Deadline for anti-money laundering is looming; PricewaterhouseCoopers advises to shape up or risk fines

PricewaterhouseCoopers (PwC) advises Irish financial institutions, estate agents, solicitors and other designated bodies to ensure that they are fully compliant with the Anti-Money Laundering Regulations, due to be transposed into Irish law in 2009.

Combating money laundering and terrorist financing are fast becoming critical compliance and business issues. If not addressed, organisations will be subject to costly litigation, large fines and long prison sentences. Successful penetration by money launderers may cause incalculable damage to corporate reputations and professional careers.

The existing law on money laundering is to be consolidated to give effect to the third EU Money Laundering Directive (Directive 2005/60/EC). The Minister for Justice has recently received Government approval for the drafting of a Criminal Justice (Money Laundering) Bill which is likely to be transposed into Irish law in 2009. The new regime will have implications for a wide range of designated bodies including financial institutions, solicitors, estate agents, accountants and traders dealing in high value goods.

Robin Menzies, Advisory Partner, PwC said:

“We are urging these Irish businesses to take action now. This is especially important when there has never been greater pressure on financial institutions to ensure their anti-money laundering controls are fit for purpose. Meeting the challenges of tackling economic crime is not easy. Recent PwC research has shown that the costs of overall economic crime has doubled, making it even more critical to have appropriate internal controls in place to ensure early detection”.

“Key to the new regime is the introduction of a pragmatic, risk based approach to the detection of money laundering and terrorist financing. It creates a framework that ensures measures to mitigate money laundering and terrorist financing are commensurate with the risks identified. Directors and senior management of designated bodies must be able to demonstrate that they have adequate processes and controls for the verification of customers, record keeping, risk management, ongoing monitoring of customers and staff training and education”.

A key feature of the Directive is the requirement on designated bodies to apply Customer Due Diligence (CDD) procedures in line with their risk based approach. The CDD process will require institutions to obtain and verify the identity of their customers, to obtain information on the source of funds and the purpose and intended nature of the business relationship. The Directive requires an "enhanced" due diligence approach for customers or situations that are, by their nature, higher risk and “simplified” due diligence for lower risk types. There is also an obligation to identify and verify, where applicable, the beneficial owners of customers. (see note 1 below).

Robin Menzies concluded:

“There may be lessons to learn from the UK where there has been a near universal satisfactory implementation of the risk based approach, although time constraints and a lack of resources were the key challenges. Properly applied, the risk based approach allows firms to implement cost efficient controls, which suit their business and get the best from their systems. However, there is still a need to get the balance right between the costs and benefits of implementing this approach”.

While Ireland has yet to transpose the Third Anti Money Laundering Directive, the transposition date is nevertheless looming. Designated bodies should now be working towards implementation of this significant Directive.

ENDS

Notes to editor

Beneficial owners in the draft legislation are defined in the directive as “the natural person(s) who ultimately owns or controls the customer and/or the natural person on whose behalf a transaction or activity is being conducted.

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