20 th March 2013 Paula Reid

1. CPD Accreditation Reference - 2013-0599 The Legal & Practitioners Guide to the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2013 20th March 2013 Paula Reid

2. Anti-Money Laundering Compliance Overview of New Developments ACOI Seminar, 20 March 2013 Paula Reid, Partner, A&L Goodbody, Ireland - 15397943

3. Anti-Money Laundering – What’s New Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill, 2013 Commission Proposal for a Fourth Anti-Money Laundering Directive Emerging themes in domestic AML Regulation Impact on Compliance/Senior Management 15397943

4. CRIMINAL JUSTICE (Money Laundering and Terrorist Financing) Amendment, Bill 2013

5. Criminal Justice (Money Laundering and Terrorist Financing) Amendment, Bill 2013 • Bill published 1 February – (Heads of this Bill were published in June 2012) • Minor amendments to the Criminal Justice (Money Laundering and Terrorist Financing) 2010 Act proposed to align Irish law with FATF Recommendations

6. Criminal Justice (Money Laundering and Terrorist Financing) Amendment, Bill 2013 • Amendment to the definition of “occasional transaction” which is one of the triggers for CDD • for customers of private members’ gaming clubs the financial threshold is set at not less than €2,000 • for certain wire fund transfers at not less than €1,000 • confirmation that the definition applies when an amount of €15,000 is reached, rather than exceeds €15,000

7. Criminal Justice (Money Laundering and Terrorist Financing) Amendment, Bill 2013 Simplified Due Diligence • SCDD cannot be applied unless checks are done to confirm the customer is a “specified customer” or “specified product” PEPs • enhanced CDD must be applied to an existing customer who subsequently becomes a PEP and enhanced on-going monitoring to business relationships with a customer who is or becomes a PEP

8. Criminal Justice (Money Laundering and Terrorist Financing) Amendment, Bill 2013 Enhanced CDD • mandatory enhanced CDD where there is a higher risk of money laundering/terrorist financing (ML/TF) Internal policies and procedures • measures to keep documents and information about customers up to date • additional measures to give effect to enhanced CDD where there is a heightened risk of ML/TF • measures to manage the risks of ML/TF which may arise from technological developments including the use of new products and new practices and the manner in which services relating to such developments are delivered.

9. Criminal Justice (Money Laundering and Terrorist Financing) Amendment, Bill 2013 Enforcement • extension of enforcement powers of State competent authorities so as to allow such authorities to issue directions to designated persons to take specific actions/processes that are reasonably necessary for purposes of compliance

10. Criminal Justice (Money Laundering and Terrorist Financing) Amendment, Bill 2013 HEADS

11. Criminal Justice (Money Laundering and Terrorist Financing) Amendment, Bill 2013 Bill is not in line with proposed Fourth Anti-Money Laundering Directive Does not address issues which are subject to regulatory scrutiny or industry concern and focus

12. PROPOSAL FOR A FOURTH ANTI-MONEY LAUNDERING DIRECTIVE

13. Proposal for a Fourth Anti-Money Laundering Directive Background Under the 3 MLD the Commission is required to report on the implementation of the Directive Commission Report was published in April 2012 – concluded that the 3 MLD framework appears to work well and no fundamental changes required. Key changes flagged: • incorporating more risk-based elements in the framework • measures to assist with the transparency of legal persons and arrangements

14. Proposal for a Fourth Anti-Money Laundering Directive • new provisions to deal with domestic PEPs and those working for international organisations • greater focus on sanctions for non-compliance • greater alignment of AML rules with principles of data protection • enhancing supervisory powers in cross-border situations

15. Proposal for a Fourth Anti-Money Laundering Directive Scope • financial threshold which is CDD trigger for traders in goods for cash reduced from €15,000 to €7,500 • inclusion of providers of “gambling services” – currently ‘casinos’ • inclusion of tax crimes within definition of “serious crimes” – no impact in Irish law • minimum standards directive

16. Proposal for a Fourth Anti-Money Laundering Directive Risk-based approach • EBA, ESMA, EIOPA to produce joint opinion on ML/TF union risks • national risk assessments to be conducted • Member States shall ensure that regulated businesses apply a risk-based approach having regard to these risk assessments. • independent audit to test robustness of AML procedures may be appropriate • greater focus on engagement by senior management in formulating and updating risk profiles • supervisors should apply a risk-based approach

