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Report on Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions Compliance in the Irish Funds Sector released

Report on Anti Money Laundering – Nov 2015

  • Firms have responded positively to previous communications but some more work required to effectively manage money laundering/terrorist financing risk
  • The Central Bank expects all Funds and Fund Service Providers to carefully consider the issues raised in its report

The Central Bank of Ireland today published a report of its observations on Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions compliance by Funds and Fund Service Providers in Ireland.

The report is based on on-site inspections carried out by the Central Bank in relation to the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended by the Criminal Justice Act 2013).

Head of Anti-Money Laundering at the Central Bank Domhnall Cullinan said:

Latest figures show that Irish domiciled funds have a net asset value of almost €1.8 trillion, making the Irish funds industry a significant part of the Financial Services sector. Any business with such a large variety and amount of customers, high values and volumes of transactions and a cross border nature is attractive for money laundering/terrorist financing.

The Central Bank acknowledges that many firms had responded positively to previous Central Bank communications but, as the report identifies, more work is required by firms in Ireland to effectively manage money laundering/terrorist financing risk. The Central Bank expects all Funds and Fund Service Providers to carefully consider the issues raised in the report, and to use the report to inform the development of their AML/CFT and FS frameworks.

The issues identified in the report include:

  • Reliance on third parties to conduct elements of customer due diligence in circumstances where the arrangement with the third party does not fully meet all required conditions, and more generally, a lack of oversight from Funds of service providers carrying out AML/CFT functions on their behalf;
  • Insufficient evidence of effective on-going monitoring of investor transactions;
  • A lack of procedures and controls for ceasing the provision of services to and discontinuing business relationships with investors who have failed to provide the required or updated customer due diligence documentation or information requested by firms;
  • Deficiencies in the on-boarding process of Politically Exposed Persons, including the failure to sufficiently identify, verify and document Source of Funds and Source of Wealth, and the failure to document senior management approval.

Notes

  • The report is based on on-site inspections carried out by the Central Bank over the course of 2014, supplemented by Risk Evaluation Questionnaires completed by Firms and submitted to the Central Bank for assessment.
  • The Financial Action Task Force, the inter-governmental body developing and promoting policies to combat Money Laundering/Terrorist Financing recommends that relevant competent authorities co-ordinate and share information. This Report is also informed in part by the Central Bank’s interaction with other competent authorities.