Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018

PART 1 Preliminary and General

1. Short title, commencement and collective citation

1. (1) This Act may be cited as the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018.

(2) This Act shall come into operation on such day or days as the Minister for Justice and Equality may appoint by order, or orders, either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or different provisions.

(3) The Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 and 2013 and this Act may be cited together as the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2018.

2. Definitions

2. In this Act—

“Act of 2010” means Criminal Justice (Money Laundering and Terrorist Financing) Act 2010;

“Act of 2013” means Criminal Justice Act 2013.

PART 2 Amendment of Act of 2010

3. Amendment of section 2 of Act of 2010

3. Section 2 of the Act of 2010 is amended—

(a) in subsection (1)—

(i) by the deletion of the definition of “Implementing Directive”, and

(ii) by the insertion of the following definition before the definition of “Minister”:

“ ‘Fourth Money Laundering Directive’ means Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015[^2] on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC;”,

and

(b) by the substitution of the following subsection for subsection (2):

“(2) A word or expression used in this Act and also used in the Fourth Money Laundering Directive has, unless the contrary intention appears, the same meaning in this Act as in that Directive.”.

4. Amendment of section 24(1) of Act of 2010

4. Section 24(1) of the Act of 2010 is amended—

(a) by the insertion of the following definitions after the definition of “business relationship”:

“ ‘business risk assessment’ has the meaning given to it by section 30A;

‘Capital Requirements Regulation’ means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013[^3] on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012;

‘collective investment undertaking’ means—

(a) an undertaking for collective investment in transferable securities authorised in accordance with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (S.I. No. 352 of 2011) or otherwise in accordance with the Directive of 2009,

(b) an alternative investment fund within the meaning of the European Union (Alternative Investment Fund Managers) Regulations 2013 (S.I. No. 257 of 2013),

(c) a management company authorised in accordance with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 or otherwise in accordance with the Directive of 2009, or

(d) an alternative investment fund manager within the meaning of the European Union (Alternative Investment Fund Managers) Regulations 2013;”,

(b) by the insertion of the following definition after the definition of “competent authority”:

“ ‘correspondent relationship’ means—

(a) the provision of banking services by one bank as the correspondent to another bank as the respondent, including providing a current or other liability account and related services, such as cash management, international funds transfers, cheque clearing, payable-through accounts and foreign exchange services, or

(b) the relationships between and among credit institutions and financial institutions including where similar services are provided by a correspondent institution to a respondent institution, and including relationships established for securities transactions or funds transfers;”,

(c) in the definition of “credit institution” by the substitution of the following paragraph for paragraph (a):

“(a) a credit institution within the meaning of point (1) of Article 4(1) of the Capital Requirements Regulation, or”,

(d) by the insertion of the following definition after the definition of “designated person”:

“ ‘Directive of 2009’ means Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009[^4] on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS);”,

(e) by the insertion of the following definition after the definition of “EEA State”:

“ ‘electronic money’ means electronic money within the meaning of the European Communities (Electronic Money) Regulations 2011 (S.I. No. 183 of 2011);”,

(f) by the deletion of the definition of “Electronic Money Directive”,

(g) by the substitution of the following definition for the definition of “financial institution”:

“ ‘financial institution’ means—

(a) an undertaking that carries out one or more of the activities set out at reference numbers 2 to 12, 14 and 15 of the Schedule to the European Union (Capital Requirements) Regulations 2014 (S.I. No. 158 of 2014) or foreign exchange services, but does not include an undertaking—

(i) that does not carry out any of the activities set out at those reference numbers other than one or more of the activities set out at reference number 7, and

(ii) whose only customers (if any) are members of the same group as the undertaking,

(b) an insurance undertaking within the meaning of Regulation 3 of the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015), in so far as it carries out life assurance activities,

(c) a person, other than a person falling within Regulation 4(1) of the European Union (Markets in Financial Instruments) Regulations 2017 (S.I. No. 375 of 2017), whose regular occupation or business is—

(i) the provision to other persons, or the performance, of investment services and activities within the meaning of those Regulations, or

(ii) bidding directly in auctions in accordance with Commission Regulation (EU) No 1031/2010 of 12 November 2010[^5] on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances pursuant to Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowances trading within the Community on behalf of its clients,

(d) an investment business firm within the meaning of the Investment Intermediaries Act 1995 (other than a non-life insurance intermediary within the meaning of that Act),

(e) a collective investment undertaking that markets or otherwise offers its units or shares,

