Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I thank Senator Conway for raising this important issue and for his diligence in following up on the representations that have been made to him. Prize bonds are part of a range of State savings products which include savings bonds, savings certificates, instalment savings, national solidarity bonds and deposit accounts such as the ordinary demand deposit account and the 30 day notice deposit account plus.

State savings products form part of the sovereign debt of Ireland, which is managed by the National Treasury Management Agency. An Post and the Prize Bond Company are agents of the National Treasury Management Agency in respect of the State savings product range. Neither An Post nor the Prize Bond Company retains or manages any State savings money. All State savings money is placed directly with the Government under the management of the NTMA and forms part of the national debt. The direct unconditional obligation of the Government to repay the national debt applies equally to State savings, which include principal, interest and bonus payments if due, and, in respect of prize bonds, cash prizes.

The value of one prize bond is €6.25 and the minimum purchase is four prize bonds costing €25. Each prize bond that has not been encashed is entered into a weekly draw for a range of cash prizes. The top prize is currently €1 million in the last weekly draw of every second month - that is, February, April, June, August, October and December - and €20,000 in all other weekly draws. Approximately 8,000 other cash prizes are awarded each week.

The European Council and European Parliament have adopted legislation to protect the financial system and certain professions and activities from being misused for money laundering and the financing of terrorism. The anti-money-laundering obligations applicable in Ireland derive from the third EU money laundering directive, the provisions of which were transposed into Irish Law by the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. Part 4 of the Act sets out the obligations in regard to customer identification for the purposes of the legislation. These include the obligation to conduct customer due diligence prior to the establishment of a business relationship. Customer due diligence refers to the identification of customers and the beneficial owners of financial products associated with the customer. The extent to which a particular person or product may be exempted from the customer due diligence requirements is determined by reference to the Act, having regard to the underlying directives.

An Post and the Prize Bond Company are deemed to be a designated person under the Act as they fall within the definition of a financial institution. In light of this, An Post and the Prize Bond Company are required to comply with the relevant provisions of the Act in relation to the sale of prize bonds to customers. This means, in practical terms, that customer due diligence must be conducted on all purchases of prize bonds, irrespective of value. The Act designates the Central Bank as the competent authority for financial services providers, with responsibility for monitoring them and taking measures that are necessary for the purposes of securing their compliance with the Act. The Central Bank of Ireland has no discretion to exempt certain firms from the requirement to comply with the Act. In light of the above, the Minister for Finance is exploring with the National Treasury Management Agency and his colleague, the Minister for Justice and Equality, whether exemptions available under the directive may be applied to small-value purchases of prize bonds facilitated on behalf of the State by An Post and the Prize Bond Company. The two Ministers are investigating whether a more flexible arrangement can apply.