Anti-Money Laundering and Countering the Financing of Terrorism – Stubbs Gazette AML Workshop Orna McNamara – Anti Money Laundering Division, Central Bank of Ireland12th April 2016

Introduction

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International Principles EU Law Domestic RegulationFATF

Standards

European Directives

Irish Law

Note:

All of this culminates in a single addition to our designated enactments – Part 4 of the 2010 Act - see S114(4)

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AML/CFT Regulatory Law in Ireland• Primary legislation (Acts) dealing with AML/CFT• Part 2 CJA 2010- ML offence

a) Predicate offence- “proceeds of criminal conduct”b) Conceal, convert or transfer

• CJA (Terrorist Offences) 2005- Terrorist Financing offence• Part 4 of CJA 2010- Regulatory requirements

a) Customer Due Diligence b) Suspicious Transaction Reportingc) Tipping offd) Policies, procedures, training and record keeping

• Breach of requirements subject to regulatory and potentially criminal sanction

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The Role of the Central Bank

• Under Section 63 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, as amended in 2013 (“CJA 2010”), the Central Bank of Ireland (“the CBI”), as the State’s competent authority, must:

– Effectively monitor credit and financial institutions (“designated persons”); and

– Take measures (i.e. criminal and/or administrative sanctions) that are reasonably necessary for the purpose of securing compliance by those designated persons with the requirements in Part 4 of the CJA 2010.

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Central Bank of Ireland – AML Supervisory Approach

Supervisory Tools

• Risk Evaluation Questionnaires (REQs)

• Inspections• Sectoral & Thematic Reports

– Dear CEO Letter 2012– Sectoral Reports to date – Insurance,

Funds, Banking & Credit Unions

• AML/CFT/FS Review Meetings• Liaison with prudential supervisors

• Remediation – at firm level on foot of REQ or inspection

• Administrative Sanctions• Feedback to industry at

aggregate level – via reports and industry events.

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Supervisory Tools Supervisory Outcomes

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Inspection Process - What to expect from an AML Inspection• Inspection Process

Request for Information Onsite Review Issue of findings Follow up

• Key Themes Tested Corporate Governance Customer Due Diligence Ongoing Monitoring Suspicious Transaction Reporting Training Record Keeping

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Reports on AML/CFT and FS Compliance• Life Insurance Sector Report

published in March 2016• Irish Funds Sector Report

published in November 2015• Credit Union Sector Report

published in May 2015• Banking Sector Report

published in February 2015• Cross-sectoral ‘Dear CEO

Letter’ issued in 2012

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Governance of the AML/CFT Control Framework

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Key Inspection Findings

Governance and Controls

• Meaures to comply with the CJA 2010 not implemented in a timely manner.• The risks of ML/TF facing the credit union not adequately assessed and documented.• Policies and procedures not tailored to the specific needs of the credit union .

Training

• All relevant persons in the credit union, including the Board, not receiving instruction on the law relating to ML/TF.• Specialist training not provided to individuals in key AML/CFT roles.• Lack of training specific to the risks of the credit union and its own AML/CFT policies and operational procedures.

Customer due diligence

• Absence of detailed CDD procedures which clearly outline the requirements for different categories of member accounts. • Assessment not conducted of pre-July 2010 members to determine extent of CDD deficiencies and actions to be taken.• Inadequate transaction monitoring procedures or a failure to maintain evidence and results of monitoring conducted.

Suspicious Transaction Reporting

• A lack of clear and consistent procedures for the internal reporting of suspicions from staff to the MLRO.• Suspicious transactions not reported as soon as practicable and poor record keeping regarding the assessment and adjudication

of STRs.

Record Keeping

• Policies in place regarding the retention of records but due to deficient practices these policies not being fully adhered to. Note: Importance of maintenance of records in accordance with the act and also as evidence of the implementation of a robust AML/CFT framework.

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Summary and Expectations – Risk-based and proportionate ML/TF risk management

measures.– Active engagement by the Board of Directors and Senior

Management in the mitigation of such risks.– Comprehensive and detailed ML/TF risk assessments. – Comprehensive policies, procedures, systems and controls

implemented to address ML/TF risks to which the credit union may be exposed.

– Detailed and relevant training provided to staff to enable them to discharge their obligations effectively.

– Documentation maintained to evidence implementation of and adherence to, the credit unions’ AML/CFT framework.

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4th Anti-Money Laundering Directive (4AMLD)

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• Published on 5th June 2015 as Directive (EU) 2015/849

• Member States required to transpose to national law by 26th June 2017

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Background to the FATF Mutual

Evaluation Review (“MER”)

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Stages of MER process- Prior to onsite (January- May 2016)

- country submissions- assessors conduct desk based review of technical compliance- scope key areas of focus and onsite preparation

- Onsite visit (November 2016)- typically 2- 3 weeks duration- interviews and further documentation - key findings

- Post onsite (December – June 2017)- draft report and written comments /face to face meeting - key issues and FATF Plenary discussions

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Assessing Effectiveness

The extent to which the outcomes of the AML/CFT system are being achieved

- How well is the country mitigating ML and TF risks? - Does the AML/CFT system work in practice? - Outcomes not outputs (not efficiency)- Effectiveness model

- High Level Objective (1)- Intermediate Outcomes (3)- Immediate Outcomes (11)

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IO 4 Preventive MeasuresFinancial institutions and DNFBPs adequately apply AML/CFT preventive

measures commensurate with their risks, and report suspicious transactions

Six core issues (questions) under IO4 will be assessed:1) Understand AML/CFT obligations and ML/TF risks?2) How well apply mitigating measures commensurate with their risks?3) How well apply CDD and record-keeping measures…?4) How well apply enhanced/specific measures…?5) What extent meet their reporting obligations…?6) How well apply internal controls and procedures…?

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Preparations by Central Bank for FATF MER• Independent review of AMLD operations and strategy conducted

• Member of national AML steering committee chaired by D/Finance

• Inputting into National Risk Assessment

• Reviewing and updating Central Bank ML/TF risk assessment

• Preparing relevant Technical Compliance and Effectiveness submissions

• Engagement at FATF Plenary and working group meetings

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Further Information

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Thank You

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