Introduction to Anti-Money Laundering
The law in Ireland on anti-money laundering (AML) and the countering of the financing of terrorism (CFT) is governed by The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended by Part 2 of the Criminal Justice Act 2013 (“the Act”). The Act transposes European Union Law on AML and CFT (the Third Money Laundering Directive (2005/60/EC) and its Implementing Directive (2006/70/EC)) into Irish Law.
The law on AML and CFT reflects, both at the European and Irish level, the recommendations made by the Financial Action Task Force (“FATF”), which is a specialist international organisation that concentrates on the international fight against money laundering and terrorist financing. Ireland has been a member of FATF since 1991.
The Central Bank of Ireland (the “Central Bank”) is the competent authority in Ireland for the monitoring and supervision of financial and credit institutions’ compliance with their obligations under the Act. The Central Bank is empowered to take measures that are reasonably necessary to ensure that credit and financial institutions comply with the provisions of the Act.
Key features of the Act
The Act sets out legal provisions to ensure technical compliance and effective implementation of international standards relating to AML and CFT. The Act:
- Defines broadly the offence of money laundering.
- Defines designated persons and beneficial owners that come under the provisions of the Act.
- Provides for Directions, Orders and Authorisations relating to investigations.
- Sets out customer due diligence, reporting, internal policies and procedures, training and record keeping requirements of designated persons.
- Provides for monitoring of designated persons.
Designated persons should adopt a risk based approach when carrying out its obligations under the Act.
Ireland is subject to monitoring by FATF of its international obligations concerning AML and CFT through mutual evaluation reviews. The next review of Ireland’s compliance with the FATF Recommendations is due to take place in 2016. See more about FATF and Ireland.
Anti-Money Laundering Explained
What is Money Laundering?
Money laundering is the process by which the proceeds of crime are ‘washed’ through the financial system in an effort to disguise their illegal origin. Money laundering involves:
- an underlying, profit-making crime (e.g. tax evasion, fraud, theft, organised crime, drug trafficking, embezzlement);
- an act to conceal, transfer or convert the proceeds of crime; and
- the person involved knows or ought to have known that the property is the proceeds of crime.
Why are Anti Money Laundering laws important?
Money laundering diverts resources away from economically and socially productive uses and can negatively affect a country’s financial system by undermining its stability. Weak anti money laundering (AML) controls will also have reputational consequences for a country’s financial system.
It is important that a country is seen as having robust AML regulatory framework with financial firms effectively implementing AML systems and controls as it dissuades criminals from targeting that financial system.
In order to combat money laundering, Irish and European law requires financial firms to ensure that they have information about their customers and to develop and maintain AML policies and procedures. This is to ensure that financial firms know who their customers are and what the nature of the business relationship is over the lifetime of that relationship. This will help prevent legitimate accounts from being used by anyone but the legitimate account holder and help prevent criminals setting up anonymous accounts to launder criminal proceeds.
It is important that Ireland, as a small, open economy with a thriving financial services industry, is an active participant in preventing its financial system from being used for money laundering.
Why must customer identification documentation be provided and kept up to date?
A financial services firm is obliged by law to seek identification and verification information from a customer when opening an account. This information is required to prevent money launderers from using the financial system to launder their ill-gotten gains and from compromising the customer’s account. By disclosing basic identification information and keeping this information up to date, a customer helps to ensure that his or her account is secure. By seeking customer information and keeping the information up to date, financial firms are ensuring that proper AML controls are in place and are preventing the Irish financial system from being used for money laundering.
Anonymous accounts or those with limited and/or outdated information allow money launderers to operate undetected in the financial system and exploit this weakness to turn their criminal proceeds into legitimate funds. If a customer does not disclose relevant information required by law, a financial firm is obliged under the AML laws to cease providing services to that customer and may ultimately have to discontinue the business relationship. Customers need to be aware of this as it may prevent accounts being used for everyday transactions such as receipt of payments (e.g. salaries, social welfare).
For general anti-money laundering and countering the financing of terrorism (AML/CFT) queries, please contact:
Anti Money Laundering Division,
Central Bank of Ireland,
PO Box 11517