The final text of the 3rd EU Anti-Money Laundering Directive (the “3rd Directive”) was formally adopted on 20 September and came into force on 15 December 2005. Member States have until 15 December 2007 to implement its provisions into national law. In addition to the financial and insurance sectors, the 3rd Directive applies to lawyers, notaries, accountants, real estate agents, casinos, trust and company service providers, and all providers of goods (whenever payments are made in excess of EUR15,000). The 3rd Directive imposes new requirements and consolidates, into one document, the 1st and 2nd EU Anti-Money Laundering Directives. Indeed, some Member States have already enacted certain parts of the 3rd Money Laundering Directive into national law, e.g. criminalising the financing of terrorism.
The 3rd Directive builds on existing EU legislation and incorporates into EU law the June 2003 revision of the Forty Recommendations of the Financial Action Task Force (FATF), the international standard setter in the fight against money laundering and terrorist financing. During the final stages of adoption by the European Commission the Internal Market and Services Commissioner Charlie McCreevy said: “I am delighted that close cooperation between the European Parliament, the Council and the Commission has enabled the swift adoption of this crucial Directive which will boost the fight against terrorist financing and organised crime as well as preventing damage to the stability and reputation of the financial sector and the single market. These are top political priorities for the EU and I congratulate all parties on this final adoption.”
The 3rd Directive requires credit institutions, financial institutions and other persons regulated for money laundering purposes to: (a) identify and verify the identity of their customer and of its beneficial owner and to monitor transactions with the customer, while taking into account a risked-based approach; (b) to report suspicions of money laundering and terrorist financing to their national authorities; and (c) to take supporting measures, such as record keeping, training of personnel and the establishment of internal policies and procedures. The 3rd Directive is completed with a section on supervision and monitoring by national authorities. Member States must establish appropriate penalties where those regulated for (anti) money laundering and (anti) financing of terrorism purposes fail to meet their obligations.
In response to calls from the regulated community, the European Commission released a working document on the 3rd Directive seeking comments by 21 October 2005 to 16 questions on customer due diligence (CDD). For example the EU Commission asks ‘would the application of the risk based approach in connection with normal CDD procedures be in your view enough for institutions and persons covered by the directive to deal normally with the low risk situations’ (see Question 1). The European Commission also asks a range of questions on the preferred approach to identifying business relationships with Politically Exposed Persons (‘PEPs’) and their family and associates. In particular, readers are asked whether a close list of categories of persons should be established in helping the regulated community identify business relationships with PEPS, their families and associates. (See Question 8).
To whom does the 3rd Directive apply?
The 3rd Directive is applicable to the financial sector as well as lawyers, notaries, accountants, real estate agents, casinos, trust and company service providers. Its scope also encompasses all providers of goods, when payments are made in cash in excess of €15,000.
Those subject to the 3rd Directive must:
· Identify and verify the identity of their customer and of its beneficial owner, and to monitor their business relationship with the customer;
· Report suspicions of money laundering or terrorist financing to the public authorities, usually, the national financial intelligence unit; and
· Take supporting measures, such as ensuring proper training of the personnel and the establishment of appropriate internal preventive policies and procedures.
When will Ireland adopt the 3rd Directive into local law?
The Irish Minister for Justice, Equality and Law Reform published the Criminal Justice (Money Laundering and Terrorist Financing) Bill 2009 on 28th July 2009. The Irish Government has not yet publicly stated the date by which Ireland will comply with the requirements of the Directive, however the Act was signed into law in May 2010. Even though the Act was passed by the Irish Parliament, the Minister has discretion to set the actual commencement date. Thus firms may get some breathing space between the publication of the Act and the date of its commencement. We understand it is intended to commence the Act with effect from 15 July 2010. Ireland cannot drag its feet on this matter. On 16 October 2008 the EU Commission launched infringement proceedings against Ireland (Spain, Belgium and Sweden) for failing to implement the 3rd EU Money Laundering Directive. This did not come as a surprise in Ireland as we were warned on 18 July 2008 by the EU that it would take action against Ireland unless we undertook action to quick and decisive action to implement the directive. As we did not take such action, we are now being sued by the EU Commission for our delay. Go to the top of this page for specific information and links on Ireland's progress to implement the 3rd EU Directive.
In general, the 3rd Directive and the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 will prohibit money laundering as well as terrorist financing offences which some Member States, such as Ireland and the UK, have already outlawed. In Ireland, our latest response to prohibiting financing of terrorism was the Criminal Justice (Terrorist Offences) Act 2005. The 3rd Directive (and the 2010 Act) is applicable not just the financial sector but also to many non-financial professionals (e.g. lawyers, notaries, accountants, auditors, tax advisors, trust and company service providers, real estate agents and casinos, as well as all providers of goods to the extent payments are made in cash in excess of €15,000). Excluding trust and company service providers, the other non-financial professionals referred to above were captured under the 2nd EU Anti-Money Laundering Directive which Ireland and the UK implemented in September 2003 and March 2004 respectively.
What is the main purpose of the new Criminal Justice (Money Laundering and Terrorist Financing) Act 2010?
The main purpose of this Act is to:
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transpose the Third EU Money Laundering Directive (60/2005/EC) into Irish law.
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ensure that Ireland complys with the recommendations of the third mutual evaluation report on Ireland of the Financial Action Task Force, (FATF).
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repeals and re-enact the current anti–money laundering legislation (i.e. Criminal Justice Act 1994 (as amended) and other statutes).
How will the new Act acheive its purposes?
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it contains 121 Sections.
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it consolidates all of Ireland’s anti money laundering legislation in a single statute.
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it increases the obligations on a wide range of legal persons, including credit and financial institutions, lawyers, accountants, estate agents, trust and company service providers, tax advisers and others in relation to money laundering and terrorist financing.
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it contains requirements on the part of designated bodies covered by the legislation, such as Banks, Lawyers, Accountants, Real Estate Agents, and dealers in high value goods, to identify customers, to report suspicious transactions to An Garda Síochána and the Revenue Commissioners and to have specific procedures in place to provide to the fullest extent possible for the prevention of money laundering and terrorist financing.
it provides that the categories of designated bodies (the new Act will use the term 'designated persons' instead of designated bodies) in respect of which there is no supervisory or competent authority, for example:
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the Law Society in respect of solicitors
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the Financial Regulator in respect of credit and financial institutions
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the Department of Justice Equality and Law Reform for tax advisers who are not accountants or solicitors, and dealers in high value goods (i.e. those who may receive cash receipts of €15,000 or more, e.g. people such as car and boat dealers, jewellers, art dealers and others).
A significant change introduced in this Act is the requirement for the designated persons covered by the Act to undertake specific effective customer due diligence measures at the outset of a business relationship and certain other measures during the course of the business relationship.
For the first time Private Member’s Gaming clubs will be included in the legislation and will be required to comply with all of the requirements of the money laundering and terrorist financing legislation and will be monitored by the Department to ensure compliance.
Compliance Ireland, Lower Ground Floor, 13 Adelaide Road, Dublin 2 -Phone: +353 (0) 1 425 5962 Fax: +353 (0) 1 633 5005 email: email@antimoneylaundering.ie
