has a subsidiary in another country, it must ensure that it applies adequate anti-money laundering measures. If the subsidiary is in another EU Member State, it has to make sure that it complies with local anti-money laundering laws. If it is in a third country where the laws do not allow the implementation of the group’s policies and procedures, it must take additional measures. And if these measures do not address the risk, action can be taken by the competent authority.

Section 31 extends a prohibition on entering into a correspondent relationship with a shell bank, so that it now applies to all financial institutions.

Section 32 makes an amendment which will make the Legal Services Regulatory Authority a State competent authority, which means they have extra supervisory powers for money laundering purposes.

Section 33 substitutes the section creating a defence of due diligence to the offences under this part of the Act. There is no longer provision for guidelines to be made to be taken into account here.

Section 34 inserts a section which requires certain designated persons to register with the Central Bank. This is for entities which the Central Bank supervises for money laundering purposes but which are not otherwise authorised by or registered with them.

Section 35 amends the penalties that can be applied by the Central Bank under its administrative sanctions procedure, to bring them in line with the Directive. As well as its usual penalties, it can impose a €5 million monetary penalty on a natural person for breaches of certain provisions of money laundering legislation. It can also impose a penalty of twice the benefit obtained from the breach.

Section 36 substitutes Schedule 2 to the 2010 Act which lists some of the financial services and activities subject to the Act.

Sections 37 and 38 set out the factors that must be taken into account in determining whether there is a low or high risk.

Section 39 repeals certain provisions of existing law and section 40 makes consequential amendments to other legislation.


In conclusion, this Bill is of great importance. By enhancing Ireland’s already extensive money laundering regime, 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.

I commend this Bill to the House.