The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 (the Act) was signed into law on 18th March 2021, by Michael D. Higgins, President of Ireland. The Act amends the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2010 as amended (the CJA 2010) to incorporate the requirements of Directive (EU) 2018/843 (“Fifth EU Money laundering Directive” or “5AMLD”) into the existing legislative framework. A number of the amendments are particularly relevant to the Funds Industry, highlighting requirements around beneficial ownership, customer due diligence, PEPs and High-risk third countries.
Below are some of the key changes introduced by the Act that will impact the Fund’s industry.
Customer Due Diligence
Access to data on the beneficial owners of trusts, ICAVs and Companies will be accessible without any restrictions to competent authorities, Financial Intelligence Units, the professional sectors subject to AML rules and will be accessible to other persons who can demonstrate a legitimate interest.
- The Act requires that where a beneficial owner is a senior managing official (as defined under 4AMLD), a Designated Person (DP) 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.
- Prior to the establishment of a business relationship with a customer, a DP must confirm that information concerning the beneficial ownership of the customer is entered into the beneficial ownership register.
- Customer accounts can be opened before ascertaining that the beneficial ownership information is on the register, as long as the DP ensures that transactions are not carried out.
Politically Exposed Persons (PEP)
- The definition of a PEP has been broadened to include “any individual performing a prescribed function”.
- There is now a requirement for Member states to maintain a list of what are considered ‘prominent public functions’ (e.g. Heads of Government departments, elected ministers etc.)
- The Minister of Justice may provide guidelines to the competent authorities in respect of roles that are considered to be prominent public functions.
- The Act also notes that DPs must continue monitoring someone who was previously a PEP until such time where there is no continuing or further risk.
The Act updates Schedule 4 of the CJA 2010 to include a number of additional risk factors:
- Where a customer is a third country national who applies for residence rights or citizenship in the State in exchange for capital transfers, purchase of property or government bonds or investment in corporate entities in the State.
- Transactions related to oil, arms, precious metals, tobacco products, cultural artefacts, and other items of archaeological, historical, cultural and religious importance, or of rare or scientific value, as well as ivory and protected species.
- Non-face-to-face business relationships or transactions, without certain safeguards.
EU High Risk Third Countries
High Risk Third countries are identified by the EU as jurisdictions outside the EU having strategic deficiencies with regard to AML/CFT controls. Firms must carry out Enhanced Due Diligence (EDD) measures when dealing with customers established or residing in high-risk third countries.
Firms must ensure they collect additional information on the following:
- Customer & Beneficial Owner
- Nature & Purpose
- Source of Funds & Source of Wealth of the customer and beneficial owner
- Purpose of Transaction
- Other requirements include the following:
- Approval of Senior Management for establishing or continuing the business relationship
- Conducting enhanced monitoring of the business relationship by increasing the number and timing of controls applied and selecting patterns of transactions that need additional investigation
The Act proposes a slight relaxation of the requirement for DPs to examine the background and purpose of transactions which are complex or unusually large by providing that a DP shall do this “as far as possible”.
Suspicious Activity Reporting
The Act proposes that the Irish Financial Intelligence Unit (FIU) shall, where practicable, provide timely feedback to DPs who have submitted a suspicious transaction report.
The Act has been updated to allow a DP (being a credit institution, financial institution, majority-owned subsidiary, or a branch of a credit or financial institution) to make a disclosure to an entity within the same group structure and to allow for sharing of information relating to suspicious transactions within the Group.
Reporting Breaches to Competent Authority
The Act has been amended to include a new section in order to encourage the reporting of potential and actual breaches of the 2010 Act. Each Competent Authority is responsible for establishing effective and reliable mechanisms to encourage the reporting of potential and actual breaches of the Act and to provide one or more secure communication channels for persons reporting the matters. Competent authorities must ensure that the channels of communication can also be used by persons to report any threats or retaliatory or hostile actions they are subjected to for reporting suspected breaches of this Act.