annual criminal justice (anti-money laundering & …€¦ · what is anti-money laundering...

THE PROFESSIONAL INSURANCE BROKERS

ASSOCIATION

ANNUAL CRIMINAL JUSTICE (ANTI-MONEY LAUNDERING &

TERRORIST FINANCING) ACT 2010 TRAINING

www.piba.ie

What is Anti-Money Laundering & Terrorist financing?

It is the process by which criminals conceal the true origin and

ownership of the proceeds of drug trafficking or other criminal activity.

A common misconception in relation to Money Laundering is that it

only relates to theft, drug or similar offences.

• It might also be:

Tax evasion

Financial fraud and deception

Theft

AML STAFF TRAINING PRESENTATION 2016

www.piba.ie

To be guilty of money laundering a person must know or believe the property involved is or probably is the proceeds of criminal conduct or be reckless as to whether the property is the proceeds of criminal conduct.

Terrorist Financing

Funds intended to finance an act of terrorism.

Links between terrorist groups and organised criminal gangs.

Includes converting, transferring, handling, acquiring, possessing or using the property that is the proceeds of criminal conduct.

There must be intention or knowledge in providing or collecting funds for the purposes of financing terrorism, in order for there to be an offence.


www.piba.ie

Stages of Money Laundering

• There are three stages in the money laundering process:

Placement – this is the physical disposal of cash;

Layering – the creation of complex layers which make tracking

transactions difficult;

Integration – absorbing the money back into the economy as

legitimate money.


www.piba.ie

Designated Persons

Mortgage Intermediaries and intermediaries by virtue of their registration as Insurance Intermediaries who provide Life Assurance or other investment related services are deemed to be “Designated Persons”.

Note: Intermediaries only operating in the General Insurance market do not fall under the requirements.


www.piba.ie

Designated Persons

Designated Persons must have internal policies and procedures to reflect the requirements of the legislation in relation to the following areas:

Customer due diligence

Reporting

Record keeping

Internal procedures & training

(All staff including executive & non-executive directors are required to receive training in relation to AML & combating terrorist financing.)


www.piba.ie

What does Customer Due Diligence mean

• Identify & verify the customer.

• Identify & verify the beneficial owner (An individual who ultimately owns or controls the customer and/or on whose behalf a transaction or activity is conducted).

• Establish purpose & intended nature of business relationship (a business, professional or commercial relationship between the designated person and the customer that the designated person expects to be ongoing).

• Monitor customer dealings on an on-going basis.


www.piba.ie

Beneficial Owner

• Company

An Individual holding 25% or more of shares or voting rights.

• Partnership

An Individual holding 25% or more of profits or capital or voting

rights.

• Trusts

An individual with at least 25% of capital or has control over a trust.

• Estate

Executor.


www.piba.ie

Purpose & intended nature of the business relationship

In most cases this will be self evident e.g.

Investing in a life policy

Opening bank account

Ongoing monitoring

Scrutinise transactions:

Source of wealth or funds

Consistent with knowledge of customer and the customer’s business and pattern of transactions


www.piba.ie

Customer Due Diligence Requirements

Legislation allows designated persons to apply aspects of the customer

due diligence requirements on a risk-sensitive basis depending on:

a) The nature of the product being sold;

b) The delivery mechanism or distribution channel used to sell the

product;

c) The profile of the customer; and

d) The customer’s geographical location and source of funds.


www.piba.ie

Intermediaries are required to carry out Customer Due

Diligence

• Prior to establishing a business relationship with the customer.

• Prior to carrying out for/with the customer any transaction which

appears linked to another transaction or prior to assisting the

customer in carrying out a single transaction if:

(i) You do not have a business relationship with the customer; and

(ii) The total amount of money paid by the customer in the single

transaction or series of transactions is greater than €15,000.


www.piba.ie

Intermediaries are required to carry out Customer Due

Diligence (contd.)

