Eugene Regan (Fine Gael)

I agree with the Minister on the importance of the Bill and that as a responsible and committed member of the European Union, Ireland needs to transpose this directive and to do so without delay. The reputation of this country and of the International Financial Services Centre makes it imperative to have the best practice standard of anti-money laundering and anti-terrorist financing legislation. However, if this is such important legislation why have we delayed so long? This directive was to be transposed into Irish law by 15 December 2007. There have been two judgments against Ireland in the European Court of Justice, one of 1 October 2009 and the other of 19 May 2009. In the latter judgment the court declared that Ireland had failed to comply with its obligations under EU law because of the failure to implement this directive. This judgment records a reply given by the Government to the European Commission on 19 March 2008. The Irish authorities indicated to the Commission that approval had been given for the drafting of a Bill and it would be subject to public consultation. It was anticipated the legislation transposing the directive would be published in summer 2008. More time elapsed and it was published in July 2009, almost two and a half years late. However, the delay by the Government and the Minister in bringing this legislation to a conclusion is very embarrassing for this country, considering the two judgments made against us and the fact that Ireland is still in default with regard to this legislation.

The Minister in his contribution outlined the importance of this legislation and of Ireland being a good member of the European Community, the reputation of the financial services centre and our role in the fight against organised crime and international terrorism. It is very difficult to understand and to stand over the inexcusable delay in the completion of this transposition by the Government of the third money laundering directive.

This is crucial legislation in dealing with the issue of organised crime, terrorism and white collar crime. This Bill consolidates, streamlines and broadens the scope of the anti-money laundering legislation. A broader group of individuals will have responsibility to notify authorities of suspicious transactions. The Bill responds to the financial action task force recommendations and in particular its report of 17 February 2006, which evaluated Ireland's situation in respect of these matters. This report found that Ireland had a sound legal framework in place to combat money laundering although the number of convictions for money laundering is somewhat low. As regards relevant non-financial businesses and professions, for example, accountants or real estate agents, certain measures have been put in place but these need to be extended and preventive measures could be improved by providing regulatory authorities with the power to apply an increased range of administrative sanctions directly for breaches of any money laundering and counter-terrorist financing obligations. To a certain extent these matters have been addressed in the Bill.

I appreciate the Bill has been vetted by the other House. I note the Minister may bring forward some amendments on Committee Stage in this House, following further consultations. I will reserve my position regarding amendments I may wish to make on Committee Stage.

This legislation is important in that it fulfils our obligations under EU law. I refer to the importance of the financial services centre for the economy. It is a source of disappointment that this legislation has not been put in place to date. The International Monetary Fund has estimated that money laundering accounts for between 2% and 5% of the world's gross domestic product, or between €500 billion and €1.5 trillion. It is an important issue in this country, given the financial flows.

The three stages in the process of turning illicit proceeds into legal money or goods are placement, layering and integration and provide the background to this legislation. It is recognised that this problem can only be dealt with at an international and European level and this co-operation only began in the 1980s with the Vienna convention, the United Nations convention against illicit traffic in narcotic drugs and psychotropic substances in 1988 and the Council of Europe convention on laundering, tracing, seizure and confiscation of proceeds of crime 1990. These were the initial efforts at Community level. The financial action task force established by the G7 in 1989 was fundamental to this effort. The European Commission joined that organisation and its membership has since expanded considerably. Its 40 recommendations and the additional eight recommendations more recently adopted, have been adopted by 180 countries, with the United Nations, World Bank and the International Monetary Fund playing their part. Best practice at world level has been identified by this organisation along with a process of assessment of compliance and effective implementation. I have mentioned the assessment by the FATF of the process of mutual evaluation which was carried out in Ireland in 2006. The importance of this legislation in criminalising the activity of money laundering and in preventing money laundering cannot be understated.

The first EU money laundering directive was introduced in 1991, the second in 2001 and the third, the subject of this discussion, in 2005. It is interesting to consider how the manner in which this issue has been dealt with at EU level has changed. Initially, it was dealt with under the first pillar of the EU treaties. The passing of later treaties and the advent of greater co-operation in the criminal law area have made it possible for it to be dealt with under the appropriate legal base. No distinction is drawn between what have traditionally been third pillar issues and first pillar measures.

It is important for Ireland to be fully involved in co-operation at EU level in the area of criminal law. Our opt-out in this area was introduced by the Government in the context of the Lisbon treaty. This legislation highlights the importance of EU measures that deal with the combating of crime with an international cross-border dimension. The first two EU money laundering directives have been replaced by the third directive which reflects the recommendations of the FATF. There is an emphasis in the Bill on the threat of terrorism. The sources of funds can be legitimate, in many ways. Moneys that come from non-governmental organisations or charities can be used for illicit purposes. The third anti-money laundering directive captures this, as does this legislation.

The definition of "money laundering" in this legislation is a revision of that used in the Criminal Justice Act 1994, the Proceeds of Crime Act 1996 and Criminal Justice (Terrorist Offences) Act 2005. The definition of "criminal conduct" is broadened under this legislation in order that it is understood as "conduct that constitutes an offence". The 1994 Act specified that such conduct should constitute an "indictable" offence. The definition of "designated person" is being expanded, as are the obligations with regard to customer due diligence. The designated bodies and institutions which will be responsible for reporting suspicious transactions, as well as the level of due diligence that will be required on the part of such parties, are well set out.

The Bill provides for the identification and verification of the identities of customers and beneficial owners on the basis of reliable independent data. Bodies and institutions will have to be satisfied as to ownership and the control structure of the customer and will have to obtain information on the purpose and intended nature of the business relationship. The legislation also provides for ongoing monitoring of that relationship, including scrutiny of transactions, to ensure consistency with the customer's business, risk profile and source of funds.

The provision in the Bill in respect of persons who are "politically exposed" is an important one. That concept is to be introduced in Irish law. The decision to deem politically exposed persons who constitute a particularly high risk group and who are more likely to be implicated by political corruption is in keeping with the risk-based approach to anti-money laundering measures adopted by the FATF and in line with the third money laundering directive. This welcome development in Irish law may be of domestic and international application. In accordance with the general provisions, designated persons must take "such steps as are reasonably warranted by the risk that the customer ... is involved in money laundering or terrorist financing". In the case of the immediate family members or close associates of a politically exposed person, section 37 requires designated persons to "determine the source of wealth and of funds involved in the proposed business relationship, or in the transaction or series of transactions" and "ensure that approval is obtained from any senior management of the designated person before such a relationship is established".

The issue of legal and professional privilege which has arisen under the third directive is dealt with in the Bill. Perhaps we will discuss it further on Committee Stage. UK jurisprudence on the issue has found that the language of the UK legislation in this regard is not to be construed as over-riding legal professional privilege without explicit provision to that effect. It is important that the offence of "tipping off" which was provided for in the Criminal Justice Act 1994 is also included in the Bill.

The Bill is very welcome but overdue. It captures most of our obligations under EU law and our international obligations in respect of the FATF recommendations. I welcome the additional obligations which will be placed on designated persons and the extension of the scope of application of anti-money laundering legislation. In general, the Bill has my full support. I will reserve my position on the amendments the Minister intends to propose. I may propose some on Committee Stage also.