Dermot Ahern (Louth, Fianna Fail)

I move: "That the Bill be now read a Second Time."

The main purpose of the Bill before the House today is to transpose the third EU money laundering and terrorist financing directive into Irish law and to comply with the recommendations of the financial action task force, FATF, third round mutual evaluation report on Ireland. The Bill will also give effect to certain provisions of the United Nations Convention Against Transnational Organized Crime including Article 6, and the relevant parts of Article 15.

This Bill was published in July and since then a number of representations have been made to my Department by interested bodies regarding aspects of it. I am considering a range of amendments on Committee Stage to reflect some of those views and to introduce certain technical and drafting amendments which are considered necessary. I will mention the more significant intended amendments during the course of this speech. The aim of the Bill is to combat the efforts of criminals and their associates to conceal the origin of the proceeds of criminal activity or to channel money obtained lawfully or unlawfully for terrorist purposes. The problem of money laundering has been with us for a very long time. What makes money laundering such an important issue in the modern world is the increasingly sophisticated nature of this kind of crime. That fact, allied with the increasing globalisation of both the financial and business worlds and the internationalisation of a great deal of criminal activity makes the crime of money laundering more prevalent.

Part 2 of the Bill deals with the main offence of money laundering occurring in or outside the State. It is an offence under the terms of this Bill if a person conceals or disguises the true nature, source, location, disposition, movement or ownership of property, including money, which is the proceeds of criminal conduct. Converting, transferring, handling, acquiring, possessing or using such property is also an offence, as is removing the property from or bringing it into the State. The offence applies to a person who knows or believes, or is reckless as to whether the property is the proceeds of criminal conduct.

The seriousness of the offence of money laundering is underlined by the level of the penalties which a person may face who is found guilty of the offence. On summary conviction, the guilty party could face a fine of up to €5,000 and a term of imprisonment of up to 12 months. On indictment, an offender found guilty could be jailed for up to 14 years or be fined or both. It should be noted that a reference to a person knowing or believing that property is the proceeds of criminal conduct also applies to a person who knows or believes the property is probably the proceeds of crime.

This country already possesses anti-money laundering legislation, which primarily is contained in the Criminal Justice Act 1994, as amended. This legislation is being repealed and consolidated in the Bill before the House today. The Government recognises that the increasing facility with which money can be transferred from one country to another and from one financial institution to another along with the generation, through criminal activity, of significant proceeds which require to be laundered needs to be addressed by way of new updated and strengthened legislation. This is what is intended in this Bill.

A key element in this legislation is the application of customer due diligence measures on the part of the designated persons covered by the Bill, which include requirements to identify the customer and any beneficial owner and to verify that identity. The directive provides that the customer due diligence provisions of the Bill should be applied to existing customers at appropriate times on a risk-sensitive basis and the Bill is intended to reflect this requirement. The list of designated persons covered by this Bill is extensive and includes bodies such as credit and financial institutions, which are made up of banks, building societies, credit unions, insurance companies and intermediaries, bureaux de change, money transfer businesses, credit unions and An Post, as well as independent legal professionals, including both barristers and solicitors. It also incorporates a trust or company service provider, which is defined in section 24(1) of the Bill. This includes company directors but not all company directors. The Bill applies only to a person who acts as a company director by way of a nominee of a third party and by way of business.

Members are aware of the existence of private members' gaming clubs and, therefore, those directing these clubs are covered by the provisions of the Bill in respect of the gambling activities which take place there but only in the context of the requirements of the money laundering legislation. The provisions of the Bill also apply to dealers in high value goods and specifically to those who may receive payments in cash of at least €15,000 whether in a single transaction or in a series of transactions which are or appear to be linked. In addition to those categories specifically set out, the Bill confers a power on the Minister for Justice Equality and Law Reform to prescribe other classes of persons who could be covered by the provisions of the legislation.

