Dermot Ahern (Louth, Fianna Fail)

The main purpose of the Criminal Justice (Money Laundering and Terrorist Financing) Bill is to transpose the third EU money laundering directive into Irish law and to comply with the recommendations of the Financial Action Task Force 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. The aim of the Bill is to combat the attempts by criminals to conceal the origins of the proceeds of criminal activity and to prevent the channelling of money obtained lawfully or unlawfully for terrorist purposes.

This is a Bill which, quite rightly, has been the subject of a great deal of consultation with a wide range of stakeholders who ultimately will be affected by its provisions. The consultation process initiated by my Department began some years ago and has been ongoing, even up to this point in the proceedings in the Oireachtas. I have sought to ensure my officials have actively engaged with those covered by the legislation to ascertain their views on the proposals while ensuring the Bill accurately transposes the third money laundering directive into Irish law.

The Bill was considered on Committee Stage in the Dáil in January last and on Report Stage on 17 February last. In light of comments made by Opposition speakers on those Stages and in response to issues which have been raised by interested parties, I intend to table further amendments to the Bill on Committee Stage in this House to reflect these views and to introduce certain drafting and technical amendments which may be considered necessary. I will refer to some of these proposed changes during the course of my speech. The first of the amendments concerns section 7. I propose to table an amendment in regard to the payment of reasonable legal expenses which a person may incur in the context of criminal proceedings.

Most significant crime involving money or property will inevitably involve the concealing of that money or property from the lawful authorities. The proceeds of crime will be laundered to conceal its origins. The problem of money laundering has been with us for a very long time. The increasingly sophisticated nature of criminal activity and the increasingly international dimension to a great deal of crime has had the effect of making the crime of money laundering more prevalent and, in this electronic age, far more difficult to detect.

This is a lengthy and complex Bill. While it transposes the third European Union money laundering directive into Irish law, it also repeals and consolidates the existing Irish anti-money laundering legislation which is contained primarily in the Criminal Justice Act 1994, as amended. The House should be aware that we have effective money laundering legislation in place in this jurisdiction. This Bill will update and strengthen those provisions.

The Bill is divided into five Parts. Part 2 deals with the main offence of money laundering occurring inside and outside the State. Careful consideration was given to this Part of the Bill in an effort to improve the potential for detecting this crime and for prosecuting those engaged in this activity. It is an offence under the terms of this Bill for someone to conceal or disguise the true nature, source, location, disposition, movement or ownership of property, including money which is the proceeds of criminal conduct. It is also an offence to convert, transfer, handle, acquire, possess or use such property. It also makes it an offence to remove the property from the State or to bring it into the State.

The offence of money laundering applies to a person who knows or believes or is reckless as to whether or not the property is the proceeds of crime. A reference to a person knowing or believing that property is the proceeds of crime also applies to a person who knows or believes the property is probably the proceeds of crime. The penalties for money laundering reflect the seriousness of the offence. For example, a person convicted on indictment could be jailed for up to 14 years or given an unlimited fine, or both. The penalty for a person found guilty on summary conviction is a fine of up to €5,000 and a term of imprisonment of up to 12 months.

Those covered by the provisions of this Bill are referred to as "designated persons". The list of designated persons is extensive and includes credit and financial institutions, that is, banks, building societies, credit unions, insurance companies, bureaux de changes, payment services businesses and An Post. Independent legal professionals, such as barristers and solicitors, and members of the accountancy profession are also designated persons for the purposes of this Bill. All of these groups must have regard to the provisions of the Bill as they apply to their daily activities. In that context I will examine again the provisions of the Bill regarding membership of professional bodies and the appropriate references for such bodies and the professions involved.

The term "designated person" also incorporates trust or company service providers. This category is defined in section 24(1) and includes company directors. However, the Bill applies only to persons who act as company directors by way of a nominee of a third party and by way of business. I am considering an amendment to section 24 in regard to the term "occasional transaction" which occurs in a number of places in the Bill to explain the meaning of this term. Another feature of the Bill is the inclusion of private members' gaming clubs and those who effectively direct such clubs as designated persons for the purposes of the Bill. The Bill will apply to the gambling activities which take place in such clubs, but only in the context of the requirements for money laundering.