(f) an insurance intermediary within the meaning of the Insurance Mediation Directive (other than a tied insurance intermediary within the meaning of that Directive) that provides life assurance or other investment-related services, or

(g) An Post, in respect of any activity it carries out, whether as principal or agent—

(i) that would render it, or a principal for whom it is an agent, a financial institution as a result of the application of any of the foregoing paragraphs,

(ii) that is set out at reference number 1 in the Schedule to the European Union (Capital Requirements) Regulations 2014, or

(iii) that would render it, or a principal for whom it is an agent, an investment business firm within the meaning of the Investment Intermediaries Act 1995 (other than a non-life insurance intermediary within the meaning of that Act) if section 2(6) of that Act did not apply;”,

(h) by the substitution of the following definition for the definition of “group”:

“ ‘group’ means a group of undertakings which consists of a parent undertaking, its subsidiaries, and the entities in which the parent undertaking or its subsidiaries hold a participation, as well as undertakings linked to each other by a relationship within the meaning of Article 22 of Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013[^6] on the annual financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC;”,

(i) by the insertion of the following definition after the definition of “group”:

“ ‘high-risk third country’ means a jurisdiction identified by the European Commission in accordance with Article 9 of the Fourth Money Laundering Directive;”,

(j) by the deletion of the definition of “Life Assurance Consolidation Directive”,

(k) by the insertion of the following definitions after the definitions of “member”:

“ ‘monitoring’, in relation to a business relationship between a designated person and a customer, means the designated person, on an ongoing basis—

(a) scrutinising transactions, and the source of wealth or of funds for those transactions, undertaken during the relationship in order to determine if the transactions are consistent with the designated person’s knowledge of—

(i) the customer,

(ii) the customer’s business and pattern of transactions, and

(iii) the customer’s risk profile (as determined under section 30B),

and

(b) ensuring that documents, data and information on customers are kept up to date in accordance with its internal policies, controls and procedures adopted in accordance with section 54;

‘national risk assessment’ means the assessment carried out by the State in accordance with paragraph 1 of Article 7 of the Fourth Money Laundering Directive;”,

(l) in the definition of “occasional transaction”—

(i) by the substitution of the following paragraph for paragraph (b):

“(b) in a case where the transaction concerned consists of a transfer of funds (within the meaning of Regulation (EU) No. 2015/847 of the European Parliament and of the Council of 20 May 2015[^7]) that the amount of money to be transferred is in aggregate not less than €1,000,”,

(ii) by the insertion of the following paragraph after paragraph (b):

“(bb) in a case where the designated person concerned is a person referred to in section 25(1)(i), that the amount concerned—

(i) paid to the designated person by the customer, or

(ii) paid to the customer by the designated person,

is in aggregate not less than €10,000, and”,

and

(iii) in paragraph (c), by the substitution of “(a), (b) or (bb)” for “(a) or (b)”,

(m) by the substitution of the following definition for the definition of “public body”:

“ ‘public body’ means an FOI body within the meaning of the Freedom of Information Act 2014;”,

(n) by the deletion of the definition of “Recast Banking Consolidation Directive”,

(o) by the substitution of the following definition for the definition of “regulated market”:

“ ‘regulated market’ means—

(a) a regulated market with the meaning of point (21) of Article 4(1) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014[^8] on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, located within the EEA, or

(b) a regulated market that subjects companies whose securities are admitted to trading to disclosure obligations which are equivalent to the following:

(i) disclosure obligations set out in Articles 17 and 19 of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014[^9] on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC,

(ii) disclosure obligations consistent with Articles 3, 5, 7, 8, 10, 14 and 16 of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003[^10] on the prospectuses to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC,

(iii) disclosure obligations consistent with Articles 4 to 6, 14, 16 to 19 and 30 of Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004[^11] on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC, and

(iv) disclosure requirements consistent with EU legislation made under the provisions mentioned in subparagraphs (i) to (iii);”,

(p) by the insertion of the following definition after the definition of “relevant professional adviser”:

“ ‘senior management’ means an officer or employee with sufficient knowledge of the institution’s money laundering and terrorist financing risk exposure and sufficient seniority to take decisions affecting its risk exposure, and need not, in all cases, be a member of the board of directors;”,

and

(q) by the insertion of the following definition after the definition of “transaction”:

“ ‘transferable securities’ means transferable securities within the meaning of the European Union (Markets in Financial Instruments) Regulations 2017;”.