• Prior to carrying out any service for the customer, if you have

reasonable grounds to believe that there is a real risk that the

customer is involved in money laundering/terrorist financing(ML/TF).

• If you have grounds to doubt the veracity of documents provided by

the client.


www.piba.ie

Three categories of Customer Due Diligence (CDD)

• Simplified Customer Due Diligence applies to low risk customers

and products.

• Enhanced Due Diligence applies to non-resident ‘Politically

Exposed Persons’ deemed to be high risk.

• Standard Due Diligence must be applied to all remaining

customers and products.


www.piba.ie

Simplified Customer Due Diligence

• Simplified Customer Due Diligence (SCDD) means that a

designated person does not need to comply with the CDD

obligations (as listed previously). You must obtain sufficient

information about the customer to satisfy that the customer meets

the criteria for Simplified Due Diligence.


www.piba.ie

Simplified Customer Due Diligence: Specified

Customers

• Banks and financial institutions in the State

As they are themselves Designated Persons?

• A Company whose shares are listed

• A public body

• EU agencies and bodies


www.piba.ie

Simplified Customer Due Diligence: Specified Products • Life assurance policy having an annual premium of no more than

€1,000 or a single premium of no more than €2,500.

• Pension, superannuation or similar schemes which provide retirement benefits to employees; where contributions are made by an employer or by way of deduction from an employee’s wages and the scheme rules do not permit the assignment of a member’s interest under the scheme.

• Insurance policies for pension schemes if there is no surrender clause and the policy cannot be used as collateral (e.g.) Pension Term Assurance.


www.piba.ie

Enhanced Due Diligence

• In practice for intermediaries, Enhanced Due Diligence applies in

respect of a business relationship or transaction with non resident

Politically Exposed Persons (PEP’s).

• A “PEP” is an individual who is not resident in Ireland and has been

entrusted with prominent public functions or an immediate family

member or a known close associate of such a person, who is not

resident in Ireland.

• A person is a PEP if they held a relevant office at any time within the

last 12 months


www.piba.ie

Enhanced Due Diligence contd.

• Designated persons must have processes in place prior to

establishing a business relationship with a customer to determine

whether the person may be deemed to be a “PEP”.

• Intermediaries should establish whether the client is resident or non

resident.

• Where the client indicates that they are non resident, steps should

be taken by the intermediary to establish if the customer falls within

the definition of a “PEP”.


www.piba.ie

Enhanced Due Diligence contd.

• Require senior management approval to establish a business

relationship with a “PEP”

• Take measures to establish the source of wealth and funds for

transactions.


www.piba.ie

Standard Customer Due Diligence (SCDD)

• Applied on a risk based approach

Profile of the customer

Nature of product or service

Distribution channel

Geographical area of operation


www.piba.ie

Standard Customer Due Diligence

There are 3 overall levels of risk for insurance products:

• Low Risk

• Intermediate Risk

• Increased Risk


www.piba.ie

Standard Customer Due Diligence (Low Risk)

There are products due to their inherent features which are unlikely to be used as a vehicle for money laundering purposes. These are classified as “Low Risk”.

The following features would indicate low risk:

• Only pays out on death or diagnosis of terminal illness of policy holder.

• Only pays out on medical evidence and proof is required as to loss of income.

• No surrender value.

• Small, regular premiums: additional payments by customer not possible.

• Large premiums will normally require medical evidence.

• No investment element.

• Once term of policy is finished no payout and policy ceases.


www.piba.ie

Standard Customer Due Diligence (Low Risk)

Examples of Products which fall into the low risk category are:

Mortgage Protection, Term Life Assurance, Income protection products, Critical illness products (relating to diagnosis of a specific critical illness) and Whole of Life policies.

For reduced risk level products, designated persons may accept personal cheques and other payment instruments drawn on a customer’s account (i.e. Direct Debits/Standing Orders) to satisfy the standard evidence requirement.

