anti money laundering the legislation and the requirements

In Association with:-

Online CPD for Accountants & Professional Advisors

Anti Money Laundering - the Legislation and the

Requirements

Presenter: Michelle Kane - OmniPro

CPDStore.com Unit 3, South Court, Wexford Road Business Park, Carlow.

Block D, Iveagh Court, 5 – 8 Harcourt Road,

Dublin 2. 059 9183888 01 4110000

www.OmniPro.ie www.CPDStore.com

A Personalised CPD Certificate of Completion will be forwarded to you upon completion of this course. These notes do not serve as proof of completion alone.

Anti Money Laundering

Legislation – EU Third Money Laundering Directive transposed

into Irish Law

– The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010

Criminal Justice (ML &TF) Act 2010

• In broad terms this Act– Defines the offence of money laundering

– Requires designated persons to identify non-domestic politically exposed persons (PEPs)

– Requires identification of beneficial owners of legal entities such as companies and trusts

– Focuses on the level of risk of money laundering

– Requires Central Bank and Financial Services Authority to monitor credit and financial institutions under this act

• The CCABI through the Institute’s have published new Guidance in the form of a Revised M42 Statement

OmniPro Education & Training 1


Designated Persons

• Accountants in practice are ‘designated persons’ under section 25 of the Act

• Other professions designated now include – Solicitors and barristers

– Tax advisers

– Credit and financial institutions

– Trust and company service providers

– Private members gaming clubs

• Many of the obligations continue from the previous regime or will not have changed significantly, eg

• Obligation to identify clients

• Keep records

- retain identification records for at least 5 years from last doing business with the client

- retain documentation relating to transactions for at least 5 years following the date the transaction was completed

- Adopt procedures

- Undertake appropriate training

- Report knowledge, suspicion or reasonable grounds for suspicion to the Garda and the Revenue Commissioners



- Report all transactions connected with certain ‘designated’ states and territories

• In addition this Act extends its requirements to businesses which are deemed to be in the High Value Goods sector

• Any person trading in goods, but only in respect of transactions involving payments in cast of a total of atleast €15,000 whether one transaction or a series

HVG Examples

• Antique dealers

• Boat sales

• Car sales

• Dealers in precious stones

• Jewellers



New Developments

• Risk based approach to be taken to CDD

• Risk based approach to verify the identity of beneficial owners

• Enhanced Due Diligence for politically exposed persons (PEP’s) and for clients who have not presented themselves in person when establishing the business relationship

• Simplified due diligence for certain categories

• Removal of the general exemption from CDD for clients who are themselves designated eg other accounting firms or legal firms are no longer exempted

• The ability to place reliance on 3rd parties to carry out CDD

• On-going monitoring of your dealings with your clients on a risk sensitive basis

• Introduction of more detailed requirements in relation to your policies and procedures for CDD measures and on-going monitoring, reporting, internal control

• Including– Internal reporting procedures

– Risk assessment and risk management

– Monitoring and management of compliance

– internally communicating the policies you have established



• A supervision obligation on the competent authorities to ensure that designated persons are in compliance with the legislation– In other words your Institute will have a more

onerous obligation to inspect your procedures and how you are applying them.

What is Money Laundering Anyway?

The 2010 Act defines money laundering very widely

• all forms of handling or possessing the proceeds, where the person knows or believes such proceeds is or represents the proceeds of criminal conduct,

• It includes possessing the proceeds of one‘s own crime,

• facilitating any handling or possession of such proceeds.

• The proceeds of criminal conduct may take any form, including in money or money‘s worth, securities, tangible property and intangible property.



• The offence of money laundering also includes someone being reckless as to the criminal nature of the proceeds.

• Money laundering can be carried out in respect of the proceeds of conduct that is an offence in Ireland as well as conduct occurring elsewhere that – is an offence in the place where the conduct

takes place and

– would have been an offence if conducted in Ireland

What is a Money Laundering Offence?

• Anyone can commit a money laundering offence.

• A person commits a money laundering offence if he, knowing or believing that property is or probably comprises of the proceeds of criminal conduct or being reckless as to whether the property is or probably comprises of such proceeds, engages in any of the following acts in relation to the property:



• Concealing or disguising the true nature, source, location, disposition, movement or ownership of the property, or any rights relating to the property;

• Converting, transferring, handling, acquiring, possessing or using the property;

• Removing the property from, or bringing the property into, the State.

