Ireland must change PEP laws, failed to convict after money laundering trials, says FATF

The Financial Action Task Force (FATF) is pressuring Ireland to amend its legislative framework covering politically exposed persons (PEPs) and high-risk countries. The country has a strong money laundering offence but has failed to convict anybody of money laundering after a trial, or to prosecute a terrorist financing offence, the FATF said.

Ireland is only partially compliant with FATF recommendations on PEPs and correspondent banking, and non-compliant on high-risk countries, it said in its mutual evaluation report on anti-money laundering and counter terrorist financing measures in Ireland.

“FATF expects to see Ireland address all deficiencies identified in the report, in particular those identified as partially compliant and non- compliant, and it will be required to report on progress until it has done so,” a FATF spokeswoman said.

“If Ireland fails to address the deficiencies, this could lead to FATF taking action, which could ultimately harm the country’s international reputation and increase the cost of doing business there,” she said.

Top priorities

As top priorities, Ireland must focus on ensuring compliance with PEP obligations, and it should amend its legislative framework in relation to PEPs and high-risk countries, the report said.

Ireland should also pursue more actively terrorist financing prosecutions with a view to securing convictions, and should seek to prosecute a wider range of money laundering cases, the FATF spokeswoman said.

Ireland should enhance its efforts to pursue the proceeds of crime moved offshore, she said. It must review and strengthen its asset confiscation legislation. The country should also have more quantitative data in its risk understanding, and take further steps to give competent authorities access to beneficial ownership, the report said.

Conviction failure

Ireland has secured 22 money laundering convictions where the offender has pleaded guilty, but the complete lack of convictions after a trial may reflect reluctance by prosecutors to test the anti-money laundering laws or a conservative approach by the judiciary.

No prosecutions of terrorist financing offences have occurred, the report found. Where terrorist financing activities have been identified, the authorities pursued other offences under the general counter-terrorism legislation. The evidential requirements of the terrorism financing offence would seem difficult to prove beyond a reasonable doubt.

PEP and senior management

FATF has found the requirement on financial institutions to have risk-based procedures to decide whether a customer is a PEP does not cover foreign PEPs residing in Ireland. The PEP definition excludes domestic or international organisation PEPs.

There is no requirement to determine the beneficial owner of a life insurance policy or to inform senior management before a policy payout, or to consider making a suspicious transaction report, the report found.

Ireland also does not have requirements to obtain senior management approval for establishing business relationships with such customers, or determine the source of wealth and source of funds involved in the business relationship and to monitor this relationship.

FATF found that Ireland was only partially compliant with its recommendation on correspondent banking relationships. Enhanced measures apply only to respondent institutions outside the European Union.

Other areas of partial compliance include new technology. There is no requirement for financial institutions to undertake risk assessments specifically before launching new products or practices, and so no measures to manage the risks.

On wire transfers, another area of partial compliance, intermediary financial institutions are not required to have risk-based policies to decide when to execute, reject or suspend a wire transfer lacking originator or beneficiary information.

Ireland is only partially compliant with the FATF recommendation on internal controls and foreign branches and subsidiaries. There are numerous shortcomings on reporting entities’ internal controls, such as no explicit requirement for the appointment of a compliance officer.

On high-risk countries Ireland is non-compliant, lacking the measures which require applying enhanced due diligence measures involving a country where FATF has called for its members to apply them. Ireland lacks the ability to impose countermeasures.

Due diligence

On customer due diligence Ireland is partially compliant. There are deficiencies in provisions for customer due diligence, recordkeeping, PEPs and new technologies.
On transparency and beneficial ownership of legal arrangements, Ireland is partially compliant. Professional trustees must have information on beneficiaries and face sanctions for failure to comply with identification requirements, but this does cover cases where a private individual does so.

Ireland achieved some positive results in the report. It has a good understanding of the money laundering and terrorist risks it faces, the FATF spokeswoman noted. A strong point of the Irish system is good coordination between national authorities and with the private sector. Ireland has achieved good results in supervision and international cooperation.
Ireland recently adopted requirements for companies to gather and maintain information on beneficial ownership, the FATF spokeswoman said.

“Once fully implemented, this will enhance transparency and improve measures to combat money laundering and terrorist financing,” she said.

Published 13-Sep-2017 by
 Alex Davidson, Regulatory Intelligence

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