The AML Update All Financial Service Providers in Ireland Must Consider

The implementation of the Fifth Money Laundering Directive (5AMLD) into Irish law is long overdue. Despite the implementation deadline of January 2020, the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 (CJA 2021), was only signed into law by the President on 18 March 2021 and came into effect on 23 April 2021.

We provide a high level overview of the key areas that regulated financial service providers (RFSPs) should be aware of.

The CJA 2021 amends the anti-money laundering/counter terrorist financing (AML/CTF) framework in Ireland, namely the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 and amends the scope of regulation and the regulatory requirements.

The implications of the CJA 2021 are far reaching and as the Central Bank of Ireland has stated that AML/CTF is a key area of focus for 2021, RFSPs should closely adhere to their regulatory requirements.

New Designated Persons

The CJA 2010 introduced regulatory requirements for those who fall within the scope of the regulations (Designated Persons).

The CJA 2021 provides for new Designated Persons, namely:

• Virtual asset service providers

• Letting Agents

• High Value Art Dealers

• Tax Advisors

Virtual Asset Service Providers (VASPs)

The most significant change introduced by the CJA 2021 is the extension of the AML/CTF regime to entities that provide or intend to provide certain virtual asset services including any of the following services relating to virtual assets:

• An exchange between virtual assets and fiat currencies

• An exchange between one or more forms of virtual assets

• The transfer of virtual assets, i.e. conducting a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another

• Custodian wallet provider, and

• Participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset or both

VASPs will be required to register with the Central Bank for AML/CTF purposes.

In order for the Central Bank to approve an application it must be satisfied that:

• The VASP’s AML/CFT policies and procedures are effective in combatting the AML/CFT risks associated with its business model, and

• The VASP’s management and beneficial owners are fit and proper

The Central Bank will maintain a register of VASPs.

Letting Agents

Previously, only Property Services Providers (PSPs) engaging in the auctioning of property other than land, or engaging in the purchase or sale of land were subject to the provisions of the CJA 2010. The CJA 2021 now brings PSPs letting land and engaging in property management services within the scope of regulation under the CJA 2010.

Letting and property management agents must now comply with the provisions of the CJA 2010 and develop AML policies and conduct training on AML to meet the regulatory requirements of the CJA 2010.

Enhanced CDD

The CJA 2021 provides a list of additional measures that Designated Persons should apply when dealing with customers established or residing in a high-risk third country. This involves obtaining additional information on:

• The customer and beneficial owner
• Their sources of funds and sources of wealth
• The intended nature of the business relationship, and
• The reasons for the intended or performed transactions

Designated Persons are also required to obtain senior management approval for establishing or continuing the business relationship, and must conduct enhanced monitoring of the business relationship by increasing the number and timing of controls applied, in addition to selecting patterns of transactions that need further examination.

Beneficial Ownership

Beneficial Ownership Checks

Prior to the establishment of a business relationship, a Designated Person is required to ascertain that information concerning the beneficial owner of a customer is entered into the relevant Beneficial Ownership Register.

The CJA 2021 amends the requirements of Section 35 of the CJA 2010 requiring all Designated Persons to obtain information on the beneficial ownership if the beneficial owner of the customer is an express trust.

Verification of Identity of Senior Managing Officials

The CJA 2021 requires that where a beneficial owner is a senior managing official, a Designated Person shall take the necessary measures to verify the identity of that person and shall keep records of the actions taken to verify the person’s identity including any difficulties encountered in the verification process.

Politically Exposed Persons (PEPs)

The CJA 2021 introduced amendments to the requirements for PEPs including:

• Permitting Designated Persons to continue to monitor someone who was previously a PEP, once a risk is still posed by that person and only until they are no longer considered a risk

• Widening the definition of PEP to include “any individual performing a prescribed function”, and

• Empowering the Minister for Justice, with consent of the Minister for Finance, to issue guidelines to the competent authorities, in respect of functions in the State that is considered to be prominent public functions

“Tipping off” defence

The CJA 2021 amends the defence to tipping off under the CJA 2010 to make provision for the sharing of information relating to suspicious transactions in group situations.

Electronic money & anonymous safe-deposit boxes

The CJA Act has lowered the value limits for carrying out CDD on e-money instruments (such as pre-paid cards) from €250 to €150.

The CJA 2021 also dispenses with the €500 limit exemption for domestic electronic payment instruments, reduces the cash redemption limit from €100 to €50, adds an additional requirement that a transaction cannot exceed €50 if initiated by means of a remote payment transaction and prohibits credit or financial institutions from creating anonymous safe-deposit boxes.

Conclusion

Any RFSP impacted by the changes introduced by the CJA 2021 will need to assess their business and update their AML/CFT policies and procedures to take account of the new requirements under the CJA 2021.

In addition, VASPS will need to review or put in place their AML/CTF frameworks to ensure that they will be in a position to comply with the new requirements imposed under the CJA 2021. VASPs must also be ready to submit their application for registration to the Central Bank by the end of July. We can assist VASPs with each step of this process.

We can assist RFSPs with ensuring their current practices are in line with current Irish and European sectoral requirements and this may include:

1. Assessing business models

2. Conducting a review of any existing AML/CFT policies and procedures

3. Providing training to the Board of Directors/ Senior Management on new and existing AML/CTF obligations, and

4. Ensuring that all in scope services are compliant with the regulatory framework

If you have any queries, please contact a member of our Financial Regulation or Investment Funds teams.

The content of this article is provided for information purposes only and does not constitute legal or other advice.