• For a matter to be money laundering there must not only be criminal conduct, but also proceeds of criminal conduct

Punishment for committing a money laundering offence

• Up to 14 years in prison

• And/or an unlimited fine



Failing to make a report is an offence

• If in the normal course of business, ie acting as an auditor you come across something which appears to be, or where you have a suspicion it is, money laundering you must make the required report

• Failure to do so is an offence under Section 42

• You are obliged by the legislation to make a report

• There is no diminimus level in this legislation so reports are required no matter the amount concerned

• Failure to make a report carries up to 5 years imprisonment and/or an unlimited fine

Legal privilege

• External reports are not necessarily required where you are assisting a client rectify position or

• receive information or documentation for example when engaged by a legal professional to carry out work on behalf of a client.



Internal systems & controls

• Firms need to have in place a range of systems in order to prevent and detect operations related to money laundering or terrorist financing.

• customer due diligence and ongoing monitoring;

• reporting procedures ;

• record-keeping;

• internal control;

• risk assessment and management

• compliance management;

• communication and training.

• need to establish systems that create an internal environment or culture in which staff are aware of their responsibilities under the Irish anti-money laundering regime and where they understand that they are expected to fulfil those responsibilities with appropriate diligence.



How do I decide what systems I need?

Consider a range of matters including:

• the type, scale and complexity of your own operations;

• the different types of activities you are involved in;

• the types of services you offer, and your client profiles;

• how you sell your services;

• the type of business transactions it becomes involved in or advises on; and

• the risks associated with each area of its operations in terms of the risks of the accounting firm or its services being used for money laundering or terrorist operations, or the risks of its clients and their counterparties being involved in such operations.

What are the likely risks to be considered at a firm level

• Clients trying to evade the payment of taxes;

• Clients attempting to utilise false accounting to support a claim;

• Clients deliberately trying to defraud their customers;

• Clients using this practice to assist them to launder criminal proceeds in an attempt to make them legitimate; and

• Clients assisting with terrorist financing.



Reporting Procedures

• Staff need to have clear procedures as to

– How; and

– Who

They need to make reports to either internally or externally if you do not appoint an MLRO

• It is recommended that information in respect of any report should not be kept on the client file to ensure that there is no possibility of ‘tipping off’

Training Staff

• Training needs to include– Information on the legislation including

penalties

– On how to recognise suspicious transactions

– How and who to consult with internally

– How to make internal reports

– How to avoid tipping off



• Frequency of training - is up to you to decide but it is suggested that it should be no less than annually

• New staff members should be trained as soon as is practicable after starting

Applying a risk based approach

• You need to develop a risk profile for your firm

• And

• To apply to your client base– eg, Assess your clients by industry, type or

sector

– The jurisdictions of client origin, funding, investment and conduct of business

– Different types of services or products

Keep it simple

• Categorise by

- low

- normal

- high

• Risk ratings can be raised or lowered with appropriate management input in particular or exceptional circumstances



Consider how your firm is being used

• Are Clients– Using the firm actively to launder money through

the handling of cash or assets

– Are you concerned in an arrangement which could facilitate money launder through provision of investment services or providing trust or company services

– Is there a risk attaching to the client eg high risk sector, illegal activities, tax evaders, fraud?

Is a Money Laundering Reporting Officer Required?

• The 2010 Act does not specifically require the appointment of a MLRO

• Section 44 (1) states that accounting firms can do so if they decide it is appropriate as part of the procedures they adopt

• If an MLRO is appointed then the obligations under S42 are met by individuals making an internal report

• If there is no such internal procedure, ie a MLRO is not appointed then individual staff members would be obligated to make the external reports



Role of the MLRO

• Receive internal reports of suspicions from other staff members

• Consider the facts and circumstances and decide whether or not to make an external report

• Ensure that staff have obtained appropriate training to be aware of suspicious transactions etc

• Act as the liaison point with the Garda and Revenue Commissioners

• Maintain the firms records in relation to any cases reported including documents detailing the investigation/review of internal reports

• Advising on how to proceed with work once a report has been made in order to manage the risk of prejudicing any investigation (tipping off)

• Design and implement internal AML systems

Customer Due Diligence (CDD)

• Identifying the customer- Verifying that identity on the basis of documents, data or

info received from a reliable and independent source

• Identifying beneficial owners

• Applying risk based measures to understand ownership and control structures

• Conducting ongoing monitoring of the business relationship



Identification Procedures for Existing Customers

• S33 now requires you to satisfy yourself that you have adequate documentation on the identity of all clients including any ‘grandfathered’ under the old regime.

