Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

These amendments all relate to the establishment of a registration and supervision regime, for AML and CTF purposes, for virtual asset services providers. The committee will be aware that these amendments propose to add a substantial chapter into the Criminal Justice Act 2010, as amended, along with other amendments to add definitions and consequential changes. I will provide an overview of the aim of these substantial amendments and, of course, provide further details on each of them if members wish.

The purpose of chapter 9A is to create a registration and supervision regime for AML purposes in respect of virtual asset service providers, VASPs. In general, the purpose of the Criminal Justice (Amendment) Bill 2020 is to transpose much of the 5th anti-money laundering directive, which requires providers of virtual services to be registered and supervised for AML-CTF purposes. 5AMLD defines virtual assets as "a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment." It is a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes. VASP refers to a natural or legal person who, as a business, conducts services involving virtual assets such as exchanges between virtual and fiat assets.

However, the directive is silent on what a registration process for VASPs should look like. In framing this regime, we have sought to address our EU obligations, as well as the international obligations that arise from our membership of the Financial Action Task Force, FATF. The FATF is the international organisation that sets global standards to fight against money laundering and the financing of terrorism. Ireland is a long-standing member.

FATF has 40 recommendations, known as standards, which together provide guidance to members on what an effective AML-CFT framework looks like. Our proposals for the Bill will address the VASPs criteria contained within the standards and therefore further strengthen our financial services framework to shield from the scourge that is money laundering and terrorist financing.

As part of the management and mitigation of emerging money laundering and terrorist financing regimes, FATF recommends that countries ensure VASPs are registered and effectively supervised for AML-CFT purposes. In addition, the FATF guidance requires a VASP registration regime to allow for the Central Bank's withdrawal, restriction or suspension of a registration, where appropriate. FATF also advocates for an offence of operating without a registration.

Furthermore, FATF recommends that five categories of virtual asset service providers be supervised rather than the two specified in the fifth AML directive. While there is a marked difference between the approaches of the EU and FATF on this issue currently, members should note that the EU has clearly indicated its intention to align EU rules in this area, with the FATF recommendations, as soon as possible. Therefore our approach, in adopting legislation now that addresses the FATF recommendations, is careful. It strengthens our financial systems and places us ahead of the curve in regard to EU requirements. We believe it is in our best interest to construct our regulatory framework to meet both our EU and international obligations at this time. The proposed chapter 9A addresses the requirements of the fifth AML directive and also the regime anticipated with reference to FATF guidance.

The new chapter provides for the following: a registration and supervision regime, for AML-CFT purposes, for providers of services relating to virtual assets; enablement of the Central Bank, as competent authority, to undertake a detailed assessment of a firm's policies and procedures before granting registration; a fitness and probity regime to allow the Central Bank to undertake an assessment of the fitness and probity of the beneficial owners of these providers, before granting registration; enablement of the Central Bank to refuse a registration in circumstances where the Bank is not satisfied with the firm's AML-CFT policies and procedures, and-or the fitness and probity of the senior management and-or beneficial owners of the firm; and transitional arrangements for incumbent virtual asset service providers.

The regime proposed will contribute towards maintaining a robust framework in this area for Ireland. It will need to be updated continuously, however, to meet the ever-changing and emerging money laundering and terrorist financing threats across the world.

As mentioned at the outset, this is a substantial amendment that includes a many provisions. If members wish for me to speak in more detail about a particular section, I will be happy to do so.