Deputies will note from the extent of the designated persons covered by the requirements of the Bill that the proposed legislation will affect a very wide variety of activities. What is being proposed in this Bill is a new and strengthened regime to combat money laundering and the financing of terrorism. Deputies should also note, however, that the Bill recognises, as does the Directive which is being transposed, that the risk of money laundering and terrorist financing is not the same in every case. Designated persons can apply a risk-based approach in dealing with their customers. The identification and verification of customers is required in all cases but simplified customer due diligence is provided for in appropriate cases.

Equally, the Bill recognises the reality that certain situations present a greater risk of money laundering or terrorist financing. While there is a requirement in every case to identify and verify customers the legislation provides for the application of enhanced due diligence in certain situations where more rigorous procedures are called for. An individual who is not physically present when opening an account for example, would come into that category. The Bill introduces the concept of the politically exposed person who resides outside the State and the enhanced customer due diligence measures will apply to those people and to the immediate family members and close associates of the person as defined in the Bill. These provisions arise directly from the requirements of the Money Laundering Directive and the implementing directive. I will bring forward an amendment on Committee Stage to section 37 of the Bill to take account of concerns expressed about the practical difficulties in refusing to open an account for a person when it has not been ascertained finally that the individual is in fact a politically exposed person.

Enhanced due diligence will also apply when a credit institution, a bank, enters into a correspondent banking arrangement with another credit institution situated in a place other than a member state of the European Union or a state which is recognised as having equivalent requirements. In addition to the role of designated persons, the Bill also provides in chapter 8 for the role of competent authorities, they are the supervisory authorities for each of the designated persons covered by the Bill. In that regard the competent authority for credit and financial institutions is the Financial Regulator. In the case of a designated person who is a solicitor, the competent authority is the Law Society. In the case of a designated person who is a barrister, the competent authority is the Bar Council. In the case of a designated person who is an auditor, external accountant, a tax adviser or trust or company service provider and who is a member of a designated accountancy body, that body is the competent authority. For some of the designated persons covered by the Bill such as dealers in high value goods and trust and company service providers and tax advisers who are not accountants or solicitors, the Minister for Justice, Equality and Law Reform will be the competent authority. A unit within my Department will act as a monitoring and authorising body for these groups for the purposes of money laundering.

The function of a competent authority for the purposes of this Bill is to effectively monitor the designated body for whom it is a competent authority and to take whatever measures are reasonably necessary to secure compliance with the provisions of the Bill. The measures which could be taken may include reporting to the Garda Síochána and the Revenue Commissioners any knowledge or suspicion the competent authority has that a designated person for which it has responsibility has been or is engaged in money laundering or terrorist financing. Under the provisions of our current anti-money laundering legislation many competent authorities compile guidelines for their members on the operation of the legislation. Courts can have regard to these guidelines in considering matters relating to a prosecution for money laundering which may come before them.

This Bill will make provision for the Minister to approve such guidelines for the purpose of guiding the designated persons to whom each set of guidelines applies. Having considered the matter further, I will introduce an amendment on Committee Stage to have the codes of practice referred to in section 107 referred to as "guideline"' which is closer to the terminology in use. The Bill provides for the approval of these codes of practice by the Minister for Finance. Following discussions between my Department and the Department of Finance on this matter, I intend to introduce an amendment on Committee Stage to the effect that such approval would be given by the Minister for Justice, Equality and Law Reform in consultation with the Minister for Finance. Nothing in the Bill will limit the matters to which a court may have regard in determining whether a person took all reasonable steps and exercised all due diligence to avoid committing an offence.

This Bill contains not only criminal law provisions but also many provisions relating to changes in financial regulation in so far as it impacts on the question of money laundering and terrorist financing. The Bill contains 121 sections, set out in five parts. The largest, part 4, is divided into ten chapters. It is not essential, nor is there sufficient time today to provide the House with details of each section. I wish, however, to outline the various parts of the Bill, the salient sections in each part and to indicate significant changes to the existing laws in this area which are being proposed.

Part 1 of the Bill contains the usual provisions setting out the short title and commencement provisions, the interpretation section, the Minister's regulatory powers and the expenses arrangements. Section 4 provides for the repeal of the existing anti-money laundering provisions contained in the Criminal Justice Act 1994. 1 will bring forward a technical amendment to section 2 (1) on the definition of the Third Money Laundering Directive to take account of provisions of recent EU directives in the financial services sector which amend the Money Laundering Directive.

