Mr. Brendan Bruen:

I am grateful to the Cathaoirleach and members of the committee for the invitation to be here today as the committee considers the general scheme of the Bill. It will give effect in Irish law to the EU directive on the violation of Union restrictive measures. I am conscious that the directive and the general scheme are quite detailed and at this stage I propose to address them only in quite general terms. I am of course happy to address individual aspects and questions members might wish to raise.

Restrictive measures, more commonly known as sanctions, are adopted under the EU's common foreign and security policy. They include measures targeting natural and legal persons such as asset freezes and travel bans and also encompass specific sector measures including trade prohibitions and providing financial or other services. While these are a particular currency as regards sanctions imposed as a result of Russia's aggressive war in Ukraine, the proposed Bill has broader applicability. There are over 50 such measures in force.

Restrictive measures are adopted at European level and have direct applicability. As such, the specific requirements and prohibitions they contain do not require further national action to have legal effect. Member states are, however, required to introduce national rules to provide for effective, proportionate and dissuasive penalties for breaches of sanctions and to provide for a range of administrative measures to support effective implementation.

Primary motivation for the directive was that member states have applied widely varying rules and penalties for breaches of sanctions. In some countries they are treated as criminal offences; in others they attract only administrative processes. This inconsistent approach to enforcement across member states has the potential to undermine the EU's collective efforts. To address this inconsistency, the directive places sanctions breaches firmly in a criminal justice context. It sets out various types of breaches of restrictive measures, requires that such breaches be criminal offences and sets the minimum levels which must be available as penalties for such offences. Provision is also made for appropriate investigative tools to be available, comparable to those provisions which may be available for serious organised crime offences. It provides for protections in relation to the reporting of breaches, statistical reporting and enhanced co-operation between relevant authorities in investigating these offences. Notably, provision is also made for the punitive confiscation of assets where certain offences are committed in relation to those assets by or on behalf of the relevant sanctioned person. For example, an attempt to circumvent sanctions in respect of a financial asset may be punished by the confiscation of that asset.

I emphasise the directive requires criminalisation only to the extent the conduct is in breach of a restrictive measure. It does not independently prohibit any conduct outside of what is already prohibited by those restrictive measures. However, it does apply prospectively. As new forms of conduct are prohibited by restrictive measures in the future they may be captured within the offences created pursuant to the directive in this Bill. In Ireland, restrictive measures are given effect to by statutory instruments adopted under the European Communities Act 1972. All breaches are criminal offences and carry a maximum penalty of three years imprisonment. Other criminal offences of broader application may also apply to sanction breaches, most notably money laundering, which carries a maximum penalty of 14 years, and certain offences under the Criminal Justice (Theft and Fraud Offences) Act 2001, carrying penalties of up to ten years. As such, Ireland already adopts the key principle of the directive in applying a fully criminal framework to breaches of sanctions.

Restrictive measures touch on many aspects of the Irish economy and responsibility for their enforcement spans several Government Departments and public agencies, notably including the Department of Foreign Affairs and Trade, which has lead responsibility in relation to the negotiation of new measures, the Department of Finance and the Central Bank, the latter particularly in relation to compliance with asset freeze and financial services elements of the regime. Responsibility also rests with the Departments of justice and Enterprise, Tourism and Employment, An Garda Síochána and several other bodies. Co-ordination with respect of Ireland’s implementation of restrictive measures is led by the cross-departmental international sanctions committee chaired by the Department of foreign affairs. This group brings together senior officials across government and law enforcement to ensure a coherent national approach is taken.

I will note certain aspects in relation to the approach in the general scheme. The directive adopts a minimum harmonisation approach. Therefore the question arises in transposition as to whether to strictly follow the minimum standard set out in the directive or to create broader offences that go further than these minimum standards. Following consultation, the proposed approach is twofold. A broader approach is taken in relation to the frozen asset offences, closely aligned with Ireland's anti-money laundering framework, and a narrower, minimum harmonisation approach is generally taken for the other offences. This broader approach on frozen asset offences, as may be seen in head 5 of the scheme, aligns with the money laundering offence under section 7 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. This alignment is of particular importance as, given the nature of the conduct involved in a violation of a restrictive measure involving funds or economic resources, such conduct is likely to also constitute a money laundering offence or, at the very least, a reasonable suspicion of such. Under Irish law, a person is guilty of such an offence if they deal with an asset knowing, or being reckless as to whether, it represents the proceeds of crime. That is a section 7 offence. A similar approach is proposed in relation to frozen assets. For the other offences, given the variety of situations in which breaches might occur, we have opted for a narrower approach that adheres more closely to the minimum harmonisation requirements of the directive.

It is important to view the directive, and this Bill, in context. Criminal offences are only one part of the enforcement mechanism. Preventing circumvention requires a multifaceted approach, and one which is continually assessed and improved. The methods used to avoid sanctions, particularly in relation to hiding financial assets, evolve constantly and we must keep pace.

The comparison with the international approach to money laundering is particularly relevant here. Criminal offences are of course important but to meaningfully prevent money laundering, we have to address the entry and exit of illicit assets through the financial system and the broader economy. Accordingly, a detailed range of obligations is imposed on private sector actors to help achieve this under money laundering legislation. This includes the conduct of customer due diligence - the “know your customer” requirements - assessment of business risks in relation to individual business services and transactions, and the reporting of suspicious transactions to the Garda financial intelligence unit and so on.

The emphasis we have placed on the alignment with the money laundering framework mirrors that now adopted on European level in the adoption of the sixth anti-money laundering package. This will place complying with restrictive measures on a par with preventing money laundering more generally. The business measures that I referred to in relation to AML will now also apply to business relationships which may touch on frozen assets.

The directive was subject to a one-year transposition period, with a deadline of May of this year. This was acknowledged as particularly challenging by all member states and, in fact, only seven member states have thus far claimed to have completed transposition. In Ireland, it is being progressed as quickly as possible and the scheme being considered today was brought to the Government immediately after the recent election. The drafting of the Bill is being progressed and publication is expected during the autumn session.

The transposition of the directive across the Union is an important component in strengthening the regime, and ensuring that these important foreign policy tools are consistently implemented will enhance their effectiveness. I look forward to discussing the Bill with the committee.