• The Act does not require immediate CDD

• CCAB I recommends when you are next commencing an engagement with existing clients

When do I apply CDD?

• When establishing a business relationship

• At appropriate times to existing customers

• Where there are any doubts about previously obtained customer information

• YOU NEED TO ‘KNOW YOUR CLIENT’

• YOU NEED TO DOCUMENT YOUR KNOWLEDGE PROPERLY

• YOU NEED TO RISK ASSESS THEM



Reporting suspicions

• Accounting firms need to submit external reports to the Garda and the Revenue Commissioners where– You have knowledge

– Suspicions

– Or grounds to suspect

That another person has been, or is engaged in money laundering or terrorist financing

• This knowledge or suspicion must arise ‘in the course of carrying on business as an accounting firm’

• Can only arise where you have scrutinised the information

• Where doubt exists seek legal advice

What needs to be reported

• the information on which the knowledge or suspicion has arisen

• The identity of the suspect

• The whereabouts of the laundered property

• Any other relevant information eg names of associates etc



• Insolvency practitioners need to take care when being appointed to a case that the assets which they have been appointed to sell may represent the proceeds of criminal conduct .

• Selling those assets may constitute an offence under Section 42(9)

How to make reports

• There is a prescribed form which can be downloaded from www.antimoneylaundering.gov.ie

Where are reports made to?

• By post to:

• Detective Superintendent, Financial Intelligence Unit, Garda Bureau of Fraud Investigation, Harcourt Square, Dublin 2

• Tel: 01 6663714

• And



• Revenue Commissioners, SuspiciousTransactions Reports Office, Block D, Ashtowngate, Navan Road, Dublin 15

• Tel No: 01 8277542

• Following a STR you will receive an acknowledgement and feedback will be provided on a six-monthly basis regarding the status of any investigation

Taxes Consolidation Act 1997

• Income Tax

• Capital Gains Tax

• VAT

• Capital Acquisitions Tax

• Stamp duty, etc



S 1078 Outlines Revenue offences

• Incorrect returns

• Incorrect claims or reliefs

• Issuing incorrect invoices

• Failure to deduct PRSI

• Incorrect books of account

• Failure to submit returns or certificates as required

S1079 Duty to Report

• As an Accountant in Practice/Auditor you become a relevant person and so you then have a duty to make a report under this legislation of any instance of a relevant offence

Relevant Offences

• Wilfully or knowingly making an incorrect return, statement or accounts

• Wilfully or knowingly claiming or obtaining a relief on or an exemption from making a payment

• Failing to comply with any provision of the Acts in respect of furnishing return in relation to income, or profit or gain



Other reporting responsibilities

• Company Law Enforcement Act 2001

• Criminal Justice (Theft and Fraud Offences) Act 2001

• To the professional bodies regarding misconduct of members

• To PI Insurers

Reporting to the Professional Bodies

• Because of the way complaints are dealt with internally if you are going to make a report be mindful of ‘Tipping Off’

• It may be sensible to speak to someone within the body who is aware of the responsibilities it has under Anti Money Laundering legislation

• The same principle applies to alerting your insurers.



Insolvency practitioners

• Obligations under S56 of the CLEA 2001 which requries the liquidator to report on the conduct of the directors of an insolvent company

• If in doubt take advice to ensure you are avoiding the risk of prejudicing an investigation

Anti-Money Laundering Compliance Unit

• Established by the Department of Justice and Law Reform to administer functions of a competent authority– The authorisation process for Trust and

Company Service Providers

– The registration for Private Members Gaming Clubs

– The functions of monitoring designated persons assigned to the Minister



Trust & Company Services Providers

• Who carry on activities without registering will be subject to a fine of €5000 or imprisonment of 12 months or on conviction of an indictment to a fine and/or imprisonment of up to 5 years

What does it mean to your firm?• You need to be diligent and spot those

transactions that fall foul of the legislation

• You need ensure that staff are appropriately trained in AML procedures and that they have adequate client knowledge to spot suspicious items

• You need to ensure that your firm makes all of the appropriate reports to Garda and Revenue, and others

• You need to ensure that your own procedures are adequate

• By now you will need to have client identification on all clients;

• Have adopted and documented appropriate risk assessment of your business and your clients

• Have appointed an MLRO



• And, have carried out your first AML compliance review!

Useful Webpages

• CAI’s frequently asked questions

• Financial Regulator section on Anti-Money laundering

• www.antimoneylaundering.gov.ie