If payment is made by bankdraft for the products above, PIBA would recommend that you get confirmation from the client, from the bank, confirming where the money is coming from.


www.piba.ie

Standard Customer Due Diligence (Medium Risk)

The medium risk level is given to products whose inherent features

pose some risk for the purposes of money laundering or terrorist

financing. These may be products which have a facility for “top up”

payments.

The following features would indicate medium risk:

• Long term savings plan often for retirement.

• Requires at least 5 years to gain positive return on investment.

• Often unable to be surrendered in first or second year, with penalties

in years three to five.

• Additional ’top up’ payments may be permitted.


www.piba.ie


Examples of Medium risk products are :

• Life Assurance Savings plan (unless premium is less than €1,000 or

€2,500, then Simplified Customer Due Diligence applies.)

• Endowments


www.piba.ie


The recommended standard for intermediate risk is as follows (subject to exemptions):

• Due diligence requirements are satisfied by the information collected on the application form, in conjunction with the fact that the payment is made from an account in the customer’s name (i.e. personal cheques and other payment instruments drawn on a customer’s account such as Direct Debits/Standing Orders).

• If payment is made by bank draft for the products referenced PIBA would recommend that you get confirmation from the client, from the bank, confirming where the money is coming from.


www.piba.ie

Standard Customer Due Diligence (High Risk)

This level of risk has been given to products whose inherent features allow for the possibility of them being used for money laundering purposes.

• These products have the facility for third party and/or “top up” payments and therefore an enhanced level of due diligence, by asking for more information, is appropriate.

• This is the risk level that the majority of a designated person’s AML resources will normally be directed. The majority of products in this range are found in the investment category which reflects the higher value premium that can be paid into them.


www.piba.ie


The following features would indicate High Risk:

• Open ended investment.

• Usually a 5 year recommended minimum investment term but can

be surrendered earlier.

• Additional ‘top up’ payments permitted by policy holder and by third

parties.

• May be segmented and individual segments may be assignable.


www.piba.ie


Examples of High Risk products are:

• Single premium investment bonds including:

With profits

Guaranteed

Income

Investment

Offshore international bonds


www.piba.ie

The recommended CDD industry standard for High Risk products is as follows:

1. Personal customers:

Identification of a personal customer is the process whereby a

designated person obtains from a customer the information necessary

for it to identify who the customer is. The identity of an individual has a

number of aspects at any point in time, all of which must be obtained

by the designated person:

1) name (which may change due to particular events);

2) address (which is likely to change from time to time); and

3) date of birth (which is a constant).


www.piba.ie

One plus One approach

Obtain one item from the list of photographic IDs (to verify name and date of birth) and one item from the list of non-photographic IDs (to verify address) at the outset of the business relationship.

Sources which can be used to verify identity are:

• Current valid Passport.

• Current valid driving licence.

• Current valid National Identity Card.

• In the absence of the above documents, written or otherwise documented, assurances from persons or organisations that have dealt with the customer for some time may suffice.

• A designated person might consider it appropriate to adopt an alternative approach of identification such as seeking a social welfare card, National Immigration Bureau Card off an individual who has recently immigrated into the State.


www.piba.ie

Verify address

• Current official documentation/cards issued by the Revenue

Commissioners.

• Current official documentation/cards issued by the Department of

Social and Family Affairs.

• Instrument of a court appointment (such as liquidator or grant of

probate).

• Current local authority document e.g. refuse collection bill.

• Current statement of account from a credit or financial institution.

• Current utility bills (including those printed from the internet).

• Current household/motor insurance certificate and renewal notice.


www.piba.ie

Legal persons and arrangements

Directors or the equivalent, for example: Partnerships and unincorporated businesses, Clubs, Societies, Public Sector bodies.

Identification can generally be satisfied by either:

• obtaining a copy of the annual audited accounts listing directors (where the necessary information is publicly accessible and considered by the firm to be current and reliable); or

• Obtaining relevant and up-to-date legal opinion from a reliable source documenting due diligence conducted, in relation to information on directors:

obtaining information from relevant company or other registry such as the CRO or known foreign equivalent; or

as warranted by the risk, verify one or more directors in line with requirements for personal customers.


www.piba.ie

Legal persons and arrangements contd.

