Anti-Money Laundering FAQs (ROI)

Frequently Asked Questions (FAQs) in relation to Anti-Money Laundering in the Republic of Ireland. These are based on the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 ('2010 Act') and the new CCAB-I guidance contained in M42 (revised) Anti-Money Laundering Guidance Republic of Ireland.

The FAQs are intended for information purposes only and readers are advised that reference to the abovementioned legislation and guidance should be made in all cases.

Disclaimer

No responsibility for loss occasioned to any persons acting or refraining from action as a result of any material in these "Frequently Asked Questions" can be accepted by Chartered Accountants Ireland.

 


  1. What am I required to do to comply with the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (‘2010 Act’) and when?

  2. What’s new in the 2010 Act compared with the previous regime (under the Criminal Justice Act 1994)?

  3. Does our firm need to appoint a Money Laundering Reporting Officer (MLRO) under the 2010 Act? If so, what does such a role entail?
  4. No identification procedures were required under the previous regime for client which existed prior to the making of the 2003 Regulations on 15 September 2003. Does this still apply under the 2010 Act?
  5. A former client has approached me to act for him again. Do I have to go through the identification procedures now?
  6. Our firm offers potential new clients a free initial consultation. Do we have to carry out client identifictaion procedues at this stage?
  7. I have been approached by a potential client to provide tax advice. He will not be able to visit my office for a number of months. He has provided me with copies of his passport and some utility bills as evidence of identity. Is this sufficient?
  8. I have been approached by a potential client who is resident outsde of the Republic of Ireland to provide tax advice. How can I identify that individual?
  9. I run a small practice and sometimes staff from agencies or sub-contractors during busy periods. Do I have to make sure they are suitably trained in money laundering issues?
  10. I am considering taking on a new audit client. As part of my standard acceptance procedures I send a professional enquiry letter to the potential client's previous auditor. If I ask the previous auditor to confirm that his firm has carried out identification procedures and he does so is that adequate to discharge my own obligations in this regard?
  11. I have recently received a professional enquiry letter with regard to a former client. It specifically mentions AML issues. Prior to my business relationship ending with the client, I had reason to suspect a money laundering offence may have been committed by the client and reported accordingly. I understand that there are ‘tipping off’ provisions under the 2010 Act and I do not know how I should respond to the letter.
  12. Should I draw my clients' attention to my obligations under the Regulations by including an additional paragraph in my engagement letter?

 

  1. What am I required to do to comply with the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (‘2010 Act’) and when?

    Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 ('2010 Act') was signed into law by the President on 5 May 2010 and commenced on 15 July 2010. Chartered Accountants in practice are 'designated persons' in accordance with section 25 of the Act (along with various other professions and businesses including solicitors and barristers, tax advisers, credit and financial institutions, trust and company service providers, private members gaming clubs).

    Much of the day to day obligations on accounting firms continue from the previous regime, though there are some new aspects that accounting firms will need to be aware of and incorporate into their policies and procedures. Chartered Accountants in practice are obliged to:

    • ensure that they take reasonable customer due diligence measures to confirm their clients' identities, on a risk based approach ('know your clients procedures')
    • retain identification records for at least 5 years from the date of last doing business with the client
    • retain original documentation (or copies thereof) relating to transactions or services provided to clients for a period of at least 5 years following the date the service/transaction was completed;
    • adopt policies and procedures to prevent and detect money laundering and terrorist financing, including undertaking appropriate training;
    • report knowledge, suspicions or reasonable grounds for suspicion of money laundering and terrorist financing to the Garda Síochána and the Revenue Commissioners; and
    • report all transactions connected with certain designated states and territorial units as designated by the Minister (to date, no places/states have been so designated).
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  2. What’s new in the 2010 Act compared with the previous regime (under the Criminal Justice Act 1994)?
    • the provision for policies and procedures with regard to client due diligence (CDD) to be carried out "taking measures reasonably warranted by the risk of money laundering or terrorist financing".(the 'risk based approach').
    • the requirement to take measures "reasonably warranted by the risk of money laundering or terrorist financing" to verify the identity of beneficial owners.
    • Enhanced due diligence for politically exposed persons ('PEPs') and for clients who have not presented themselves in person when establishing the business relationship.
    • Simplified due diligence for certain categories of client, such as those entities listed on the Irish Stock Exchange or other regulated markets (as defined in the 2010 Act), or credit and financial institutions.
    • the removal of the general exemption from the customer due diligence requirements under the previous regime for clients who are designated persons (other than for those qualifying for simplified due diligence above) - e.g. other accounting firm or legal firms are no longer exempted.
    • the ability for designated persons to place reliance on (certain) 3rd parties to carry out the CDD measures in specific circumstances.
    • On-going monitoring of accounting firms' dealings with their clients, on a risk-sensitive basis.
    • the introduction of more detailed requirements in relation to policies and procedures for CDD measures and on-going monitoring, reporting, internal control, including internal reporting procedures, risk assessment and management, the monitoring and management of compliance, and the internal communication of such policies and procedures.
    • the introduction of a supervision obligation on 'competent authorities' (for our members this is Chartered Accountants Ireland, operationally through CARB) re designated persons' compliance with the requirements of the legislation.
  3. There is an article dealing with this question in the August 2010 edition of Accountancy Ireland. It is available to download as a PDF.

