Anti money laundering compliance

Anti money laundering compliance. © Copyright 2022 | Legal Training Services.

What is money laundering?. (Oxford University Press, 2005) Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the "clean" money to the launderer in an obscure and indirect way.

Predicate crime. Money laundering usually refers to the legitimising of monies generated from the offences such as the following: Terrorist offences Kidnapping Prostitution Extortion Drug trafficking Smuggling – arms, people, goods Bribery, corruption.

The money laundering process usually consists of three stages: (1) placement; (2), layering; and (3) integration. Placement comprises of the division of illegal funds into various entities which may include bank accounts, companies, overseas banking systems or nominee entities. At the layering stage, due diligence measures assist designated persons in the carrying out of their roles by providing available information on customers activities being investigated. At the integration stage, the money is now integrated into the legitimate economic financial system and is assimilated with all other assets within the system.

Legislative controls and procedures required to be implemented to prevent money laundering Traditionally only applied to banks/credit institutions Extended to solicitors in 2003.

Why do we need anti-money laundering law?. Preventative Based on putting in place a range of defensive measures intended to mitigate the risk of money laundering occurring in the first place; and, in instances where money laundering does occur, to ensure that significant dissuasive sanctions are applied In Ireland, terrorist financing is also criminalised within the money laundering legislative framework and compliance controls apply equally to both.

Solicitors (Money Laundering and Terrorist Financing) Regulations 2020.

Section 25 of the 2010 Act. A designated person Includes ‘independent legal professional’ – solicitor Legislation places obligations on a designated person to take steps to ensure that their business is not being used for money laundering or terrorist financing purposes.

Is it mandatory?. Yes! Section 30A of the 2018 Act places a mandatory obligation on designated persons to carry out a risk assessment which identifies and assess the risks of money laundering and terrorist financing involved in the carrying out of their business activities..

Legislative sources. 6 Anti Money Laundering Directives Criminal Justice (money laundering and terrorist financing) Act, 2010 Criminal Justice Act, 2011 Criminal Justice (money laundering and terrorist financing) Amendment Act, 2018 European Union (anti money laundering: beneficial ownership or trusts) Regulations 2019 Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021.

What is customer due diligence?. Customer due diligence refers to the client: Identification; Verification; and, Monitoring. The rationale for conducting CDD is to find out: Who the client and beneficial owners are What the client does Whether or not client is engaged in criminal activity.

Customer due diligence. Generally involves the following: Verify client’s identity Verify identity of beneficial owners Obtain information on purpose/intended nature of business relationship Conduct ongoing monitoring.

Types of Customer Due Diligence. Simplified (section 34) Enhanced (sections 37 & 39) All other categories (‘standard’) (sections 33 – 35) Third Party reliance Allowed under section 40 of the 2010 Act but responsibility still lies with designated person.

Simplified customer due diligence. Designated persons may use simplified customer due diligence in relation to certain categories of customer and business which represent a low risk of money laundering. This does not represent a total exemption from the normal rules. There are specific, simplified measures which must be taken for the simplified CDD. Designated persons to not have any discretion to add to the categories specified under the Act..

Simplified customer due diligence. Three categories of business: Specified customers Specified products; and, Beneficial owners of pooled accounts held by notaries/ independent legal professionals Where the business falls into one of these categories, designated persons are not required to conduct CDD other than sufficient checks to satisfy themselves that the business qualifies for simplified CDD..

Enhanced Customer Due Diligence. More onerous customer due diligence procedures. It applies to three categories of business: Politically exposed persons (“PEPs”) Correspondent banking relationships; and, Circumstances where there is a higher risk of money laundering or the financing of terrorism..

Reporting Obligations. Section 42(1) – Report to Revenue and Gardaí knowledge or suspicion As soon as practicable Failure to do so is an offence Section 46(1) – legal privilege protection No requirement to disclose information that is subject to legal privilege.

Indicators of suspicious transactions. Activities which make no obvious economic or commercial sense The use of non-resident accounts or structures where they appear to be unnecessary Activities which appear to fall outside the ordinary range of services requested or are inconsistent in Designated Person’s view.

Red flags. Excessively obstructive or secretive client Client has an unusual level of AML requirements Client is reluctant or vague regarding identity documents Purpose of instructions, services and transactions are unclear Transactions involve unusual levels of funds Transactions involve areas outside Ireland Transactions relate to offshore business activities.

The Money Laundering Reporting Officer (MLRO). Not required but strongly recommended P rovides oversight for the firm’s AML procedures Acts as a focal point for related inquiries A protective role Reports to Gardaí and Revenue Commissioners Senior position reporting to AML executive Designs relevant policies and procedures, record-keeping, filing internal and external reports, and ensuring customer due diligence is performed.

Record Keeping obligations. Section 55 of the 2010 Act All CDD documents (originals/copies to he retained) All services/transactions to be recorded & retained All risk assessment notes Gardaí may direct production of records – inf furtherance of investigation Required to retain records for 5 years.

Internal policies and procedures. Section 54(1) requires a designated person to have in place internal policies, controls and procedures to prevent and detect the commission of money laundering and terrorist financing Section 54(3) Sets out the policies and procedures required What exactly are the policies and procedures required to address?.

Training. Section 54(6) – designated person must ensure that those involved in the conduct of their business are: instructed on the law relating to money laundering and terrorist financing, and provided with ongoing training on identifying a transaction or other activity that may be related to money laundering or terrorist financing, and on how to proceed once such a transaction or activity is identified..

Failure to comply with s.54 obligations. A designated person who fails to comply with obligations contained in s.54 commits an offence and is liable: on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months (or both), or on conviction on indictment, to a fine or imprisonment for a term not exceeding 5 years (or both). (section 54(15)).

The role of the Law Society. Section 63 - extends the Law Society’s powers under the Solicitors Acts to include Solicitor’s Accounts Regulations and/or examination of their file Society must ‘effectively monitor’ solicitors’ compliance Solicitors (Money Laundering and Terrorist Financing) Regulations 2020.

Familiarity with Guidance Notes Familiarity with legislation Appoint a MLRO Appoint a Compliance Officer Review letter of engagement (include AML) Assess Risk Profile Conduct Risk Assessment Draft formal written risk mitigation document Communicate policy/procedure to staff Organise training.

Guidance for solicitors ‘Anti-Money Laundering Guidance’ Law Society of Ireland – 2018 Guidance and 2021 update Updates - sanctions and high risk countries – situation in Ukraine https://www.dfa.ie/media/dfa/ourrolepolicies/irelandintheeu/2022-02-24-UkraineSanctionsInformation-Note.pdf Additional reading Conor Duff, “Dirty Money” - an overview of the Irish Anti-money laundering Landscape, Commercial Law Practitioner (CLP), 26(5) 2019.

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