17. Proposal for a Fourth Anti-Money Laundering Directive Definition of senior management • “an officer or employee with sufficient knowledge of the institution’s ML/TF risk exposure and sufficient seniority to make decisions affecting its risk exposure. It need not involve a member of the Board of Directors”

18. Proposal for a Fourth Anti-Money Laundering Directive Simplified Due Diligence • new approach to SCDD • no exemption for certain categories of “regulated” customer. Decisions on how and when to apply SCDD will have to be justified on the basis of lower risk and by reference to factors set out in Annex II • Beneficial Ownership • companies required to hold adequate, accurate and current information on their beneficial ownership • such information to be assessed in a timely manner by regulators/regulated businesses • trustees must disclose their status to designated persons when forming business relationships/occasional transactions

19. Proposal for a Fourth Anti-Money Laundering Directive PEPs • PEPs regime extended to domestic PEPs and persons holding prominent positions in international organisations • PEP checks should continue for not less than 18 months after a person has ceased to hold office as a PEP • checks to determine whether the beneficiaries of a life or investment related insurance policy, and/or where required, the beneficial owner of the beneficiary are PEPs. Such measures to be taken at the time of pay-out/assignment Enhanced CDD • When assessing ML/TF risks Member States must consider the potential high risk factors in Annex II • EBA, EIOPA, ESMA guidelines envisaged

20. Proposal for a Fourth Anti-Money Laundering Directive Record-Keeping – alignment with data protection policies • CDD and transactional records should be maintained for a period of 5 years after the business has ended. After this time, records should be deleted unless otherwise directed by national law. Member States may allow retention after this time only if required for purposes of ML/TF investigations • the maximum retention period shall not exceed ten years

21. Proposal for a Fourth Anti-Money Laundering Directive Internal Policies and Procedures • greater alignment with data protection • entities that are part of a group should implement group-wide policies and procedures, including data protection policies and procedures, for sharing of information within the group for AML/TF purposes • branches or majority owned subsidiaries in third countries should apply EU, AML and data protection rules to the extent permitted by that country, and • where there is a difficulty with such compliance additional steps will be required to handle the risk of ML/TF. This may include additional supervisory actions • EBA, EIOPA and ESMA technical standards envisaged specifying the type of additional measures required • internal training should address data protection

22. Supervision Member States to maintain statistical reports on the size of different AML regulated sectors and on the level and nature of STRs Regulators should apply a risk-based approach to supervision and; • have a clear understanding of the ML/TF risks present in their country • have on-site and off-site access to all relevant domestic/international risks • base frequency/intensity of supervision on the risk profile of the regulated business and ML/TF risk in the country • take into account the degree of discretion allowed to the regulated entity and review the assessments underlying this discretion and the adequacy of AML controls • EBA, EIOPA, ESMA guidelines envisaged on factors to be considered when conducting supervision on a risk-sensitive basis

23. Proposal for a Fourth Anti-Money Laundering Directive Enforcement • sharper focus on enforcement generally and on the application of administrative sanctions for systems failures similar to administrative sanction regime in Ireland, and • on potential liability of senior management • EBA, EIPOA, ESMA guidelines envisaged.

24. EMERGING THEMES IN AML REGULATOIN

25. Emerging Themes in AML Regulation CBI inspections focussed on: • Risk-based approach – doing it, documenting it and updating it and senior management engagement around it • Gaps in CDD – rigour and systems to close gaps • Enhanced CDD for PEPs is mandatory • Simplified due diligence – focus on the Act • Training – informed, intelligent and effective • Senior management – engagement, effectiveness and accountability • Alignment of compliance with governance

26. What Does The Future of AML Regulation Look Like? Greater emphasis on the risk-based approach – preparing, documenting and updating Increased judgment for compliance functions Effective training Real engagement by senior management – “the effective board” Need for board policy/mission statement Enforcement – administrative sanctions for systems failures Bespoke compliance – not one-size-fits all Sectoral guidance is appropriate