Jim O'Callaghan (Dublin Bay South, Fianna Fail) | Oireachtas source

I welcome that the Government has eventually commenced the process of transposing the fourth EU money laundering directive into Irish law. The directive dates from 2015 and I understand it should have been transposed into Irish law by 26 June 2017. We will be doing well if it is transposed into Irish law by 26 June 2018, considering the fact that it has to go through Committee Stage in the Select Committee on Justice and Equality and come back to this House for Report Stage and Final Stage before it heads off to Seanad Éireann.

The delay in the transposition of the directive is not a meaningless transgression. In July 2017, I understand that the European Commission began infringement proceedings against Ireland for its failure to implement the fourth EU money laundering directive. I understand that the explanation, given in November 2017 by the Minister for Finance, was that because of amendments that had been made to the directive in 2016, there were delays on the part of the State in transposing the directive. In March 2018, the European Commission said it had sent a reasoned opinion to Ireland, which is the second stage in EU infringement proceedings, following the aforementioned commencement of infringement proceedings by the European Commission against Ireland in July 2017. It is not good practice nor good governance when directives are not transposed in time. The country gets exposed to infringement proceedings and it is damaging to our international reputation, particularly in an area such as money laundering where, in general, we have a good reputation.

The Minister said that only part of the EU directive is being transposed by this legislation and that a remaining part will have to be transposed by other legislation. I understand that the Department of Finance is working with officials in the Minister's Department on that Bill. Separate legislation is being drawn up to transpose other provisions of the directive that relate to beneficial ownership of trusts and bodies corporate. It is important that we transpose those other provisions as quickly as possible as we do not want ourselves to be subjected to the third level of EU infringement proceedings, which would involve the country being brought before the European Court of Justice.

The fourth EU directive is one of the directives on money laundering that has been issued by the European Union since 1991. The first money laundering directive was the Council directive on the prevention of the use of the financial system for the purposes of money laundering. That defined money laundering in terms of drugs offences and imposed obligations solely on the financial sector. There was an update to that with a directive in 1997 which extended the scope of the 1991 directive, both in terms of crimes covered and the range of professions and activities covered. The third EU money laundering directive arose as a result of the recommendations of the Financial Action Task Force of June 2003. Those recommendations covered terrorist financing and provided more detailed requirements in respect of customs identification and verification. That resulted in a further directive in 2005 arising from the recommendations of the Financial Action Task Force.

Money laundering is a complicated matter and to deter it, it is important that it is recognised as being an international problem. It cannot be dealt with just within the European Union and, in dealing with it, we have to take into account the international context. Money laundering and terrorist financing are international problems and the effort to combat them should be global. Where credit institutions and financial institutions in Ireland have branches and subsidiaries located in third countries, in which the requirements are lower than in the European Union, it is important that obligations are placed upon them. That is what the directive requires and I am pleased to say that it is what the legislation before the House today provides.

I will refer the Minister to two aspects of the legislation which are worth considering on Second Stage. The first is section 15, which deals with the examination of the background and purpose of certain transactions. It deals expressly with the issue of white-collar crime and imposes obligations on a designated person to ensure he or she keeps a vigilant eye out for suspicious activity. The definition of "designated person" in the 2010 Act has been extended in this legislation. I welcome that as doing so is an example of forward thinking. Under the new section 36A of the 2010 Act, there will be an obligation on a designated person to look out for unusual patterns of transactions that have no apparent economic or lawful purpose. We need to ensure that the provision is sufficiently broad to capture as much unusual economic activity as possible. If a designated person is prone to facilitating money laundering, very little can be done to deter it because of that person's criminal mind. However, where a designated person does not have a criminal mind, it is important that the legislation imposes upon that person as wide an obligation as possible, in order that he or she is required to look with suspicion upon transactions which appear not to have economic or lawful purpose. It can sometimes be difficult to understand what a specific economic purpose is. The objective would be to ensure that any transaction that has taken place has been done for some obvious commercial activity, involving a legitimate payment arising from it.

Another sector that merits close scrutiny is section 26, which deals with internal policies, controls and procedures. It seeks to set out further obligations on designated persons to ensure they have procedures and policies in place to make it easier for them to identify any money laundering or terrorist financing that should be brought to the attention of the authorities. At present, many businesses are going through the process of preparing for the coming into force of the GDPR and, similarly, when this legislation comes into force there will be further requirements on designated persons in Ireland to ensure they have fully adequate policies, controls and procedures in place to identify, detect and report any examples of money laundering and terrorist financing.

The legislation replicates the requirements in the directive to identify factors that suggest potentially high levels of risk. The Bill also requires the identification of factors in low levels of risk but the former is more instructive, as high-risk cases are those which need to be watched vigilantly by designated persons. These are listed in the proposed Schedule 4 to the 2010 Act.

Business persons or professional advisers in Ireland must keep mindful of a number of factors for the purpose of ensuring there are no money laundering or terrorist financing processes in operation. One of the geographical risk factors is that the countries where the transaction is coming from or going to would have effective anti-money laundering systems in place. If one identifies countries where there are not effective anti-money laundering systems, that should trigger in one's mind a concern and a high risk factor.

Another factor to be taken into account concerns countries identified by credible sources as having significant levels of corruption or other criminal activity. I have said previously that Ireland is not a country with high levels of corruption but there are other countries where there are very high levels of corruption. Those high levels of corruption have been identified. It is important we do not allow our State, country or financial institutions to be used by individuals from other corrupt countries for the purpose of trying to hide money or for the purpose of criminal activity. It is not always the case that it is for the purpose of terrorist financing. I would have thought that most of this legislation, as it will apply in Ireland, will be in respect of trying to identify money laundering arising from criminal activity.

Fianna Fáil welcomes the eventual introduction of the legislation into this House. It is very important that we transpose it into Irish law as soon as possible. Fianna Fáil will be supporting this legislation on Second Stage. We believe it should be brought in as promptly as possible. We will seek to encourage the Minister to ensure that the remaining parts of the EU money laundering directive, which have not been transposed as of yet or which are not covered in this legislation, are brought forward promptly. We do not want to find Ireland in a position where we are subject to infringement proceedings by the European Union, particularly when it comes to an area of such sensitive reputational value as legislation to deal with money laundering and identifying terrorist financing.

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