Part 2 of the Bill deals with the main offence of money laundering. I have already outlined some of the provisions of this part. The part was drafted subject to the advice of the Attorney General and is somewhat different from the provisions currently contained in the Criminal Justice Act 1994. Our legal advice is that the provisions now set out in the Bill will be more effective in ensuring subsequent prosecutions of the offence in court. As I have mentioned, the penalties for the offence set out in section 7, particularly for a conviction on indictment, reflect the gravity with which we regard the crime of money laundering. A good deal of Part 2 of the Bill relates to the aspects of the offence of money laundering which take place outside the State. The penalties for the offence committed outside the State are identical to the penalties which apply to the main offence of money laundering which takes place in this jurisdiction. The application of jurisdiction for an offence occurring outside the State is a feature of many criminal law statutes. Money laundering is a crime which very frequently has an international dimension. On Committee Stage I will bring forward an amendment to section 8 on the extra-territorial jurisdiction issue on the basis of advice received from the Office of the Attorney General.

Part 3 of the Bill deals with directions and orders in the context of an investigation of the offences covered by the Bill. Section 17 provides that a member of the Garda Síochána, not below the rank of superintendent may direct a person not to carry out a service or transaction for a period not exceeding seven days. The same section provides that a judge of the District Court may order a person not to carry out a specific service or transaction for a period not exceeding 21 days, if satisfied on information given by a member of the Garda Síochána that the service or transaction may comprise or assist money laundering or terrorist financing. I propose to increase this period to 28 days and I will bring forward an amendment on Committee stage to this effect.

Section 19 provides that a judge of the District Court may revoke a direction or order if he or she is satisfied that the circumstances envisaged under Section 17 do not or no longer apply. Section 20 provides that a judge of the District Court may, on application by any person affected by a direction or order, make any order appropriate in relation to any of the property, if it is necessary to do so to enable the person to discharge the reasonable living and necessary expenses incurred or to be incurred in respect of the person or in respect of his or her dependants.

Part 4 is the longest and most extensive part of the Bill. It is divided into ten chapters covering sections 24 to 109. This part is concerned with a range of provisions relating to the financial services industry, professional service providers and others. It also contains the provisions for the application of the all-important customer due diligence measures and the various degrees of customer due diligence which apply in different circumstances. Customer due diligence is divided into four distinct parts in this Bill, basic customer due diligence, simplified customer due diligence, enhanced customer due diligence and monitoring of customer transactions. Chapter 1 deals entirely with the interpretation of the various terms which are essential to this part and to the Bill as a whole. The key terms defined in section 24 include the following: beneficial owner; business relationship; competent authority; credit institution; financial institution; designated person; professional service provider; property service provider; tax adviser and trust and company service provider. I will be bringing forward an amendment on Committee Stage to define the term Electronic Money Directive, which is relevant to this section. In addition to some drafting changes to this section I also propose to include An Post within the definition of financial institution for clarification, by way of amendment on Committee Stage.

Section 25 sets out the meaning of the term "designated person", which I have already outlined. A designated person refers to all of those individuals or bodies to which this legislation applies. This section also gives the Minister for Justice, Equality and Law Reform powers to prescribe a class of persons as a designated person if he or she is satisfied that any of the business activities they engage in may be used for the purposes of money laundering or terrorist financing.

Section 28 defines a "trust", meaning a trust that administers and distributes funds. A beneficial owner of a trust means an individual who is entitled to a vested interest in possession, remainder or reversion, whether or not the interest is defeasible, in at least 25% of the capital of the trust property; a class of individuals in whose main interest the trust is set up or operates; any individual who has control over the trust; or an individual who is the beneficial owner of a body corporate that is entitled to a vested interest of the kind referred to in section 28(2)(a).

Section 29 provides that a beneficial owner with regard to an estate of a deceased person in the course of administration means the executor or administrator of the estate concerned. In section 30, a beneficial owner with regard to a legal entity or legal arrangement with some exceptions means an individual who benefits from the entity or arrangement to the extent of at least 25% of the property; individuals who benefit from the entity or arrangement in whose interest the entity or arrangement is set up or operates; or an individual who exercises control over at least 25% of the property.

