The Financial Action Task Force (FATF), in a 2006 report, summarizes the findings of its 2006 Mutual Evaluation on Ireland's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. In this report the FATF notes that the Irish legal structure and international cooperation framework meet high standards. The report, however, observes that statistics regarding AML/CFT investigations, prosecutions, and convictions are not comprehensive. Therefore, the actual implementation of Ireland's AML/CFT laws and regulations could not be properly evaluated by the 2006 FATF team. In its 2006 report, the FATF also indicates that Ireland's terrorist financing legislation is not comprehensive; the Irish Financial Intelligence Unit (FIU) lacks resources to carry out its responsibilities, and the FIU lacks a full range of sanctioning powers. Furthermore, the report notes that customer due diligence requirements are lax, non-profit sector oversight is weak, and a full range of designated non-financial business and professions is not covered by the scope of the AML/CFT laws. The FATF recommends that the Irish Financial Regulator improve its domestic cooperation between the FIU and the Irish Financial regulator.
General Overview
According to the Financial Action Task Force's (FATF) Third Mutual Evaluation report on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT), released in February 2006, Ireland is largely compliant with the FATF's Recommendations 1 and 2 on the criminalization of money laundering, and Special Recommendation II on the criminalization of terrorist financing. The 2007 U.S. Department of State (DoS) report also discloses that the 2006 FATF report assessed Ireland's money laundering definition as meeting FATF requirements and acknowledged that the Irish legal structures and international cooperation frameworks met high standards. However, implementation was deemed to be weak, with low rates of prosecutions and convictions.
The 2006 FATF Report also found a few other deficiencies. For instance, terrorist financing legislation is not comprehensive and the Irish Financial Intelligence Unit (the Money Laundering Investigation Unit, or MLIU) lacks resources to carry on its responsibility. The MLIU also lacks a full range of sanctioning powers to non-compliant financial institutions and designated non-financial business and professions (DNFBPs). The report also noted that requirements for customer due diligence (CDD) are lax and domestic cooperation between the MLIU and the Irish Financial Regulator has room for improvement. Finally, the full range of DNFBPs is not covered by the scope of the AML/CFT laws, and non-profit sector oversight is weak.
The 2007 U.S. DoS report details the principal laws that form the AML/CFT framework in Ireland. The report mentions that the 1994 Criminal Justice Act criminalizes money laundering relating to narcotics trafficking in Ireland. A 2003 law mandates designated institutions to file suspicious transactions reports (STRs) with the Revenue (Tax) Department in addition to the MLIU. The 2003 amendment to Ireland's Anti-Money Laundering Law transposes the Second European Union (EU) Money Laundering Directive to Irish law by extending CDD and STR requirements to lawyers, accountants, auditors, real estate agents, auctioneers, and dealers in high-value goods, in addition to financial institutions. The Company Law Enforcement Act of 2001 establishes the Office of the Director of Corporate Enforcement (ODCE) to enforce the provisions of the Company Act. The Criminal Justice (Terrorism Offenses) Act of 2005 brought Ireland in line with United Nations Conventions and European Union Framework decisions on combating terrorism. Ireland is also required to align its laws with the Third EU Money Laundering Directive of 2005 by 2007. The same report discloses that Ireland intends to expand its AML/CFT legal framework to address CDD, identification of beneficial owners, politically exposed persons (PEPs), designation of trusts, and customs reporting for amounts exceeding €10,000 into or out of the EU. The U.S. DoS report also mentions the Irish Financial Services Regulatory Authority (IFSRA), which is the Irish financial regulator and a component of the Central Bank and Financial Services Authority of Ireland (CBFSAI)). The IFSRA is the primary agency supervising money laundering compliance. The report also mentions the Criminal Assets Bureau (CAB), which was established in 1996 to confiscate the proceeds of unconvicted crime.
The 2006 FATF report notes that criminals, terrorists, and other money launderers have used financial institutions, businesses, or professions for money-laundering fraud, including credit institutions, money remittance companies, solicitors, accountants, second hand car dealerships, and others that are either not regulated or have a low AML compliance culture. Citing 2005 statistics, the 2007 U.S. DoS Report notes that 10,735 STRs were received by the MLIU, with 8 money-laundering prosecutions and 3 convictions. However, there have been no prosecutions for terrorism offences, and the lengthiest penalty for AML has been six years, although the crime carries a maximum penalty of 14 years and unlimited fine.
The 2007 U.S. DoS Report further adds that Ireland is a member of the FATF, and the MLIU is a member of the Egmont Group. Ireland is also a party to the United Nations (UN) International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime, and the 1988 UN Drug Convention.
