The Criminal Justice (Terrorist Offences) Act 2005 was signed into law on the 8th March 2005. Its provisions had immediate effect with the exception of those set out in Section 32 which required designated bodies (now designated persons) to have procedures (including staff training) in place to facilitate the detection of Terrorist Funding. The provisions of Section 32 came into force on 8th of July 2005.

The main purpose of this Act was to enhance the State’s response to international terrorism. It gives effect to a number of international instruments directed to terrorism and meets commitments which Ireland has undertaken as part of the European Union and the broader international community.

New Offence

The Act brought in a new offence of ‘financing of terrorism’.  In Summary this is:

• If you collect or receive funds intending or knowing that they will be used to carry out an act that is either:

• o an offence in Ireland within the scope of the Terrorist Financing Convention
• o intended to cause serious bodily injury with the purpose being to intimidate a population/government to do or abstain from doing anything

• If you collect or receive funds intending or knowing that they will be used for:

• o the benefit of a terrorist group
• o the carrying out of an act noted above

Most importantly, a firm could be guilty of an offence if they:

• failed to implement measures to forestall and prevent operations relating to terrorist financing

• failed to report your suspicion of the above offences to Garda & Revenue and Revenue Commissioners

For a copy of the Act click here

On the 7th February, the Department of Finance published the sectoral AML-CFT guidance notes for Credit Unions. The Guidance Note was drafted by the Irish League of Credit Unions (ILCU) to assist Credit Unions in their compliance with the provisions of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.

These Guidance notes have replaced the 2004 Money Laundering Guidance Notes for Credit Unions. As with the Core Guidance notes for financial institutions these Guidance Notes are not secondary legislation and credit unions must always refer directly to the CJA 2010 when ascertaining their statutory obligations.

For a copy of the guidelines click here

The work of the AML unit is not complete. Firms should expect more inspections as the annual program of risk-based thematic inspections is set to continue. The focus of these inspections would be in the following areas:

• Specific provisions of the 2010 Act

• Compliance with Guidelines

• Specific types of financial activity

Regulatory Tools

There will be deep-dive inspections on firms on a particular issue or a range of issues that it may have. The Central Bank of Ireland has indicated that it will use the full suite of regulatory tools that it has at its disposal, including:

• Warnings

• Risk Mitigation Programme

• Directions

• Cease and desist

• Not taking on new business or business in a particular location

• Enforcement

The Central Bank will continue in publishing more ‘Dear CEO’ letters as a continuation of their communication policy.

Typical Inspection Process

An inspection from the Central Bank of Ireland is a stressful time for any firm. However, it is better to be prepared and know the process beforehand. The typical focus during an AML inspection would be:

• Positioning of AML/CFT in the organisation

• Resources deployed

• Identification and mitigation of risks

• Alignment of business processes

• Decisive actions taken promptly when required

• Monitoring and management of compliance with policies and procedures

• Ability of firm to demonstrate compliance.

The firm will be selected through a risk-based approach. This depends on a number of factors including type of firm, activities it carries out, complaints, PRISM risk rating etc. A notification letter will be sent to the firm outlining the following:

• Scope of the inspection

• Date of the inspection

• Who will be attending

• Documents to forward immediately to the Central bank

• Documents to have available on the day of the inspection.

On-Site Inspection

The onsite visit will comprise of the following:

• Opening meeting(s) with senior management and/or MLRO

• Interview with MLRO/Head of Compliance with responsibility for Anti-Money Laundering

• Walk-through of systems – ‘a day in the life of your processes0

• Sampling of CDD files

Following the onsite visit, the Inspection team will prepare a report for internal use and issue a post-inspection letter to the firm. If there are any issues a risk mitigation plan will be opened and pursued until the matters are closed out. If there are any issues the firm will be made aware of:

• The facts

• Supporting information

• Relevant provisions of 2010 Act that have been contravened

• Recommended actions.

Recommended Actions

The recommended actions could be numerous and wide ranging. Some of the more common ones are:

• Amend policies and procedures with Board assurance

• Undertake broader sampling exercise of CDD files

• Conduct remediation exercise within a set time limit

• Cease accepting new business until issues have been resolved.

Following the publication of the Key findings of the AML unit, the Central bank issued a Dear CEO to all Regulated entities subject to Anti-Money laundering legislation on the 12th of October 2012. The letter addresses the current level of compliance by firms with AML-CFT legislation and provides an overview of the control failures identified in the course of Central Bank inspections. The letter highlights the importance of good governance in this area and the necessity for firms to anticipate changes to legislation and international standards. The letter also reminds credit and financial institutions of the wider context of Ireland’s membership of FATF and the reputational risks Ireland faces from poor governance and compliance in respect of AML-CTF.

The letter also indicated that boards should keep abreast of relevant legislative changes and to future proof AML/CFT systems and controls.

Most importantly, there is an expectation on firms that they should now review AML/CFT policies and procedures to address any shortcomings and provide remediation work to ensure that they do not fall down on any of the key findings.

For a copy of the letter click here