The provisions of the Bill also apply to a category known as dealers in high value goods, that is, traders who receive payments in cash of at least €15,000 in a single transaction or in a series of transactions which appear to be linked. The Bill gives the Minister power to add other classes of persons who could be covered by the provisions of the legislation by way of regulation. Senators will note the wide range of designated persons covered by the requirements of this Bill. Senators will also note, however, that the requirements of the directive which are reflected in this Bill and set out the risk of money laundering and terrorist financing are not the same in every case. The Bill is not intended to place an undue burden of administration on designated persons in dealing with their customers. The Bill recognises, as does the directive, that designated persons can apply a risk-based approach in dealing with their customers.

A key element of this Bill is the application of more extensive anti-money laundering legislation in the application of customer due diligence measures on the part of designated persons covered by the Bill. Under section 33, these measures require the identity of the customer to be verified and also require the identification and the verification of any beneficial owner. I intend to table amendments on Committee Stage to sections 33(1 )(b) and 33(1 )(d), the first of which is consequent on an earlier proposed amendment while the second relates to the concept of existing customers. Both will have the effect of clarifying the wording in each of the subsections. I also give notice of two further minor amendments to sections 33 and 35.

The directive provides that customer due diligence provisions shall be applied to existing customers at appropriate times on a risk-sensitive basis. The Bill is intended to reflect this requirement. The identification and verification of customers is required in every case but simplified customer due diligence is provided for in appropriate cases. Clearly, certain situations present a greater risk of money laundering or terrorist financing than others. Although customers must be identified and verified in every case, the Bill provides for enhanced customer due diligence in circumstances where more rigorous procedures are necessary. For example, an individual who is not physically present when opening a bank account would come into the category whereby enhanced due diligence is required.

The Bill introduces the concept of the politically exposed person, PEP. This refers to someone who holds, or has held, political office or other senior posts in public administration and who is resident outside the State. The directive requires that enhanced customer due diligence must apply to this category. Such measures also apply to the immediate family members and close associates of the politically exposed person as defined in the Bill and these provisions are set out in section 37. I put Senators on notice that I may introduce further amendments on Committee Stage to this section that are intended to give greater clarity to the provisions of subsections (2), (4) and (8) of this section.

Other circumstances where enhanced due diligence also applies are when a credit institution, namely, a bank, enters into a correspondent banking arrangement with another credit institution situated outside of the European Union or outside of a state which is recognised as having equivalent requirements.

The term "designated persons" refers to those categories covered by the requirements of the Bill. The Bill also provides in Chapter 8 for the role of competent authorities. These are the supervisory bodies for each of the designated persons covered by the Bill. For example, the Financial Regulator is the competent authority for the credit and financial institutions and the Law Society is the competent authority for the solicitor's profession. In the case of a designated person who is a barrister, the competent authority is the Bar Council. For accountants, auditors, tax advisers and trust or company service providers who are members of a designated accountancy body, that body is the competent authority for those persons.

We recognise that not all the designated persons covered by the Bill will necessarily have a competent authority in place to supervise their activities. Therefore, designated persons covered by the Bill such as trust or company service providers, tax advisers and dealers in high value goods who are not subject to supervision by any other competent authority will be monitored by my Department for the purposes of money laundering. A unit within the Department has been established specifically for this purpose. The function of a competent authority for the purposes of the Bill is to monitor the designated persons for whom it has responsibility and to take the measures which are reasonably necessary to secure compliance with the provisions of the Bill. It may be necessary for a competent authority to report to the Garda Síochána and the Revenue Commissioners any knowledge or suspicion it may have that a designated person for which it has responsibility has been engaged in money laundering or terrorist financing.

The existing anti-money laundering legislation provides for the compilation of guidance by competent authorities for their members in respect of the operation of this legislation. Courts can have regard to this guidance in considering matters relating to a prosecution for money laundering which may come before them. This Bill contains a similar provision and also provides for the Minister for Justice, Equality and Law Reform to approve such guidance in consultation with the Minister for Finance. Nothing in this Bill will limit the matters a court may have regard to in determining whether a person took all reasonable steps and exercised all due diligence to avoid committing an offence. In preparing this legislation, my Department has worked closely with the Department of Finance on all relevant aspects of the Bill.

This Bill contains not only criminal law provisions but also many provisions relating to changes in financial regulation in so far as they impact on the question of money laundering and terrorist financing. Many of the provisions of the Bill relate to the provision of financial services and other matters which are within the remit of my colleague, the Minister for Finance.