    Many of the day-to-day activities of practitioners with regard to their anti-money laundering (AML) obligations will not change significantly - e.g. the obligation to identify clients and to keep records, the obligation to report knowledge or suspicions of money laundering or terrorist financing to the Garda Síochána and the Revenue Commissioners.

    In summary, the main new developments for accountants in practice, arising from the 2010 Act, include:

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  4. Does our firm need to appoint a Money Laundering Reporting Officer (MLRO) under the 2010 Act? If so, what does such a role entail?

The 2010 Act does not require the appointment of an MLRO or similar. Under Section 44(1), accounting firms can, if they so decide, establish internal reporting procedures which could involve, for example, the appointment of a nominated officer. If appointed, such a role would involve receiving internal reports of suspicions from other staff members, considering the facts and circumstances of such an internal report and deciding whether or not a report to the Garda Síochána and the Revenue Commissioners (referred to as an 'external report'), in accordance with Section 42. If accounting firms establish such a procedure, the obligations of individual members of the firm are fulfilled under the 2010 Act by making an internal report. If no such procedure is established, individual members of staff could be obligated to make external reports themselves.

A nominated officer, if appointed, should be a senior person of authority in the firm, preferably a principal. Internal anti-money laundering procedures should require that all suspicions of money laundering arising within the firm should be reported directly to the nominated officer who will make a decision as to whether the matter should be reported to the relevant authorities. The role of the nominated officer would typically involve:

 

  • considering internal reports of money laundering;
  • deciding if there are sufficient grounds for suspicion to pass those reports on to the Garda Síochána and the Revenue Commissioners in the form of an external report, and, if so, to make that report;
  • acting as the key liaison point with the Garda Síochána and the Revenue Commissioners; and
  • maintaining firm records in relation to money laundering and terrorist financing, including documents detailing the investigation / review of the internal reports received in relation to money laundering and documentation of external reports.

Depending on the procedures established by the accounting firm, nominated officers, where appointed, may also take responsibility for:

  • training within the accounting firm;
  • advising on how to proceed with work once an internal report and/or external report has been made in order to guard against risks of prejudicing an investigation ('tipping off'); and
  • the design and implementation of internal anti-money laundering systems and procedures.
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  • No identification procedures were required under the previous regime for client which existed prior to the making of the 2003 Regulations on 15 September 2003. Does this still apply under the 2010 Act?

    No. Section 33 of the 2010 Act requires that accounting firms satisfy themselves that they have adequate documentation/information on the identities of all clients, including those 'grandfathered' in under the old regime. This is a requirement of the Third EU Money Laundering Directive (2005/60/EC) which the 2010 Act transposes. Accounting firms are required to apply customer due diligence measures prior to carrying out any service for the customer if they have grounds to doubt the "veracity or adequacy of documents ... or information" they hold in relation to the client.

    There is no requirement in the legislation for all existing clients to be subjected to customer due diligence procedures immediately on the coming into force of the 2010 Act (15 July 2010). CCAB-I recommends that accounting firms keep their clients' identification and verification information up-to-date and suggests that an appropriate time to consider the need for additional information from the client, in order to ensure compliance with the requirements of 2010 Act, would be at the commencement of the next engagement with existing clients.

    Section 33 recognises that designated persons, including accounting firms, may obtain relevant evidence of identity other than through the formal customer due diligence process. Accounting firms may decide, given the experience they have of dealing with a particular existing client, that the identification information they hold on the client is sufficient and that no further procedures are necessary, based on its assessment of the risks relating to that client. In such circumstances, it would be advisable for the accounting firm to document their consideration of that client.

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  • A former client has approached me to act for him again. Do I have to go through the identification procedures now?

    Yes, based on your assessment of the risks of money laundering and terrorist financing attaching to client. At a minimum you should take steps to ensure that the information you hold on the client remains up to date. You should also ensure that your 'know your client' procedures in relation to the client are updated in order for you to be able to fulfil your obligation, under Section 35, for on-going monitoring (see question 2 above) - the assessment of whether transactions undertaken by the client with your firm are consistent with your understanding of the client and the client's pattern of transactions.

