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Anti-Money Laundering & Countering the Financing of Terrorism - 4th July 2018

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Combining over 20 years experience in Regulatory ComplianceWe offer tailored Regulatory Solutions for SME’s

Provided by our Multi-disciplinary team of Qualified Professionals

Who We Are

Consultancy▪ Multi-disciplinary on-site reviews ▪ Policies and Procedures▪ DPO Services (Data Protection Officer)

Training▪ In-person (either in-house or off-site)▪ Self-paced online▪ Instructor-led Webinars

Areas of Expertise▪ Anti-Money Laundering▪ Data Protection (including GDPR)▪ Consumer Protection

Regulatory Solutions▪ Authorisations (e.g. CBI)▪ Regulator visit preparation▪ Client Interaction

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Session Agenda

AML & CFT in Ireland◼ General Context

◼ Legislation – Who does it apply to?

◼ New Developments - 4th EU AML Directive

◼ Risk Assessment

◼ Customer Due Diligence

◼ Suspicious Activity Reporting

◼ Enforcement

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Recent Irish News

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Recent Irish News

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CBI Enforcement

▪ Fined €443,000

Breaches:

▪ defective controls to protect client assets against fraud;

▪ inadequate policies and procedures in relation to Suspicious Activity

▪ Failed to provide its staff with appropriate training; and

▪ Failed to ensure that an employee, was fit for the relevant role.

THE LAW

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Legislation

▪ Criminal Justice (ML&TF Offences) Act 2010

▪ Amended by the Criminal Justice Act 2013

New:

▪ Criminal Justice (ML&TF)(Amendment) Bill 2018

- Transposing the 4th EU AML Directive

Future:

▪ Then…. the 5th Directive!

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Who does it Apply to?

CJ(ML&TF Offences) Act 2010 as amended

Competent Authorities

Designated Persons

Customers

Gardai/Revenue/CAB

Prosecution/Confiscation

Central Bank of Ireland

Supervision/Inspection/ Enforcement

Retail Intermediaries

Procedures to Risk Assess / Identify / Monitor / Report

Customer = Individual clients, Beneficial Owners of Transactions, Corporate Directors and Beneficial Owners

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▪ Financial Advice

▪ Life Products

▪ Investment Products

▪ Pensions ▪ (although Employee Pension Schemes where payments are deducted from

wages are deemed to be very low risk)

Does NOT apply to General Insurance – motor, property, etc.

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What Broker Services?

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▪ Risk Assessment▪ Company

▪ Customer

▪ AML & CFT Procedures

▪ Training

▪ CDD – Identify and verify Identity▪ PEP Screening

▪ Beneficial Owners

▪ Ongoing Monitoring

▪ Suspicious Activity Reports

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Obligations of Designated Persons

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▪ 4th EU AML Directive Changes:▪ Greater Focus on Risk Assessment

▪ Simplified Due Diligence effectively Abolished!

▪ Irish PEP’s now brought into Enhanced CDD regime

▪ Countries of Equivalence List Abolished!

▪ 5th EU Directive Proposed changes:▪ Crypto-currencies

▪ Greater powers for Financial Intelligence Units

▪ Public access to Beneficial Ownership Registers

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New Developments

Risk Assessment

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Company Level

Central Bank of Ireland expectation:

Standalone Risk Assessment Document that addresses ALL relevant AML and CFT risks

your Firm faces.

Guidance Notes 2012 – suggested relevant risk areas to focus on for Risk Assessment. New Legislation goes further.

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Not Forgetting the NRA…

October 2016 (likely to be updated over time)

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NRA - Intermediaries

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New Legislation - Risk Assessment MANDATORY

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New Legislation - Risk Assessment

(a) National Risk Assessment(b) Guidance from a Competent Authority(c) EBA, ESMA or EIOPA Guidance, where relevant

The Business Risk Assessment MUST be:

(3) Documented(4) Kept up to date(5) Approved by Senior Management(6) Made available to Competent Authority

FAILURE = OFFENCE

Customer Due Diligence

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CDD

You MUST Identify and Verify the Identity of your Customers and their Beneficial Owners

Individuals:Information – Name, DOB and AddressDocuments – Photo ID:

• Passport• Driver’s Licence• Other ID Card with Photo

- Address:• Utility Bill• Bank Statement• Phone Bill?