5. Amendment of section 25 of Act of 2010

5. Section 25 of the Act of 2010 is amended—

(a) in subsection (1)—

(i) by the substitution of the following paragraph for paragraph (d):

“(d) subject to subsection (1A), a relevant independent legal professional,”,

(ii) in paragraph (i)—

(I) by the insertion of “or by the person” after “to the person”, and

(II) by the substitution of “€10,000” for “€15,000”,

and

(b) by the insertion of the following subsection after subsection (1):

“(1A) A relevant independent legal professional shall be a designated person only as respects the carrying out of the services specified in the definition of ‘relevant independent legal professional’ in section 24(1).”.

6. Beneficial owner in relation to bodies corporate

6. The Act of 2010 is amended by the substitution of the following for section 26:

“26. In this Part, ‘beneficial owner’, in relation to a body corporate, has the meaning given to it by point (6)(a) of Article 3 of the Fourth Money Laundering Directive.”.

7. Amendment of section 27 of Act of 2010

7. Section 27 of the Act of 2010 is amended in paragraph (b) by the substitution of “controls” for “exercises control over the management of”.

8. Amendment of section 28 of Act of 2010

8. Section 28 of the Act of 2010 is amended—

(a) by the deletion of subsection (1), and

(b) in subsection (2)—

(i) in paragraph (a), by the deletion of “at least 25 per cent of”,

(ii) in paragraph (c), by the substitution of “the trust;” for “the trust.”, and

(iii) by the insertion of the following paragraphs after paragraph (c):

“(d) the settlor;

(e) the trustee;

(f) the protector.”.

9. Amendment of section 30 of Act of 2010

9. Section 30 of the Act of 2010 is amended—

(a) in subsection (1)—

(i) in paragraph (a), by the deletion of “at least 25 per cent of”,

(ii) in paragraph (c)—

(I) by the deletion of “at least 25 per cent of”, and

(II) by the substitution of “or arrangement,” for “or arrangement.”,

and

(iii) by the insertion of the following paragraph after paragraph (c):

“(d) any person holding a position, in relation to the legal entity or legal arrangement that is similar or equivalent to the position specified in paragraphs (d) to (f) of section 28(2) in relation to a trust.”,

and

(b) by the deletion of subsection (4).

10. Risk assessment by designated persons

10. The following Chapter is inserted after Chapter 1 of Part 4 of the Act of 2010:

“Chapter 1A

Risk assessment by designated persons

Business risk assessment by designated persons

30A. (1) A designated person shall carry out an assessment (in this Act referred to as a ‘business risk assessment’) to identify and assess the risks of money laundering and terrorist financing involved in carrying on the designated person’s business activities taking into account at least the following risk factors:

(a) the type of customer that the designated person has;

(b) the products and services that the designated person provides;

(c) the countries or geographical areas in which the designated person operates;

(d) the type of transactions that the designated person carries out;

(e) the delivery channels that the designated person uses;

(f) other prescribed additional risk factors.

(2) A designated person carrying out a business risk assessment shall have regard to the following:

(a) any information in the national risk assessment which is of relevance to all designated persons or a particular class of designated persons of which the designated person is a member;

(b) any guidance on risk issued by the competent authority for the designated person;

(c) where the designated person is a credit institution or financial institution, any guidelines addressed to credit institutions and financial institutions issued by the European Banking Authority, the European Securities and Markets Authority or the European Insurance and Occupational Pensions Authority in accordance with the Fourth Money Laundering Directive.

(3) A business risk assessment shall be documented unless a competent authority for a designated person decides under Article 8 of the Fourth Money Laundering Directive that an individual documented risk assessment is not required and notifies the designated person.

(4) A designated person shall keep the business risk assessment, and any related documents, up to date in accordance with its internal policies, controls and procedures adopted in accordance with section 54.

(5) A business risk assessment shall be approved by senior management.

(6) A designated person shall make records of a business risk assessment available, on request, to the competent authority for that designated person.

(7) The Minister may prescribe additional risk factors to be taken into account in a risk assessment under subsection (1) only where he or she is satisfied that it is appropriate to consider such matters in order to accurately identify and assess the risks of money laundering or terrorist financing.

(8) A designated person who fails to comply with this section commits an offence and is liable—

(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months (or both), or

(b) on conviction on indictment to a fine or imprisonment not exceeding 5 years (or both).

Application of risk assessment in applying customer due diligence