On 14 May 2020, the European Commission sent a letter of formal notice to Ireland (along with seven other EU member states and the UK) for having only partially transposed the Fifth Anti-Money Laundering Directive EU/2018/843 ("MLD5").
The deadline for transposition into national law was 10 January 2020.
The General Scheme of the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2019, which was to implement MLD5 in Ireland, was published in January 2019 but has not yet progressed any further.
MLD5 introduced a number of reforms including:
- Greater transparency with rights for members of the general public to access beneficial ownership registers ("BORs") of bodies corporate and other legal entities;
- Extending the categories of "designated persons" to include art dealers, tax advisors, letting agents and crypto currency exchanges;
- Increasing circumstances where enhanced customer due diligence ("CDD") must be applied (such as obtaining further information on the customer and the beneficial owner, the nature of their business relationship and their source of funds and wealth and the reasons for the intended transaction) and introducing additional CDD measures prior to establishing a business relationship;
- Ending the anonymity of virtual currencies such as bitcoin and requiring virtual currency exchange platforms to exercise CDD requirements with such exchanges;
- Establishing national centralised automated mechanisms to identify holders of bank and payment accounts and safe-deposit boxes;
- Improving the identification of politically exposed persons ("PEPs"); and
- Giving expanded powers to EU financial intelligence units to request information from any firm.
Other than the provisions relating to BORs, Ireland has yet to implement the measures contained in MLD5.
In the letter of formal notice, the Commission encourages the relevant EU member states to transpose all aspects of MLD5 urgently.
Without a satisfactory response from the relevant EU member states (a letter of formal notice requests an explanation of the alleged breach of EU law) within four months, the Commission may send a reasoned opinion.
This would state the reasons why the Commission believes that the EU member state is in breach of its EU law obligations and forms the basis of the Commission's case in any subsequent infringement court case against the EU member state.
A third stage of the process (where the Commission pursues infringement procedures against EU member states where they fail to comply with their obligations under EU law) is a referral to the Court of Justice of the EU.
It remains to be seen what response Ireland will submit, however until a government is formed any legislation to implement the outstanding aspects of MLD5 cannot progress.
New AML Action Plan
The formal notices follows on from an increasing focus on anti-money laundering and counter terrorist financing ("AML/CFT") as the Commission published a six-point Action Plan on 7 May 2020 to further strengthen the EU's rules and remove any weak links together with a public consultation on the effectiveness of existing enforcement tools which closes on 29 July 2020.
The six pillars cover:
(a) More effective application of EU rules;
(b) A single EU rulebook due in Q1 2021;
(c) Appointment of an EU-level supervisor so that no individual member state gaps can develop in how the rules are supervised;
(d) Coordination and support mechanism for member state financial intelligence units;
(e) Enforcing EU-level criminal law provisions and information exchange; and
(f) The EU's global role.
The Commission also published a new methodology to identify high-risk third countries that have strategic deficiencies in their national AML/CTF regimes, which pose a threat to the EU's financial system.
If you would like further information, please liaise with the below or your usual Maples Group contact.