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  • Our firm offers potential new clients a free initial consultation. Do we have to carry out client identifictaion procedues at this stage?

    No. As the individual concerned is not yet a client there is no requirement to carry out client identification procedures. It is worth noting, however, that if you were to obtain information during the meeting that would lead you to know, suspect, or have reasonable grounds to suspect that another person has committed, or is committing, a money laundering or terrorist financing offence, then the firm should report this to the Garda Síochána and the Revenue Commissioners.

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  • I have been approached by a potential client to provide tax advice. He will not be able to visit my office for a number of months. He has provided me with copies of his passport and some utility bills as evidence of identity. Is this sufficient?

    Section 33(4) of the 2010 Act deals with the situations "where a customer who is an individual does not present to the [accounting firm] for verification in person of the customer's identity". It requires a type of enhanced due diligence, suggesting the following as examples:

    • Ensuring that the client's identity is established by additional documents, data or information, e.g. verification of details supplied regarding home or business addresses, telephone numbers (electronically or otherwise) and communication with the client prior to commencing the business relationship through telephone contact, visits and/or mailing documentation;
    • Supplementary measures to verify or certify the documents supplied, or seeking confirmatory certification from a credit institution or financial institution carrying on business in the State, or in another Member State or other designated state (designated by the Minister under Section 31) where the institution is supervised for compliance with AML obligations compliant with the third money laundering directive.

    A suitable approach might be to ask the client to take his original passport and utility bills to an appropriate independent individual such as another accountant, a solicitor, a member of the Garda Síochána or a bank official and request that the latter copy the documents and certify that they are true copies of the original documents. You will need to consider in circumstances whether it is necessary to seek further evidence of the integrity and reputation of the certifying individual.

    Please refer to the response to question 8 if this client is resident outside of the Republic of Ireland.

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  • I have been approached by a potential client who is resident outsde of the Republic of Ireland to provide tax advice. How can I identify that individual?
  • You should take reasonable steps to establish whether or not the non resident individual is a Politically Exposed Person ('PEP'). If that proves to be the case, Section 37 requires a type of enhanced due diligence involving, in addition to the normal steps for identifying an individual, senior management approval for the relationship to be established and adequate measures to establish the source of wealth and funds which are involved.

    If the potential client is non-resident in the Republic of Ireland he/she may provide identification documents which are unfamiliar to the firm. In these circumstances the firm should consider asking a respected firm of accountants or solicitors local to the potential client to assist with the verification of identity. For example where a firm is a member of an international network, it may consider asking its network firm in the client's jurisdiction to assist.

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  • I run a small practice and sometimes staff from agencies or sub-contractors during busy periods. Do I have to make sure they are suitably trained in money laundering issues?

    Yes. You should satisfy yourself that they are trained in and aware of both the legislative requirements and your firm's own procedures. You should be satisfied that they understand what money laundering is and how to identify it. You should ascertain and monitor the training they have received and consider whether there is adequate proof that this has been undertaken and that their knowledge of the law and their obligations is kept up to date.

    You should establish the knowledge, understanding and experience levels of people who are new to the firm and, if necessary, arrange training for them, whether it be by external or internal courses or online training.

    It would be advisable to maintain training records evidencing the fulfilment of your obligations in this regard.

    With regard to sub-contractors, please note that Sections 41 to 43 establish that 'agents' and other persons engaged by way of contract for services with accounting firms have a reporting obligation under the Act. CCAB-I recommends that accounting firms employing the services of subcontractors, who are themselves external accountants/auditors, should establish procedures whereby any suspicions that such agents may have of money laundering and terrorist financing activity, such that they are obliged under the abovementioned sections to report to Garda Síochána and the Revenue Commissioners, are also communicated to the accounting firm in accordance with that procedure. Section 52 permit agents, who are themselves external accountants/auditors, to report their knowledge and suspicions to the accounting firm to which they are contracted, without committing the offence of prejudicing an investigation.

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  • I am considering taking on a new audit client. As part of my standard acceptance procedures I send a professional enquiry letter to the potential client's previous auditor. If I ask the previous auditor to confirm that his firm has carried out identification procedures and he does so is that adequate to discharge my own obligations in this regard?

    No. Each firm carrying on business on a designated person under the 2010 Act must ensure that customer due diligence measures are carried out prior to establishing a business relationship with the client. Section 40 does, however, allow for designated persons such as accounting firms to rely on certain other designated persons in fulfilling their customer due diligence obligations.