Chapter 3 deals with the issue of customer due diligence which relates to the identification and verification of customers and beneficial owners. It sets out the procedures which designated persons must follow if they are to adequately identify and verify their customers, including existing customers. The measures set out in this Part are to be applied, in most cases, prior to the establishment of a business relationship.

Section 33 provides for the identification and verification of customers and beneficial owners and the application of certain aspects of enhanced and simplified customer due diligence. Section 33(2) sets out the particular measures which should be applied. It sets out the kinds of documents or information which can be relied upon to confirm the identity of a customer including documents from a Government source or a prescribed class or a combination of documents.

Section 33(4) sets out the measures which should be applied where a customer is not physically present for verification. There is provision for verification to be taken during the establishment of a business relationship, rather than prior to it, if there are reasonable grounds to believe that to do so before that time would interrupt the normal conduct of business, but only where there is no real risk.

Section 34 provides for exemptions from the requirements for customer due diligence. Such an exemption will apply to the beneficial ownership of money held, or proposed to be held, in trust in a client account. Section 34(4) provides that a credit institution may apply the exemption to money held in trust in a credit institution, if satisfied that the information on the identity of the beneficial owners of the money is available on request.

Section 35(3) relates to the monitoring of the business relationship including scrutinising transactions with the object of obtaining information reasonably warranted by the risk of money laundering or terrorist financing. Section 36 provides that a designated person may be exempt from the requirements of section 35(1) if there are reasonable grounds to believe that the customer or the product concerned is a specified customer or a specified product in the meaning of section 34. A specified product is a life insurance policy having an annual premium of no more than €1,000 or a single premium of no more than €2,500 and an insurance policy in respect of a pension scheme that does not have a surrender clause and cannot be used as collateral.

Section 37 provides for enhanced customer due diligence for politically exposed persons residing outside the State. The section provides that a designated person shall take steps to determine whether a customer or beneficial owner residing outside the State is a politically exposed person or an immediate family member or a close associate of a politically exposed person. These steps are reasonably warranted by the risk that the customer or beneficial owner is involved in money laundering or terrorist financing.

Section 38 sets out the conditions under which a credit institution shall enter into a correspondent banking relationship with another credit institution in a place other than a member state of the European Union or a state with equivalent anti-money laundering requirements.

Section 42 requires a designated person to report to An Garda Síochána and the Revenue Commissioners any knowledge or suspicion which they may have that a person is engaged in money laundering or terrorist financing. I will table an amendment to section 43 on Committee Stage to include the Revenue Commissioners as a body to which reports shall be made in the case of reports in respect of transactions with certain jurisdictions.

Section 45 enables information included in a report to be used in an investigation into money laundering or terrorist financing. Sections 48 to 53, inclusive, deal with the prohibition of tipping off by a designated person, as well as with defences to a charge of tipping off in particular circumstances. Section 49 prohibits a designated person from making any disclosures likely to prejudice any ongoing or future investigation into money laundering or terrorist financing. Section 49(3) sets out the penalties for failing to comply with this provision.

Chapter 6 deals with internal policies and procedures as well as training and record-keeping. Section 54 directs that a designated person shall have policies and procedures in place in their business to prevent and detect money laundering and terrorist financing. It also provides that the designated person shall detail the type of policies and procedures to be implemented. Section 55 requires a designated person to keep records of the procedures applied and the information gathered on each customer.

Chapter 7 deals with special provisions applying to credit or financial institutions. Section 56 requires that a credit or financial institution have systems in place to enable them to respond efficiently to inquiries from An Garda Síochána about its business relationships.

Section 58 prohibits the setting up of anonymous accounts or the provision of anonymous passbooks by credit or financial institutions. Anonymous or numbered bank accounts or passbooks have not been a feature of the Irish banking system, although they have been a feature in those of some other jurisdictions. The section's purpose is to transpose the requirements of the money laundering directive. It also complements and reinforces the customer identification requirements of the directive. Section 59 prohibits a credit institution from entering into a correspondent banking relationship with a shell bank.