To identify the legal arrangement:

• A search of the relevant company or other registry (where the

necessary information is publicly accessible and considered by the

firm to be current and reliable); or

• A copy, as appropriate to the nature of the entity, of the certificate

of incorporation; a certificate of good standing; a partnership

agreement; a deed of trust or other official documentation proving

the name, form and current existence of the customer.

• In cases regarded by the firm as higher risk, use of more than one

source of information may be warranted.


www.piba.ie

2. Acquire prescribed information at the outset of the business

relationship to satisfy the additional information requirements:

a) Source of funds for the transaction e.g. an Irish bank account in own

name.

b) Employment and salary details - this information could be captured in

the Factfind.

c) Source of wealth (e.g. inheritance, divorce settlement, property sale).

This information should be captured on the source of wealth form.


www.piba.ie

Risk Assessment

• The firm must undertake and document a comprehensive risk

assessment of the business, it should demonstrate that all potential

ML/TF risks pertinent to their business have been fully considered

and challenged.

• The outcome of the risk assessment should inform the firm’s risk-

based approach and the design of AML/CFT controls.

• The firm’s risk assessment should be subject to regular and

scheduled reviews, senior management must at least on an annual

basis review and approve this risk assessment.


www.piba.ie

Monitoring

• Ensure effective on-going monitoring policies and procedures are in

place including full review and consideration of all trigger events.

undertake monitoring on an ongoing basis for patterns of unusual or

suspicious activity to ensure that higher risk activity is scrutinised.

in practice, for intermediaries this might occur where there is an early

surrender of a policy or where the payer of the policy changes.

• Employees should be adequately trained to identify such unusual

business and report to the designated person’s MLRO (Money

Laundering Reporting Officer).


www.piba.ie

Distribution Risk – may alter risk

“Face to Face” contact with no facility to take copies of ID

• Where the interaction with the customer is on a face to face basis, you should have sight of the original document(s) and appropriate details should be recorded. Where you visit the customer at his/her home address, you should make a detailed record of the visit. This would include, for example, taking details of passport or driving license numbers.

• PIBA recommends that in such scenarios, you request the customer to forward you a copy of the relevant ID and cross reference it with the details which were recorded at the point of sale.


www.piba.ie


“Non face-to-face”

• The extent of the Customer Due Diligence in respect of non face-to-

face customers will depend on the type of the product or service

requested and the assessed money laundering risk presented by the

customer.

• Where the customer is not physically present (e.g. by post, telephone

or over the internet) for identification purposes additional measures

should be undertaken to establish the customer’s identity.


www.piba.ie


Examples:

• Telephone the customer on a home or business number which

has been verified (electronically or otherwise).

• Communicate at a verified address with account opening docs for

example, which might have to be returned or acknowledged .

• First payment by the customer through a bank in the State or

other EU Member State or certain specified acceptable countries.

• Internet sign on with details sent by mail to a verified address.


www.piba.ie

Third Party Reliance

• Third Party Reliance – A designated person is permitted to rely on another designated person to identify and verify its customers for AML purposes. Designated persons who rely on third parties will remain liable for any failure to comply not withstanding their reliance on the third party.

• The primary responsibility for supervising intermediaries lies with the Central Bank of Ireland, however Product Providers as a third party retains responsibility for ensuring that customer due diligence obligations have been met by the Intermediary.

Note: Product Providers are legally obliged where an intermediary fails to meet the customer due diligence requirements to report this to the Central Bank of Ireland.


www.piba.ie

Third Party Reliance contd.

• In order to comply with the Third Party Reliance requirements,

Product Providers depending on their internal processes may require

either:

Copies of all underlying documentary evidence from the

Intermediary for applicable products.