    Such reliance on other designated persons can only be placed in the context of an 'arrangement' between the parties and the accounting firm must satisfy itself, on the basis of this arrangement, that this other designated party will provide the necessary documentation / information should it be required. Accounting firms should bear in mind that the legislation imposes the responsibility for the measures on the accounting firm itself, irrespective of the fact that the accounting firm has placed reliance on another designated person. The CCAB-I guidance recommends that accounting firms consider very carefully the risks before placing reliance on another designated person, as the accounting firm remains liable under the 2010 Act for any failure in the application of the measures.

    Where reliance is placed on another designated person, CCAB-I further recommends that accounting firms consider whether to adopt a policy of automatically requesting the evidence of identity held by the other designated person.

    Accounting firms should also note that there is no obligation on them in the legislation to agree to become party to such an arrangement on the request of another designated person. CCAB-I recommends that accounting firms consider carefully whether they wish to allow reliance to be placed on them for the purposes of another designated person's customer due diligence procedures. Whilst the ultimate responsibility under the 2010 Act remains with that other designated person, there may be other risks if an accounting firm agrees to be relied upon.

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  • I have recently received a professional enquiry letter with regard to a former client. It specifically mentions AML issues. Prior to my business relationship ending with the client, I had reason to suspect a money laundering offence may have been committed by the client and reported accordingly. I understand that there are ‘tipping off’ provisions under the 2010 Act and I do not know how I should respond to the letter.

    The inclusion of such a question in the professional enquiry letter can potentially place the previous accountant/auditor in a difficult situation in the event, as in your case, that he has had reason to report a suspicion of money laundering to the relevant authorities in respect of the client. Disclosing this fact in response to a professional enquiry letter could constitute a prohibited disclosure which might prejudice an investigation under Section 49.

    It is recommended that accounting firms do not respond to questions in professional enquiry letters concerning either their satisfaction as to the identity of an entity or natural person or as to whether any external report has been made or contemplated. Accounting firms may wish to consider a standard wording in such responses to the effect that the legislation precludes them from responding to such queries.

    Reference is also made to this situation in the Code of Ethics for Members Section 210 Professional Appointment (available on CHARIOT at www.charteredaccountants.ie).

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  • Should I draw my clients' attention to my obligations under the Regulations by including an additional paragraph in my engagement letter?

    It would be useful to draw clients' attention to the requirements under the 2010 Act and the engagement letter is one way of doing this. It may be helpful to explain to their client the reason for requiring evidence of identity and this can be achieved by including an additional paragraph in the engagement letter. The following is an illustrative paragraph that could be included in the engagement letter for this purpose:

    "Client identification
    As with other professional services firms, we are under stringent requirements to identify our clients for the purposes of the anti-money laundering legislation. We are likely to request from you, and retain, some information and documentation for these purposes and/or to make searches of appropriate databases. If satisfactory evidence of your identify is not provided within a reasonable time, we may not be able to proceed with the appointment."

    It may also be helpful to inform clients of the accounting firm's responsibilities under the 2010 Act to report knowledge or suspicion, or reasonable grounds to know or suspect, that a money laundering offence has been committed and the restrictions created by the tipping off rules on the accounting firm's ability to discuss such matters with their clients, although it is not necessary to do so. The following is an illustrative paragraph that could be included in the audit engagement letter for this purpose:

    "Money laundering reporting
    The provision of audit, accounting and taxation services are captured under the requirements of Criminal Justice (Theft and Fraud Offences) Act 2010 ('2010 Act'). Under section 42, partners and staff in audit, accounting and taxation firms are required to report all knowledge or suspicion, or reasonable grounds to know or suspect, that another person has been or is engaged in an offence of money laundering or terrorist financing, regardless of whether that offence has been, or is being, committed by their client or by a third party. Under section 43, a report is also required where transactions connected with places designated by the Minister for Justice and Law Reform. If, as part of our normal work, we have knowledge or suspicion, or have reasonable grounds to know or suspect, that such offences have been, or are being, committed, we are required to make a report to the Garda Síochána and the Revenue Commissioners. In such circumstances, it is not our practice to discuss such reports with clients because of the restrictions imposed by the section 49, which prohibits the making of 'any disclosure that is likely to prejudice an investigation that may be conducted following the making of the report' under section 42 or 43 of the 2010 Act."

    Whether or not to include these illustrative paragraphs in an engagement letter is a policy decision to be taken by accounting firms to be applied on all engagements, irrespective of particular client situations. Unless the policy is applied in a consistent manner, inclusion of these paragraphs might be interpreted by law enforcement as "tipping off".

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