Maurice Quinlivan (Limerick City, Sinn Fein) | Oireachtas source

I thank the staff in the Oireachtas Library and Research Service for their help in providing an understanding of the workings of the Bill.

Sinn Féin will besupporting this Bill. It gives effect to the fourth money laundering directive and is a welcome step in terms of transparency, regulation and ensuring financial institutions, as well as states, are measuring up to the mark in terms of money laundering and terrorist financing.

I note, however, that we are somewhat late in implementing this measure; it is a 2015 directive. We are late to the extent that the European Commission has begun infringement proceedings against Ireland for its failure to implement it on time. I understand the infringement proceedings began in July 2017, after Ireland did not transpose the legislation in time, which should have come into force on June 2017. Those proceedings, taken against 17 countries in total, could ultimately result in Ireland facing a fine from the European Union. Persistent non-compliance could end up with Ireland being referred to the European Court of Justice. I ask the Minister what is the current position in this regard. Moreover, by when must Ireland have this directive transposed and this Bill passed to avoid these fines?

As for the substance of the Bill, the directive and the Bill provide for due diligence of customers and put the onus for risk assessment on financial institutions, which will be obliged to carry out business-wide and individual assessments, something which we in Sinn Féin believe can only be a positive step.

Another key provision is expanding the remit of the financial intelligence unit, a part of An Garda Síochána, which receives information from designated persons about suspicious transactions. This is also a step in the right direction, but as we have seen in the past, much of this will come down to the resources that are made available to An Garda Síochána, as well as what I imagine will be significant upgrades in its IT systems. I note these systems very much have been brought into the spotlight in recent months with some worrying and, at times, horrifying outcomes.

The Bill also expands the definition of a "politically exposed person" under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 to include persons holding certain political, judicial or other offices in Ireland, as well as abroad, as currently defined. This measure is again one to be welcome in the context of geopolitics, and how money moves around the world.

The Bill also ensures full implementation of Article 7 of the OECD convention on combatting bribery of foreign public officials by making it an offence to launder the proceeds of bribery outside Ireland involving a foreign public official even if the bribery was not an offence in the place it was carried out. This is complemented by other laws such as the Criminal Justice (Corruption Offences) Bill.

Whether in public life or in business or commerce, corruption has been part of the history of this State. There was quite an interesting article by Ryan O’Rourke in the Irish Independent last September, which found Ireland was ranked in the top ten countries for financial transactions linked to money laundering or terrorist financing in the European Union. A study conducted by Europol shone a spotlight on the anti-money laundering apparatuses within member states and the extent of suspicious transaction reporting in the EU. It highlighted trends and developments and gave recommendations on how the anti-money laundering framework can be improved. To rank in the top ten for me spoke volumes, and the long way we have to travel to proactively address money laundering and potential terrorist financing here.

The number of financial transactions investigated by the Garda nearly doubled between 2006 and 2014, which speaks to quite a significant workload. One could speculate as to why this may have been the case, whether it be perceived ambiguous tax laws, the now infamous loophole created by section 110 of the Taxes Consolidation Act, or other mechanisms that at least in my mind have been subject to the so-called "light touch regulation" approach. Although I would point to these measures and others as providing a possible incentive to locate here, I acknowledge that an increase in detection may be due also to increased focus by the Garda but we badly need to ensure that the Garda and the Office of the Director of Corporate Enforcement, ODCE, are properly resourced to tackle these issues.

Ireland is also the third highest for reports relating to the suspected financing of terrorism, according to the EU police agency. In 2014, the EU financial intelligence units received almost 1 million reports from across the Continent. Despite this, an average of just 10% of suspicious transaction reports were further investigated by authorities, a figure we could all agree we would not like to see replicated here when it comes to pursuing both national and international cases on the part of An Garda Síochána.

Within the report, it was estimated that only 1% of the proceeds of crime are seized by the Garda, and this is a figure which appears to be replicated right across Europe. Between 2006 and 2014, Ireland recorded 120,971 suspicious transactions. These numbers increased from 10,403 in 2006 to 18,302 in 2014, the ninth highest out of 28 states. In Ireland, there were a total of 586, or 4%, of the suspicious transactions reports in 2013, and 618, or 3%, in 2014 related to terrorist financing, with the European average being a fraction of that at 0.6%.

I also wish to query how this Bill covers the area of gambling and gaming. There is a widely held belief that criminal organisations regularly use betting as a way of money laundering. It is not difficult to imagine how this might work. For example, someone placing a combination of bets with cash that is compromised or the proceeds of crime, that the combination can only ever result in a relatively small loss, at least in percentage terms, and that at the other end the person placing the bets gets back substantial amounts of clean cash. Anecdotally, this is an issue, and it is an area over which we need to have tight regulation and oversight.

My understanding is that, under the EU directive, the Irish Government has some latitude as to whether a sector is considered to carry substantial risks domestically. I wish to ask how the Government has designated or looked upon this sector and whether it is placing obligations on bookmakers and other gaming and gambling organisations, to ensure that there are oversights and checks to prevent laundering. This is an important issue that needs to be tackled.

I also wish to touch on the related area of shadow banking, as there is much we do not know about the moneys that flow in and out of some of the darker, murkier areas of financial services. It is not hard to imagine the moneys that flow in and out of these institutions could well include such proceeds and laundered moneys. The finance committee and the Dáil will soon deal with the markets in financial instruments directive, MiFID, legislation which relates to all of this.

In November a Russian bank defaulted on €500 million of loans made through a Dublin office. The International Monetary Fund, IMF, and the Financial Stability Board have warned about our exposure to such defaults and shadow banking. The Irish Timesrecently reported:

Lawyers, accountants and bankers generated almost €284 million of fees from hundreds of special purpose vehicles last year. The growing use of such entities by Russian groups has come into sharp focus as investors track risks relating to US sanctions.

Are we creating trouble for ourselves by marketing Dublin as a hub for shadow banking? Are we opening ourselves to risks not only reputationally but economically?

Is the Minister satisfied that the Bill adequately deals with this area, and that Government is ensuring that our financial services and institutions have safeguards to ensure we are not so exposed?

I note that there is an obligation under Article 31 of the fourth anti-money laundering directive which states that states shall apply a full public register of beneficial ownership of trusts as per the directive. However, there is a discretion available to member states.

I understand that the Government has run a public consultation on member state discretions, which discussed the matter of a fully public register of beneficial owners. The consultation had 19 submissions, mostly, I assume from organisations and business in the area and other interested parties. It resulted in a mixture of views, with some submission favouring full public access to the register of beneficial ownership of corporate and other legal entities and others that do not support full public access to the register of beneficial ownership of corporate and other legal entities. Another two submissions were unclear as to their position. I therefore have a concern that the Government is not fully implementing the fourth EU anti-money laundering directive regarding the beneficial ownership of trusts and that it is making use of an exemption that means it does not have to apply a full public register of beneficial owners as per the directive. Is that the case, and if so, what is the rationale? For what reason would we not have such a full public register? It is entirely possible to create an appropriate protection regime to allow for certain restrictions to the access to information where such access would expose the beneficial owner to potential risk of intimidation and other harms as outlined in Article 30(9), while still implementing the directive fully. I urge the Minister to implement this and to ensure full transparency in the spirit of the directive.

It is high time we moved to address such deficiencies and pitfalls within Irish legislation as the EU directive outlines. This is a significant task, and there are parameters and limitations for the State in tackling money laundering and terrorist financing, as well as those working within them. However, it is a vitally important piece of work to ensure a properly functioning democracy. Sinn Féin will be supporting this Bill's passage to Committee Stage.

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