This is a lengthy Bill containing 122 sections set out in five Parts. The largest, Part 4, is divided into ten separate chapters. It would be far too lengthy a process to provide Senators with details of each of the sections. However, I wish to outline to the House the salient sections in each Part of the Bill and indicate changes to the existing law where these are being proposed.

Part 1 sets out the Short Title and commencement provisions, the interpretation section, the regulatory powers conferred on the Minister and the expenses arrangements. Senators should be aware that section 4 provides for the repeal of the existing anti-money laundering provisions contained in the Criminal Justice Act 1994.

Part 2 deals with the main offence of money laundering. The drafting of this Part was subject to the detailed advice of the Office of the Attorney General and is different in certain respects from provisions currently contained in the 1994 Act. Our intention in preparing these provisions is to ensure a more effective statute to improve the prospects of prosecutions for the offence in court. I am confident it will do just that. I already mentioned the penalties for the main offence of money laundering which are set out in section 7. These penalties reflect the seriousness with which we regard the crime of money laundering and, by the standards of other EU member states, are relatively high. Part 2 also deals with the aspects of the offence which may take place outside the State. Penalties for the offence committed outside the State are identical to the penalties which apply in this jurisdiction. The question of the application of jurisdiction for an offence occurring outside the State is a feature of many criminal law statutes. It is especially apt in this case as money laundering is a crime which very frequently has a cross-border or international dimension.

Part 3 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 of up to seven days. A judge of the District Court, if satisfied by information given by a member of the Garda Síochána that the service or transaction may comprise or assist money laundering or terrorist financing, may order a person not to carry out the service or transaction for a period not exceeding 28 days. The Bill also provides that a judge of the District Court may revoke a direction or order if he or she is satisfied the circumstances envisaged under section 17 do not or no longer apply. Section 20 provides that a judge of the District Court, on application by any person affected by a direction or order, may make any appropriate order in respect of any property concerned to enable the person to discharge the reasonable living expenses, including legal expenses or expenses in regard to legal proceedings, which are or are to be incurred in respect of the person or his or her dependents.

Part 4 is the longest and most extensive and is divided into ten chapters covering sections 24 to 109, inclusive. This Part is concerned with a range of provisions relating to the financial services industry, professional service providers and the application of the all-important customer due diligence, CDD, measures. The various degrees of customer due diligence which apply in different circumstances are also set out in this Part. There are four categories of CDD: 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 the Bill as a whole. Section 24 defines a number of the key terms, including beneficial owner, business relationship, competent authority, credit institution, financial institution, designated person, professional service provider, tax adviser, trust and company service provider. An Post was also included within the definition of both a credit institution and a financial institution by way of amendment on Committee Stage in the Dail.

I have outlined to Senators the meaning of the term "designated person". This is set out in the Bill in section 25. The term refers to all individuals or bodies to which this legislation applies. Section 25 also gives the Minister powers to prescribe a class of person as a designated person if he or she is satisfied that any of the business activities engaged in by the person may be used for the purposes of money laundering or terrorist financing.

Section 28 defines a trust as one that administers and distributes funds. A beneficial owner in respect of a trust for the purposes of this Bill means any of the following: a person who is entitled to a vested interest in possession, remainder or reversion in at least 25% of the capital of the trust property, whether or not that interest is defeasible; a class of individuals in whose main interest the trust is set up or operates; any person who has control over the trust; and any person 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 in respect of an estate of a deceased person in the course of administration means the executor or administrator of the estate concerned. Section 30 states that a beneficial owner in respect of a legal entity or legal arrangement with some exceptions means someone who benefits from the entity or arrangement to the extent of at least 25% of the property, persons who benefit from the entity or arrangement in whose interest that entity or arrangement is established or operates, or a person who exercises control over at least 25% of the property.

I referred earlier to the concept of customer due diligence, CDD, and as I said it relates to the identification and verification of beneficial owners. Chapter 3 of Part 4 of the Bill sets out the procedures which designated persons must follow if they are to identify adequately and verify their customers, including existing customers. In most cases, the measures set out in this part of the Bill are to be applied before the establishment of a business relationship.