The Principles
1. Legal Systems and Related Institutional Measures
The FATF's 2006 Mutual Evaluation Report on Ireland notes that Ireland is largely compliant with the recommendations on the criminalization of money laundering and terrorist financing (Recommendations 1 & 2, and Special Recommendation II). Further, the report notes that the Irish money-laundering law meets FATF requirements. The Criminal Justice Act of 1994 criminalizes money laundering, which includes indictable offences since 2001; and the Criminal Justice (Terrorist Offences) Act of 2005 criminalizes terrorist financing in accordance with the provisions of the UN Convention for the Suppression of terrorist financing and UN Security Council Resolution 1373 of 2001. Terrorist financing is also a predicate offence for money laundering in Ireland.
The 2006 FATF report also finds that Ireland is compliant with recommendation 3, on confiscation, freezing and seizing of proceeds of crime. Moreover, the Irish laws on the confiscation of the proceeds of crime are effective and comprehensive, and available through both criminal and civil procedures. The Criminal Justice Act of 1994 lays down the freezing and confiscation measures; the Proceeds of Crime Act of 1996 provides for the civil forfeiture of property established as proceeds of crime; and the Criminal Justice (Terrorist Offences) Act of 2005 provides the legislative basis for the confiscation of orders relating to the offence of terrorist financing.
With respect to Special Recommendation III - Freezing of funds used for terrorist financing - the 2006 FATF Report finds Ireland to be partially compliant. Further, Ireland has implemented UN Security Council Resolutions 1267 of 1999 and 1373 of 2001 under EU Council Regulations, and accorded them the force of law to freeze terrorist-financing funds. The laws are effective in obliging financial institutions to freeze assets and the Criminal Justice (Terrorist Offences) Act of 2005 further provides for penalties for non-compliance. The 2006 FATF Report further notes that Ireland is largely compliant with Recommendations 26 and 30 pertaining to the MLIU and its resources, integrity, and training, and partially compliant with Recommendation 32 on statistics. The MLIU was established in 1995, and is domiciled in the Garda Bureau of Fraud Investigation (GBFI). It shares responsibility of receiving STRs with the Revenue Commissioners in relation to possible tax/customs offences.
According to the FATF 2006 report, Ireland is compliant with FATF recommendations on law enforcement, prosecution, and other competent authorities. It is largely compliant with the recommendation on staffing and resources of the authorities and only partially compliant with the recommendation on statistics. The report further states that the GBFI, the CAB and the Revenue Commissioners have adequate STR authority over financial institutions and DNFBPs, as well as sufficient powers to prosecute money laundering and terrorist financing offences. The report adds that Ireland is partially compliant with Special Recommendation IX on cross border declaration and disclosure. The Irish authorities have no authority to obtain truthful disclosure of cross-border transportation or sanction false disclosure.
The 2006 FATF evaluation found a few deficiencies in the effectiveness of Ireland's AML/CFT regime. The offence of terrorist financing does not cover the funding of a single terrorist or two terrorists acting in concert and the staffing, structures and resources of the MLIU and other prosecution authority in Ireland is limited. Further, there have been relatively few money laundering convictions, and none for terrorist financing. However, a lack of comprehensive statistics on enforcement prevents a full evaluation of effectiveness of the regime.
According to the FATF's 2006 Mutual Evaluation Report, Ireland is only partially compliant with Recommendations 5 through 8 pertaining to customer due diligence, including enhanced or reduced measures. The Criminal Justice Act of 1994 designates financial institutions subject to AML obligations and the Criminal Justice (Terrorist Offences) Act of 2005 extends the obligations to include CFT; viz. customer identification when establishing business relationships or when performing transactions over €13,000 with natural or legal persons or arrangements, record keeping, STRs, and preventing and detecting money laundering and terrorist financing. The acts however do not apply to existing business relations prior to 1995, and have a weak enforcement and sanctions regime.
As regards Recommendation 9, relating to third parties and introduced business, the 2006 FATF report states that Ireland is non-compliant. However, the guidance notes issued by the Money Laundering Steering Committee (MLSC) comprised of different government agencies and private sector bodies contain provisions on introduced business, though these guidelines do not have legal sanction and impose no further obligations for high-risk relationships for politically exposed persons.
The 2006 FATF report finds Ireland fully compliant with Recommendation 4, which deals with financial institution secrecy and confidentiality, and that the Irish AML/CFT laws meet FATF requirement by not allowing banking secrecy to inhibit AML/CFT investigations. The report also finds Ireland fully compliant with Recommendation 10 dealing with record keeping. However, Ireland is non-compliant with Special Recommendation VII relating to wire transfers, as it lacks any laws imposing record-keeping and information-gathering requirements for wire transfers.
