John Halligan (Waterford, Independent) | Oireachtas source

I am here to discuss the Social Welfare Consolidation Act 2005 (Specified Bodies) Regulations 2019. I thank the Chairman for the opportunity to discuss with the committee the Social Welfare Consolidation Act 2005 (Specified Bodies) Regulations 2019. My officials have provided committee members with briefing material for use at this meeting.

These regulations will support an important anti-money laundering measure, the central register of beneficial ownership, which will identify who is behind a corporate entity. The regulations prescribe the new position of registrar of beneficial ownership of companies and industrial and provident societies as a specified body for the purposes of Schedule 5 to the Social Welfare Consolidation Act 2005. This will enable the registrar to collect personal public service numbers to verify the identity of persons who have ultimate control of a company, ensuring that the central register is accurate, and to prevent individuals who would think of trying to conceal their identity for the purpose of money laundering or financing terrorism from doing so. The PPSN will not be visible to the registrar, staff within the registry of beneficial ownership or any member of the public. The PPSN will never be shared with any State or non-State competent authorities or with any third party.

Members will be aware of company law and the concept of directors of a company. A beneficial owner is the natural person who ultimately owns or controls a legal entity through direct or indirect ownership or through control via other means. Thus, simply because someone is a director on paper does not mean in practice that the person ultimately controls the company. Recital 25 of the EU fourth anti-money laundering directive highlights the importance of beneficial ownership information. It states:

The need for accurate and up-to-date information on the beneficial owner is a key factor in tracing criminals who might otherwise be able to hide their identity behind a corporate structure. The globally interconnected financial system makes it possible to hide and move funds around the world, and money launderers and terrorist financers as well as other criminals have increasingly made use of that possibility.

To prevent this criminality the EU fourth and fifth anti-money laundering directives, also known as 4 and 5 AMLD, legally oblige Ireland to establish and maintain a central register of beneficial ownership of companies and industrial and provident societies. This central register, known as the RBO, is the first in a series. Others are currently being finalised for trusts and for Irish collective asset management vehicles or ICAVs. Crucially, Article 30(4) of 4 AMLD means there is an EU law obligation on Ireland to ensure that the central register is accurate.

PPSN use is seen as critical to the success of the RBO as it will prevent multiple variations of the same person's details from being entered in the register. While a mechanism will be in place for beneficial owners who do not have a PPSN, the vast majority of beneficial owners already have a PPSN, particularly for tax purposes. A practical example of why such verification is needed is the charity Console. In 2016, when concerns were raised over the governance and financial management of this particular charity, it was identified that the former chief executive and his wife were connected to 12 companies. However, in official documentation submitted to the Companies Registration Office different dates of birth and signatures were provided at the time, along with use of a maiden name for some entries and a married name for others. I expect members will agree that this is not something we want to see recur. The online register, combined with PPSN verification, will ensure that such scenarios are prevented. To ensure personal information is protected the PPSNs are encrypted, not visible to RBO staff and are used only at a specific point in time, that is to say, the point of filing, to validate the PPSN and date of birth against the data that the Department of Employment Affairs and Social Protection holds for that personal public service number.

Where there is not a match, whether by accident or intent, that beneficial owner information cannot be filed. The PPSN will not be visible to staff within the RBO or the CRO because it will be stored in encrypted form. RBO staff and officials from the Department of Business, Enterprise and Innovation have worked closely with the Department of Employment Affairs and Social Protection, in consultation with the Office of the Data Protection Commissioner, to ensure that appropriate safeguards are in place to protect personal information and that there is a lawful reason for processing the PPSN data.

While the obligation to file with the RBO is new, relevant entities have been required to hold such beneficial ownership information since the introduction of the European Communities (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations in 2016. The RBO and filing requirements are provided for in S.I. No. 110 of 2019 - the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019. Under this statutory instrument, the RBO has been established since 22 June last.

While the staff and ICT infrastructure of the CRO have been utilised in the technical development of the RBO, S.I. No. 110 of 2019 provides for a new statutory office of Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies. Therefore, while the CRO is a specified body under Schedule 5 of the Social Welfare Consolidation Act 2005, following legal advice and to ensure legal certainty, the current regulations designate the Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies explicitly and separately as a specified body for the purposes of PPSN. As such, the opening of the RBO has been postponed to allow for the necessary consultation to be undertaken with both Houses of the Oireachtas and, following referral, this committee.

This is a matter of urgency. Already we are facing fines from the European Commission, which has referred the matter to the European Court of Justice, so it is imperative that we get this through as quickly as we can. Almost all European states are working on this; some of them are delayed as we are. While all previous designations have been done by way of primary legislation, given the need to resolve this issue as a matter of urgency, to allow the central register to open, the most appropriate course of action is for the RBO to be designated by means of a statutory instrument. The 2005 Act allows for a "specified body" to be prescribed by statutory instrument and these regulations provide the most appropriate course of action to facilitate the opening of the central register in order to minimise the impact of wider infringement proceedings against Ireland for failure to transpose all aspects of the anti-money laundering directive, 4AMLD. I wish to advise the committee that this statutory instrument will be temporary and that the regulations will be confirmed in primary legislation at the earliest possible opportunity.

The collection and maintenance of beneficial ownership information is an EU requirement and part of larger efforts by Ireland internationally to combat money laundering, organised crime and terrorism. Beyond this, the RBO is a mark of Ireland as a global, modern and open country promoting best international standards in transparency, business and the globally interconnected financial system.