On 23rd June 2021, the Central Bank of Ireland (“CBI”) published revised Anti-Money Laundering and Countering the Financing of Terrorism (“AML/CFT”) Guidelines for the Financial Sector (the “Guidelines”), replacing the existing guidelines published in September 2019.
The Guidelines set out the expectations of the CBI in respect of Credit and Financial Institutions’ compliance with their AML/CFT obligations as set out in the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021 (the “Act”), following the transposition of the Fifth Money Laundering Directive (“5MLD”) into Irish Law. The Guidelines also incorporate expectations set out in previous CBI AML/CFT Sectoral Reports, AML/CFT Bulletins, and the European Banking Authority Risk Factor Guidelines (March 2021).
The CBI determined that due to the limited changes to the Guidelines, a public consultation was not warranted.
The CBI has expanded their guidance on financial inclusion and has clarified their expectation that firms fully consider whether they can apply enhanced measures to reduce the money laundering or terrorist financing (“ML/TF”) risk rather than exclude entire categories of customers from access to financial services or products. If a firm decides that it cannot effectively mitigate the ML/TF risk posed, the firm should document fully its rationale for a decision to terminate the relationship or to cease the provision of a particular product/service.
The Guidelines state that a firm’s business risk assessment and customer/transaction risk assessment should be connected. Firms should rely on the assessment of the business’ inherent risk to inform their risk-based approach to the identification and verification of individual customers.
In October 2020, the CBI published an AML/CFT bulletin on transaction monitoring. Following this, the Guidelines set forth CBI expectations with regard to a firm’s transaction monitoring processes including: the detection of suspicious transactions, incorporating the business and customer risk assessment to transaction monitoring controls, and automated vs manual solutions.
The Guidelines detail the CBI’s expectation on roles and responsibilities of the Board of Directors (the “Board”) and other key functions within the Firm. This may include:
- The Member of Senior Management with responsibility for AML/CFT matters
- The Compliance Officer with responsibility for AML/CFT matters
- The Risk Officer
- The MLRO
- Internal Audit
Roles and responsibilities regarding AML/CFT activities should be clearly defined and documented. Where a firm concludes that their structure does not require any one of these roles, having regard to the nature, scale and complexity of the firm’s activities, the rationale for such a decision should be documented. The CBI may instruct a Firm to appoint an individual to a specific role, as per section 54 (7) and (8) of the Act, where deemed necessary.
The CBI has noted that the term “MLRO” is typically used to describe the person with certain AML/CFT responsibilities, and that this person may also be appointed as the “Compliance Officer” depending on the nature, scale and complexity of a firm’s activities.
The Guidelines also include amendments following the transposition of 5MLD which include:
- Beneficial ownership registers
- Prior to the establishment of a business relationship, firms are required to confirm that information concerning the beneficial ownership of a customer, subject to the beneficial ownership regulations in Ireland , has been entered into the applicable beneficial ownership register. While a customer account may be opened, a firm must ensure that no transactions are carried out until this information has been obtained.
- Electronic Identification
- The Act broadens the sources of information which can be used by firms to identify and verify a customer’s identity to explicitly include information from relevant trust services as specified in the Electronic Identification Regulation (Regulation (EU) No. 910/2014 of the European Parliament and of the Council of 23 July 2014).
- Politically Exposed Person (“PEP”)
- While a PEP is defined as an individual who is or has at any time in the preceding 12 months, been entrusted with a prominent public function, the Act requires firms to continue to apply enhanced due diligence (“EDD”) to a PEP for as long as reasonably required to consider the continuing risk posed by that person.
- High Risk Third Countries
- The Guidelines align with the Act, which includes a more prescriptive approach to EDD for customers established or residing in a high risk third country.
KB Associates Services
KB Associates provides a range of services to investment funds including:
- The provision of MLRO services
- The provision of beneficial owner register services
- The provision of UCITS management company/AIFM services
- The provision of designated persons to perform UCITS business plan/AIFMD programme of activity functions.
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