Ireland is partially compliant with Recommendations 11 and 21 concerning the monitoring of transactions and relationships, according to the 2006 FATF report. Irish laws do not require institutions to monitor unusual large transactions without a specific economic purpose; though the guidance notes assist institutions in identifying suspicious transactions and the IFSRA distributes information on non-cooperative countries and territories to institutions. The FATF report further finds Ireland to be fully compliant with the recommendations relating to STRs and other reporting, except for Recommendation 25 on guidelines and feedback, where it is largely compliant. The Criminal Justice Act of 1994 and the Criminal Justice (Terrorist Offences) Act of 2005 require designated bodies to report suspicious activities involving money laundering and terrorist financing, as well as infringement of the AML/CFT preventive measures to the GBFI and the Revenue Commissioners.
As regards Recommendations 15 and 22 pertaining to internal controls, compliance, audit and foreign branches, the 2006 FATF report finds Ireland largely compliant. The Criminal Justice Act of 1994 and the Criminal Justice (Terrorist Offences) Act of 2005 impose general obligations on the designated bodies to adopt internal control measures to prevent and detect money laundering and terrorist financing. Further, legislation provides for information sharing with branches and subsidiaries unable to observe AML/CFT standards. The Guidance Notes also offer detailed advice on adopting compliance mechanisms. Recommendation 18 on shell banks is partially met through legal safeguards against the establishment and operation of shell banks in Ireland, though not against correspondent banking relationships with shell banks.
Regarding Recommendations 23, 25, 29 and 30 pertaining to the supervisory and oversight system, the 2006 FATF report finds Ireland to be largely compliant, although on the issues of sanctions and statistics (Recommendations 17 and 32), Ireland is only partially compliant. The IFSRA applies strict licensing and supervision requirements on financial institutions in Ireland. It is adequately staffed, structured, and resourced and is operationally independent to carry on its supervisory authority without outside influence. The supervisory system also places responsibility on the management of financial institutions to implement effective AML/CFT internal controls. It however lacks sufficient sanctioning powers. Ireland also partially meets the FATF's Special Recommendation VI. Money transmission businesses or services operating in Ireland have AML/CFT obligations similar to other designated institutions and are supervised by the IFSRA. Finally, the 2006 FATF report notes several deficiencies in Ireland's AML/CFT measures. The legislative framework does not impose AML/CFT obligations on the basis of risk, there are no explicit provisions identifying and verifying beneficial owner and imposing more stringent CDD requirements, and subsidiaries of financial institutions in countries that do not have satisfactory AML/CFT application are not adequately supervised.
3. Preventive Measures - Designated non-Financial Business and Professions
The 2006 FATF report observes that Ireland is partially compliant with Recommendations 12 and 16 pertaining to CDD and STRs for DNFBPs; non-compliant with Recommendation 24 regarding regulation, supervision and monitoring; largely compliant with Recommendation 25 dealing with guidelines and statistics; and fully compliant with Recommendation 20 relating to other DNFBPs. Further, most categories of DNFBPs operate in Ireland, and include real estate agents/auctioneers, dealers in precious metals and stones, solicitors and barristers, accountants, and trust and company service providers. Also, the Criminal Justice Act of 1994 imposes the same AML/CFT obligations on them as for financial institutions. However, the report finds that the law does not have AML/CFT requirements for trust and company service providers as a separate DNFBP category despite the presence of specialist providers in Ireland. Also, casinos, including internet casinos, are illegal. According to the same report, self-regulatory organizations publish sectoral guidance notes to assist the DNFBPs fulfill their AML/CFT obligations; though they lack sanctioning power for non-compliance.
There are few deficiencies noted by the 2006 FATF report regarding preventive measures for DNFBPs. The Criminal Justice Act of 1994 lacks comprehensiveness, especially in the application of CDD measures, and therefore has limited effectiveness; the Act does not cover trust and company service providers and private gaming clubs which operate casino like facilities and pose an AML/CFT risk; and the GBFI, which has prosecution authority over the DNFBPs also lacks a full range of sanctioning powers.