Section 33 provides for the identification and verification of beneficial owners and the application of certain aspects of enhanced and simplified customer due diligence. This section also sets out the particular measures which should be applied, for example, the kinds of documents or information which can be relied upon to confirm the identity of a customer. This includes documents from a Government source or a prescribed class or combination of documents.

Subsection (4) sets out the measures which should be applied where a customer is not physically present. It contains a provision for verification to be made during the establishment of a business relationship rather than prior to it, if there are reasonable grounds to believe that to do so before then would interrupt the normal course of business. However, this should be done only where there is no real risk.

Section 34 provides for exemptions from the requirements in regard to customer due diligence. Such exemptions will apply to the beneficial owner of money held or proposed to be held in trust in a client account. The section also provides that a credit institution may apply the exemption in regard to the money held in trust in a credit institution if satisfied that the information on the identity of the beneficial owners is readily available.

Section 35(3) relates to the monitoring of a business relationship, including scrutinising transactions with the intention of obtaining information reasonably warranted by the risk of money laundering or terrorist financing. Section 36 provides that a person may be exempt from the requirements of section 35(1) if there are grounds to believe the customer or the product concerned is a "specified customer" or a "specified product". A "specified product" within the meaning of section 34 of the Bill 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. This 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. The steps to be taken in regard to this provision 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 the Garda Síochána and the Revenue Commissioners any knowledge or suspicion which he or she may have that a person is engaged in money laundering or terrorist financing. Section 45 enables information included in a report to be used in an investigation into money laundering or terrorist financing.

Section 46 provides for an exemption from the reporting requirement in respect of a relevant professional adviser in regard to information that he or she may have obtained in respect of a client in the course of ascertaining the legal position of that client. This provision is similar to the position which already exists in regard to privileged information contained in our existing legislation. The present draft of the Bill does not alter the situation with regard to such privilege in any way. The situation which currently applies under the existing anti-money laundering legislation will continue to do so.

I should mention to the House that I am considering a further matter in regard to privileged communications between tax advisers and the Revenue Commissioners and whether an amendment on Committee Stage may be required.

Sections 48 to 53 deal with the prohibition on "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. Subsection (3) of that section sets out the penalties for failing to comply with this provision.

Chapter 6 of this Part 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 regard to his or her business to prevent and detect money laundering and terrorist financing. That section 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 in regard to each customer. Since the Bill passed all Stages in the Dail, further consideration has been given to section 55 and the Parliamentary Counsel has been consulted in regard to the drafting of the section. I give Senators notice that I intend to introduce an amendment to this section with the aim of bringing greater clarity to the section and outlining exactly what is required with regard to the retention of records by designated persons covered by the Bill. I will, of course, provide the House with a detailed explanation of the proposed changes on Committee Stage.

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 it to respond efficiently to inquiries from the Garda Síochána in regard to 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, though they have been a feature in some other jurisdictions. The purpose of section 58 is to transpose the requirements of the 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 of the Bill deals with monitoring by competent authorities. Section 60 explains the meaning of the term competent authority. Subsection (2) lists persons or entities that may be considered a competent authority and subsection (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 67 permits, at subsection (1), a State competent authority to direct a designated person to provide information or documents as specified by written notice. Subsection (2) of that section sets out the penalties for failure to comply. Subsection (4) of that section provides that the State competent authority shall specify the manner and time in which the information is to be furnished and that a person should only furnish documents in his or her 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 in regard to any documents provided to the authority under section 67 or lawfully removed from the premises under section 78.

The remainder of this chapter details the powers which may be exercised by a State competent authority. These include the appointment of authorised officers, the general powers of officers to enter premises and the entering into 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 any of the following offences: 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.

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 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 of the Bill deals with miscellaneous matters. Section 110 sets out the requirements in regard to the service of documents. 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 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 An 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 to 122 of the Bill comprise mainly consequential amendments to a number of statutes. However, section 114 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 115 amends the Courts (Supplemental Provisions) Act 1961.

This is a very important Bill. It is important that as a responsible and committed member of the European Community, this directive is transposed by Ireland without further delay. It is important for our reputation as an international financial services centre that we have the best possible anti-money laundering and anti-terrorist financing legislation in place. It is most important for the ongoing fight against organised crime and the threat of international terrorism that we have updated and modernised legislative safeguards to combat money laundering and terrorist financing. I commend the Bill to the House.