Or

Confirmation of Verification of Identity, where the Product Provider

has the right of audit to ensure that the intermediary has the

necessary documentary evidence.


www.piba.ie

Failure to establish a customer and/or beneficial owner’s

identity

Where an intermediary can not establish the identity of a customer and/or

beneficial owner, as a result of the failure of the customer to provide the

designated person with documents of information required, then an

intermediary must:

Not provide a service to the customer, and

If an existing customer, must discontinue relationship with the

customer.


www.piba.ie

Procedures and Policies

• Senior Management are obliged to ensure that the firm has procedures and controls in place to demonstrate compliance with all aspects of the Act and approve them.

• Senior Management must have a clearly defined process in place for the formal review and approval, at least annually, of the policies and procedures at appropriate levels.

• Management must clearly set out all approved policies and procedures to enable staff to apply them in practice and ensure that all staff adhere to them.

• All procedures should be compliant with the Central Bank’s core and sectoral guidance notes.


www.piba.ie

Procedures and Policies

• These internal policies and procedures should include:

measures to be taken to keep documents and information relating to customers up to date.

additional measures to be taken where there are reasonable grounds to believe that the circumstances relating to a customer, beneficial owner, service, product or transaction may present a heightened risk of money laundering or terrorist financing. The intermediary shall, in respect of that customer or beneficial owner, apply additional measures.

measures to be taken to prevent the use of money laundering or terrorist financing of products/transactions that could favour or facilitate anonymity.

monitor customers and transactions against both the EU and UN Sanctions Committee lists relating to terrorism.


www.piba.ie

Record Keeping

• Intermediaries are required to keep records evidencing the procedures

applied and the information obtained, when carrying out CDD on

customers for a period of at least 5 yrs after the business relationship

with their customer has ended.

(However, the Consumer Protection Code requires records to be kept for

6 yrs from date of last transaction with client.)

• Record keeping is an essential part of the evidence trail and sufficient

processes must be put in place to ensure that records are adequately

kept.


www.piba.ie


Records Keeping

• Customer information collected to comply with the requirements of

Legislation; and

• Information regarding transactions undertaken by customers.

Possible formats in which records can be retained include one or

more of the following:

• Original documents

• Photocopies of original documents

• On microfiche

• In scanned form

• In computerised or electronic form

www.piba.ie


Record Keeping

• Intermediaries may keep such records wholly or partly in electronic

form only if they are capable of being reproduced in a written form.

All records should be capable of being reproduced in the State as

per legislation for a period not less than 6 years.

www.piba.ie


Staff Training

• Intermediaries must ensure that all staff receive on-going training

in relation to their AML and combating of terrorist financing

obligations.

• Failure by the employer to provide training is an offence under the

requirements.

• A formal training schedule should be developed and maintained to

ensure all relevant staff are adequately trained at least annually.

• Adequate records in relation to staff training should be retained for

all internal & external courses attended for a period of 5 years.

www.piba.ie


Reporting

• Requirement to have an internal reporting process for reporting a

suspicious transaction - it should provide guidance on how to

complete and submit such reports.

• All reports submitted via the internal reporting process should be

recorded.

• Reports must be made to the Money Laundering Reporting Officer

(MLRO) when you know or suspect or have reasonable grounds to

suspect that money laundering or terrorist financing is being or has

been committed or attempted.

• Presenter should provide practical examples of situations which

staff might encounter which would warrant a report.

www.piba.ie


Reporting

• Report should include appropriate details of the customer who is

the subject of concern and a statement containing as much of the

information, giving rise to the knowledge or suspicion, as possible.

If you decide not to make an external report the outcome and

reasons for not doing so should be recorded and retained.

• The MLRO will then decide whether to make the firm’s report to

the Garda and Revenue.