4. Legal Person and Arrangements & Non-Profit Organizations
According to the FATF's 2006 Mutual Evaluation Report, Ireland is partially compliant with the recommendations concerning Legal Person and Arrangements & Non-Profit Organizations (Recommendations 33 and 34, and Special Recommendation VIII). Further, the Companies Act lays down the requirements for legal persons in Ireland, including private companies, public companies, public companies limited by shares, credit unions, friendly societies, and associations. The law requires all companies and societies to register with the Registrar of Companies or the Registrar of Friendly Societies, and creates the Office of the Director of Corporate Enforcement to enforce compliance by companies and company officers with the requirements of the Companies Act. The Company Registration Office registers a list of shareholders, annual return information, and any change in directorship of all companies, and makes them publicly available on its website. The law however does not require disclosure of beneficial ownership if other than the registered shareholder.
Ireland's system of trust law allows the creation of trusts, though their information is not recorded in a registry. The Proceeds of Crime (Amendment) Act of 2005 and the Taxes Consolidation Act of 1997 contain some provisions regarding disclosure though they are limited. As regards non-profit organizations, the 2006 FATF Report finds that Ireland is reviewing its non-profit sector and enhancing its oversight to prevent and detect terrorist financing. Summing up, the 2006 FATF report recommends that Ireland broaden its requirements on beneficial ownership so that information is more readily available in a timely manner and implement the specific measures from the Interpretative Note and Best Practices Paper to Special Recommendation VIII or other appropriate measures to strengthen non-profit sector oversight.
According to the FATF's 2006 Mutual Evaluation Report, Ireland is largely compliant with Recommendation 31 relating to national cooperation and partially compliant with Recommendation 32 on statistics. Further, Ireland has adequate co-operation and coordination mechanisms between relevant organizations at the national level, and the MLSC is the main structure for AML/CFT co-operation and co-ordination efforts. Ireland is also an active participant in the EU framework, including Europol, Interpol and the World Customs Organization, and enforces EU regulations diligently. The report also indicates that Ireland is largely compliant with Recommendation 35 and notes that Ireland is a party to the Vienna Convention and the 1999 UN International Convention for the Suppression of the Financing of Terrorism. It has also signed the Palermo Convention, but not yet ratified it, although it applies most of its AML provisions. The report states that Ireland is partially compliant with Special Recommendation I on UN Special Resolutions and their implementation.
Further, the report states that Ireland is compliant with Recommendations 36, 38 and Special Recommendation V relating to mutual legal assistance, although it is only partially compliant with Recommendation 32. As evidence, it is party to a number of multilateral MLA conventions, including the Council of Europe Convention on Mutual Assistance in Criminal Matters of 1957, and the Council of Europe Convention on Laundering, Search, Seizure, and Confiscation of the Proceeds of Crime of 1990. It has also negotiated a number of international MLA memoranda of understanding (MoUs) to cooperate internationally, as well as bilateral MLA agreements with the UK, Hong Kong, China, and the U.S. Overall, the FATF notes that the systems in place are adequate.
The 2006 FATF report finds Ireland to be fully compliant with the Recommendations on extradition (Recommendations 37 &39, and Special Recommendation V). The report notes that the Extradition Acts 1965 to 2001 of Ireland provide for extradition for money laundering and terrorist financing, and that Ireland has bilateral extradition treaties with Australia and the U.S. It also has the ability to process extraditions with the EU member states through the European Arrest Warrant. Further, the FATF report finds Ireland partially compliant with Recommendation 32 on statistics, and fully compliant with Recommendation 40 and Special Recommendation V relating to other forms of international co-operation. Also, Irish channels of cooperation appear to be working effectively through the MLIU, regulatory and enforcement authorities, and through the Egmont Group. Finally, the 2006 FATF report found that domestic cooperation between the MLIU and the IFSRA could be further increased; and that Ireland should take a more proactive approach to international negotiations.
Financial Action Task Force, "Third Mutual Evaluation/Detailed Assessment Report: Anti-Money Laundering and Combating the Financing of Terrorism," Paris, France: FATF/OECD, February 2006. Available from Financial Action Task Force website. Accessed on October 10, 2007. (FATF 2006)
International Monetary Fund, "Ireland: Report on the Observance of Standards and Codes - FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism," Country Report No. 07/78, Washington D.C.: IMF, February 2007. Available from International Monetary Fund website. Accessed on October 10, 2007. (IMF 2007)
Regulation 2001/97/EC of the European Parliament and of the Council of 4 December 2001, amending Council Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering, Commission Declaration, 2001
U.S. Department of State, Bureau for International Narcotics and Law Enforcement Affairs, "International Narcotics Control Strategy Report 2007," March 2007. Available from U.S. Department of State website. Accessed on October 10, 2007. (U.S. DoS 2007)
Ireland