Companies:Information – Legal Name, Registered Address,Documents:

• Certificate of Incorporation• Constitutional Document• Shareholder List• Directors List• Beneficial Ownership Register?

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Other Information required

• Source of Funds• PEP Status• Source of Wealth for Higher Risk

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When Must you apply CDD?

1. Prior to Establishing the Business Relationship

2. For Occasional Transaction over €10,000 3. If you believe the customer is seeking

services for ML or TF purposes or is involved in ML or TF

4. If any doubt arises as to the Adequacy or Veracity of previously obtained CDD.

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Politically Exposed Persons

Definition generally includes:• Members of Parliaments• Some Judges• Senior Members of Defence Forces

4th EU AML Directive adds:• Members of International Governing Bodies• Resident PEPs

Suspicious Activity Reporting

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Requirement

S.41 & s.42 CJ(ML&TFO) ACT 2010 as amended

▪ You MUST report to the Gardai and Revenue Commissioners ‘As soon as Practicable’ where you:

◼ Knows, suspect or have reasonable grounds to suspect◼ on the basis of information obtained in the course of carrying on business as a

designated person◼ that another person has been or is engaged in an offence of money laundering

or terrorist financing

Use GoAML System to report to Gardai but you still have to print and post report to the Revenue Commissioners.

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Examples

• Level of investment in multiple or single product(s) doesn’t match client's economic profile

• Client shows more interest in the cancellation or surrender of an insurance contract than in the long-term results of investments or the costs associated with termination of the contract• Client cancels investment or insurance soon after purchase• Early redemption takes place in the absence of a reasonable explanation or in a significantly

uneconomic manner

• A customer purchases products with termination features without concern for the product’s investment performance

• Client accepts very unfavourable conditions unrelated to his or her health or age

• A customer purchases a product that appears outside the customer’s normal range of financial wealth or estate planning needs

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Examples

Client wants to use CASH for a large transaction

Client has small policies or transactions based on regular payment structure makes a sudden request to purchase a substantial policy with a lump sum premium

Client proposes to purchase an insurance product using a cheque drawn on an account other than his or her personal account

Overpayment of a policy premium with a subsequent request to refund the surplus to a third party

The first (or single) premium is paid from a bank account outside the country

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Statistics (2016)

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Statistics

Enforcement

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Appian Asset Management Ltd – June 2018

Fined €443,000

Breaches:

▪ defective controls to protect client assets against fraud;

▪ inadequate policies and procedures in relation to Suspicious Activity

▪ Failed to provide its staff with appropriate training; and

▪ Failed to ensure that an employee, was fit for the relevant role.

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Intesa Sanpaolo DAC – November 2017

Fined € 1,000,000

Breaches:

• Risk assessment didn’t include ML/TF risks specific to business.

• Procedures for ECDD on PEPs deficient.

• No procedures for making STRs without delay.

• No mechanism for regular review of Policies and Procedures.

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Bank of Ireland – May 2017

Fined €3,150,000

Breaches:

• Failing to report 6 suspicious transactions without delay

• Inadequate Risk Assessment

• Inadequate application of Enhanced CDD to correspondent banking relationship

• Reliance on Third Parties where s.40 conditions not met

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AIB plc – April 2017

Fined €2,275,000

Breaches:

▪Failing to report suspicious transactions without delay

▪Failures around identification and verification of existing customers who predated the Irish AML/CFT laws effected in May 1995 (‘Pre-95 customers’)

▪Procedures in relation to Trade Finance

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End of Session

Any questions or comments?

Contact Us:

RegSol IrelandPh 01 425 5962 info@RegSol.ie

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