Chapter 8 deals with monitoring by competent authorities with section 60 explaining the meaning of the term "competent authority". Section 60(2) lists persons or entities that may be considered a competent authority and section 60(3) provides that in certain circumstances the Minister may prescribe a competent authority for a class of designated persons. Section 62 lists the competent authorities which may be referred to as State competent authorities and provides the circumstances in which the Minister may prescribe a competent authority as a State competent authority.

Section 63 sets out the functions and duties of a competent authority. I will bring forward two minor drafting amendments to section 63(2) on Committee Stage.

Section 67(1) permits a State competent authority to direct a designated person to provide information or documents as specified by written notice. Section 67(2) sets out the penalties for failure to comply. Section 67(4) provides that the State competent authority should specify the manner and time in which the information is to be furnished and that a person should only furnish documents in their possession or documents which can be obtained lawfully. Section 68 provides that a State competent authority may direct a designated person to furnish an explanation concerning any documents provided to the authority under section 67 or lawfully removed from the premises under section 78.

The remainder of this Chapter provides, in considerable detail, for the powers which may be exercised by a State competent authority including the appointment of authorised officers, the general powers of officers to enter premises and the entering of residential premises with permission or with a warrant.

Section 81 stipulates that nothing in Chapter 8 requires a person to answer questions if to do so might tend to incriminate them. Section 82 provides that nothing in Chapter 8 requires the production of any document or information that is subject to legal privilege.

Chapter 9 deals with the authorisation of trust and company service providers. Section 84 provides for the authorisation and registration procedures for persons carrying on the business of a trust and company service provider. For the purposes of this section, a trust and company service provider does not include a member of a designated accountancy body, a barrister or solicitor, or a credit institution or financial institution.

Section 85 specifies certain matters which would disqualify a person from being considered a fit and proper person for the purposes of authorisation as a trust and company service provider. These include a person who has been convicted of money laundering, terrorist financing, an offence involving fraud, dishonesty or breach of trust and an offence in respect of conduct in a place other than the State that would constitute an offence of a kind referred to above, if the conduct occurred in the State. It would also include those with the following characteristics - where the person is an individual and under 18 years of age; the person has suspended payments due to creditors; the person is unable to meet obligations to creditors; the person is an undischarged bankrupt; or the person is otherwise not a fit and proper person.

Chapter 10 deals with other matters including in section 107 the approval of codes of practice or guidelines by the Minister to which, as I have mentioned earlier, courts may have regard in considering whether a defendant took all reasonable steps and exercised all due diligence to avoid committing an offence. Section 109 provides that a person who is a designated person in the context of section 25(1 )(h), that is a person directing a private members' club, shall register with the Minister in accordance with procedures as may be prescribed or otherwise imposed by the Minister. Subsection (3) of that section provides that particulars shall be entered into a register established and maintained by the Minister for the purposes of this section.

Part 5 deals with miscellaneous matters. Section 110 sets out the requirements in relation to the service of documents and section 111 relates to offences which have been committed by a body corporate or an unincorporated body, where a director, manager or other officer may also be taken to have committed the offence. Section 112 provides that the disclosure of information relating to a suspicion of an offence to a member of the Garda Síochána or another person concerned with an investigation into money laundering or terrorist financing, shall not be treated as a breach of disclosure of information imposed by any other enactment or rule of law.

Sections 113-121 comprise mainly consequential amendments to a number of statutes. However, section 113 will enable the Financial Regulator to inquire into and impose administrative sanctions for breaches of Part 4 of the Bill by credit and financial institutions as required by the directive. Section 114 amends the Courts (Supplemental Provisions) Act 1961.

This measure before the House today is important. It is important for our membership of the European Community that we transpose the directive without further delay. It is important for our financial services sector that we have in place the best possible anti-money laundering and terrorist financing legislation and it is important, in our fight against crime, that we have updated and modernised legislative safeguards to combat money laundering and terrorist financing.

I commend this Bill to the House.

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