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| Financial Law Update | Back to article summary. |
The end is in sight for the implementation of the Third Anti Money Laundering Directive |
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| Joe Beashel |
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| Notwithstanding the fact that the deadline for transposition of the Third Money Laundering Directive 2005/60/EC (the 'Directive') was 15 December 2007, Ireland has yet to implement its provisions and is now facing infringement proceedings by the European Commission. A bill to implement the Directive was published on 28 July 2009 and it has moved slowly through the legislative process since. However, the long road to implementation turned a corner on 14 January 2010 when the main review part of the legislative process, a select committee of the Dail, made several amendments to the draft legislation. With the transposition date now looming, designated bodies (soon to be called 'designated persons') should be working towards implementation. | ||
| Background On 28 July 2009, the Department of Justice, Equality and Law Reform published the Criminal Justice (Money Laundering And Terrorist Financing) Bill 2009 (the “Bill”), the purpose of which is to transpose the Directive into Irish Law and provide for one consolidated piece of legislation in Ireland covering the prevention of money laundering and terrorist financing. The Bill seeks to address the recommendations from the 2006 Financial Action Task Force report on Ireland which examined how the anti money laundering and combating the financing of terrorism measures in place at that time could be strengthened.
Select Committee Amendments While the publication of the Bill is certainly welcome it is disappointing to note that very few changes that have been proposed by various interested parties have in fact been accepted. The Minister for Justice Equality and Law Reform has indicated that some amendments may be accepted at the next stage of the process, the report stage. Among the matters to which such consideration may be given is the issue of the categories of entities which qualify as relevant third parties for the purpose of the Bill; the circumstances where reporting of suspicious transactions may not be required; the issue of the status of moneys paid as legal fees in the context of the provisions of the Bill and the provisions regarding trust and company service providers. The report stage is likely to be the last part of the process where any significant changes may be made and it is hoped by the Department of Justice Equality and Law Reform to have the legislation passed by Mid-March. In my view the only significant changes are: The addition of firms authorised under the Investment Intermediaries Act 1995 as 'designated persons'. This will correct the rather glaring omission from the original draft that would have excluded large parts of the domestic financial services industry and the international investment funds sector from the scope of the legislation. The clarification that payment institutions authorised under the Payment Services Directive will come within the scope of the legislation. Other changes include the following: The penalty for the main offence of money laundering, which is the most serious included in the Bill, has been amended so that if convicted on indictment it will carry a custodial sentence of up to 20 years as opposed to 14 years. The penalty for failure to comply with the various other provisions in the Bill has been increased from 5 years to 10 years. The Garda in certain circumstances can apply to the District Court for an order to suspend any specified transaction or service for a specified period where there is a suspicion of money laundering or terrorist financing. The period originally envisaged for the duration of such an order was 21 days, however, this has been increased to a maximum period of 28 days. A credit institution will be permitted to open an account, pending the verification of the customer in question as a Politically Exposed Person ('PEP'). As a PEP is someone who, by definition, is not resident in this State, the information as to his or her precise status is not always readily available to the credit institution. New Requirements for Trustees and Corporate Service Providers The Bill provides for an authorisation and registration procedure for persons carrying on the business of a 'trust or company service provider' which is defined as 'any person whose business it is to provide any of the following services: (a) forming companies or other bodies corporate; (b) acting as a director or secretary of a company under an arrangement with a person other than the company; (c) arranging for another person to act as a director or secretary of a company; (d) acting, or arranging for a person to act, as a partner of a partnership; (e) providing a registered office, business address, correspondence or administrative address or other related services for a body corporate or partnership; (f) acting, or arranging for another person to act, as a trustee of a trust; (g) 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.' The definition is extremely broad and far-reaching. It would appear that all corporate service providers are caught by the definition and also, possibly, independent directors of SPVs and regulated funds. The Bill provides that an individual, body corporate or partnership may apply to the Minister for an authorisation and sets out the application procedure to be followed. The applicant must satisfy the Minister that the proposed holder of the authorisation, or in the case where the proposed holder is a body corporate or partnership, any 'principal officer' (ie, any director, manager, secretary or similar officer) of such entity, or any person who is, or is proposed to be, a beneficial owner of the business, is a 'fit and proper person'. Once an authorisation has been granted by the Minister, the authorisation remains in force, unless revoked, for a period of 3 years from the date on which it comes into force. An application for the renewal of an authorisation should be made not less than 10 weeks before the end of the period for which it was granted. Each application must be accompanied by the prescribed fee (if any). Conclusion After an extraordinarily long delay, it looks like the Directive will soon be implemented. While it is anticipated that the legislation will be enacted by mid-March, it is not yet clear whether an implementation period will be provided for and we would recommend that those affected by the Bill plan around an early implementation date. |
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Joe Beashel is a partner in the Asset Management and Investment Funds Group and Head of Regulatory Risk and Compliance Group at Matheson Ormsby Prentice and can be contacted on +353 1 232 2000 or by email: joe.beashel@mop.ie Further information on Matheson Ormsby Prentice is available at www.mop.ie |