• Have policies and procedures in relation to reporting suspicions

that may arise as a result of a failure on the part of the customer to

provide the required or updated CDD documentation/information

www.piba.ie


Reporting

External reports must be made to the Garda Bureau of Fraud

Investigation and the Revenue Commissioners. The following

information should be contained in the report:

a) The information on which the designated person’s knowledge,

suspicion or reasonable grounds are based;

b) The identity of the suspected person;

c) The whereabouts of the property that is the subject of the

money laundering or the funds that are the subject of the

terrorist financing;

d) Any other relevant information.

www.piba.ie

Reporting

• A designated person may be directed in writing by a member of

the Gardaí, not below the rank superintendent, not to carry out a

specified service or transaction for a period not exceeding seven

days.

• A District Court judge may order a designated person not to carry

out a specified service or transaction for a period not exceeding 28

days.


www.piba.ie

Reporting

• A designated person may only proceed with a suspicious

transaction or service prior to the sending of the report to the

Gardaí and the Revenue Commissioners where:

it is not practicable to delay or stop the transaction/service from

proceeding; or

the designated person is of the opinion that failure to proceed with

the transaction or service may result in the other person suspecting

that a report may be made or that an investigation may be

commenced or is in the course of being commenced.


www.piba.ie

Reporting

• You must not disclose to the customer concerned or other third persons that a report has been made to the Gardai in relation to suspicions of money laundering or terrorist financing.

• Designated persons, employees and directors are legally prohibited from tipping off.

• Designated persons, employees and director are legally indemnified, in respect of any report made to Gardaí or Revenue Commissioners in good faith, in relation to a suspicion of money laundering of terrorist financing.


www.piba.ie


Role of Money Laundering Reporting Officer (MLRO)

• Holds a pre-approval controlled function (PCF) in the context of the

Central Bank Reform Act 2010

• Has a significant degree of responsibility and should be familiar

with relevant aspects of the Act and these guidelines.

• He/she is required to determine whether the information or other

matters contained in the suspicious transaction he/she has received,

via any internal reporting procedure, merit the making of a report to

the FIU (Fraud Investigation Unit) and the Revenue Commissioners.

www.piba.ie


Role of Money Laundering Reporting Officer (MLRO)

• Maintenance of a log of any suspicious transactions, where it was

decided not to make a report to FIU & Revenue Commissioners.

The reasons for not doing so should be recorded.

www.piba.ie


Powers of the Central Bank of Ireland

• The Central Bank of Ireland is deemed to be the competent

authority responsible for monitoring compliance of designated

persons with the Criminal Justice (Money Laundering and

Terrorist Financing) Act 2010.

• The Central Bank has the power under the Administrative

Sanctions Regime to sanction for failure to comply with the

necessary obligations.

www.piba.ie



June 2012 - Settlement with UBS International Life limited

• Failed to demonstrate that it had instructed any of its staff on

the law in relation to money laundering and terrorist financing.

• Failed to demonstrate that it had met the requirements for

placing reliance on third parties.

• Failed to adopt adequate written policies and procedures in

relation to the identification and reporting of suspicious

transactions.

www.piba.ie



October 2013 - Settlement with AXA MPS Financial

Limited

• Breached its customer due diligence requirements concerning

the identification and verification of customers and beneficial

owners.

• Failed to have processes in place prior to establishing a

business relationship with a customer to determine whether

the person may be deemed to be a Politically Exposed

Person.

www.piba.ie


May 2015 - Settlement with Western Union Payment Services

Ireland Limited

• Failed to demonstrate it had sufficiently robust policies and

procedures for anti-money laundering and countering the

financing of terrorism purposes.

• The Central Bank identified deficiencies in the firm’s Irish

procedures on: AML/CFT outsourcing; Customer Due

Diligence record retention; induction and training of retail

agents; and systems for monitoring and identifying suspicious

activity.


www.piba.ie


Reference Material

• Life assurance sectoral guidelines issued by the

Department of Finance - October 2012.

• PIBA member guidance notes – September 2015.

Copyright PIBA 2016

annual criminal justice (anti-money laundering & …€¦ · what is anti-money laundering...

Documents