By Caitlyn Buchanan, 13th May 2021
The new Criminal Justice (Money Laundering and Terrorist Financing) Amendment Act 2021 commenced into Irish law in April 2021. The Act makes amendments to the AML Criminal Justice Act 2010 and transposes the majority of the Fifth EU Anti-Money Laundering Directive (5AMLD) into law.
This new anti money laundering legislation has a significant impact on the onboarding of new clients for ‘Designated Persons’ including Accountants, Solicitors, TCSPs and some Central Bank regulated firms such as Virtual Asset Service Providers.
New Obligations for a Designated Person – Beneficial Ownership
Prior to taking on new customers, designated persons now have an obligation to check the RBO register when onboarding new clients. A designated person is required to ascertain that the beneficial ownership information of a customer has been entered in the relevant register:
- An entity’s Express Trust Register
- The Central Register of Beneficial Ownership of Companies and Industrial Provident Societies
- The Central Register of Beneficial Ownership of Irish Collective Asset-management Vehicles, Credit Unions and Unit Trusts.
In cases where the beneficial owner is recorded as a ‘senior managing official’, a designated person is required to verify the identity of that person and keep records of the steps taken in the verification process. It is also important to document any difficulties encountered when attempting to identify a senior managing official.
Designated persons are not to engage in any business until the beneficial ownership information is obtained. However, if a designated person is a financial institution, an account may be opened for the client, but no transactions can be processed until the necessary information has been obtained.
Outstanding Items in the Anti Money Laundering Legislation
The New Anti-Money Laundering Legislation will transpose the majority of 5AMLD in Irish law, however, there are a few notable elements that remain outstanding:
- A Central Register of Bank Accounts – The Department of Finance has reported that preparations are underway.
- A Central Register of Beneficial Ownership of Express Trusts – The Act lays the groundwork but enabled regulations are still required.
- PEP Definition extended to include ‘prominent public functions’ – The Minister for Justice must issue guidelines in respect of these specific functions in Ireland. These will feed into an EU-wide list of recognised functions overseen by the European Commission.
What are the main changes under the Criminal Justice Amendment Act 2021?
1. Obligations for Virtual Asset Service Providers
Arguably the most significant new feature is the extension of the AML regulatory regime to Virtual Asset Service Providers (VASPs). The following obligations for entities that provide services relating to virtual assets commenced on 23rd April 2021:
- VASPs are obligated to register with the Central Bank for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) purposes.
- VASPs must carry out compliance obligations including a business risk assessment and undertake ongoing customer due diligence.
- VASPs must file suspicious transaction reports with Financial Intelligence Unit (FIU) Ireland and the Revenue Commissioner if money laundering or terrorist financing is known or suspected.
The Central Bank of Ireland defines VASPs as firms that provide any of the following services relating to virtual assets:
- Exchange between virtual assets and fiat currencies.
- Exchange between one or more forms of virtual assets.
- Transfer of virtual assets – moving a virtual asset from one address or account to another.
- Custodian wallet providers.
- Participation in and provision of financial services related to an issuer’s offer or the sale of a virtual asset.
The Central Bank of Ireland (CBI) is to maintain the Register of Virtual Asset Service Providers. The CBI also holds supervisory power to ensure the firm’s AML/CFT policies and procedures are effective, and that the firm’s management and beneficial owners are fit and proper.
2. Extended Definition of a Designated person
The following are considered a ‘Designated Person’ under the Act and must comply with AML/CFT obligations.
- Virtual Asset Service Providers (VASPs)
- Tax Advisers – this includes any person whose principal business activity is to provide material aid, assistance, or advice on tax matters.
- Letting Agents – in respect of transactions for which the monthly rent is at least €10,000.
- High-value Art Dealers and Intermediaries – in respect of transactions of at least €10,000 in value.
3. Beneficial Ownership of Express Trusts
As previously stated, the Act lays out the groundwork but new regulations are required for the beneficial ownership of express trusts. The Act sets out further definitions regarding trusts; a ‘relevant trust’ will be subject to regulations while “excluded arrangements” including pension schemes, retirement funds and employee share schemes will be exempted. A beneficial owner of a trust is defined as a natural person(s) who falls within any of the following categories in respect of an express trust; a settlor of the trust, trustee of the trust, protector of the trust, a beneficiary under the trust, or a person who exercises ultimate control over the trust by ownership or other means.
4. Politically Exposed Persons (PEPs)
The Act has expanded the definition of a PEP to include “any individual performing a prescribed function”. As stated above, the Minister for Justice has not yet provided guidelines in respect of these specific functions. The Act also broadens the reach of AML/CFT measures to include a PEP’s family members and close associates. Under the Act a ‘Designated Person’ is permitted to continuously monitoring someone who was previously considered a PEP; they may be required to account for continued risk until that person is no longer considered a risk.
5. Co-operation between EU Member States
A section was inserted into the AML Criminal Justice Act 2010 by the European Union AML Regulations 2019. The change requires competent authorities between member states to take steps to cooperate with each other and share AML information (where it is not prevented by national law).
The Future of AML: A New AML Authority
The EU commission ultimately seeks to achieve comprehensive Anti Money Laundering Legislation across all EU Member States. This would include the creation of a single AML rulebook and EU-level supervisory body to support the coordination of financial intelligence units. By achieving cohesive AML reform across all States would be a major advantage for multinational institutions as they wouldn’t need to adjust their AML processes to the particular needs of each regulator. However, achieving a single standard across the EU it is expected to take at least two years of preparation once the current legislation has been implemented. It has been speculated that if the European Commission were to make the proposition in the first half of 2021, followed by 18 months of discussions, we could see expect to see the establishment of a new AML Authority in the first half of 2024.
Should you have any questions about the AML obligations of Irish companies or ‘Designated Persons’ please don’t hesitate to Contact Us or call +353(0)1 6461625. A member of our Company Secretarial team would be happy to assist you.
Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.