| Money Laundering as a concept may be described in simple terms as the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. If undertaken successfully, money laundering enables criminals to legitimise “dirty” money by inter-mingling it with “clean” money. This process then provides an otherwise legitimate cover for the source of the relevant income.
A more detailed definition of what precisely constitutes the offence of money laundering in Irish law is set out in the Criminal Justice Act, 1994, as amended (hereafter referred to as “the Act”.
Prevention of Money Laundering
Financial institutions designated under the Act are obliged to take the necessary measures to effectively counteract money laundering in accordance with the provisions of the Act and relevant sectoral Guidance Notes have been issued by the Irish Financial Services Regulatory Authority with the approval of the Money Laundering Steering Committee. The Steering Committee is chaired by the Department of Finance and includes representatives from relevant Government Departments, the Financial Services Regulator, the Garda Siochána and the major representative bodies in the financial sector. The Act and the Guidance Notes set out measures to counteract money laundering in line with the Forty Recommendations of the OECD based Financial Action Task Force (FATF) and the EU Directives on prevention of the use of the financial system for the purpose of money laundering.
The relevant financial sectors are
- Credit Institutions
- Other Financial Institutions
- Stockbrokers
- Insurance and Retail Investment Products (for use by Life Assurance Companies and Intermediaries)
How can Institutions combat Money Laundering ?
Relevant Institutions should, at all times, pay particular attention to the fundamental concept of good practice – “know your customer”. Having a sound knowledge of a customer’s business and pattern of financial transactions is one of the best methods by which financial institutions and their staff will recognise attempts at money laundering.
In summary relevant institutions are required, among other things, to:
- Establish the identity of their customers
- Retain copies of the materials used to identify their customers
- Retain records of customer transactions
- Make a report to the Garda Siochana and the Revenue Commissioners where they suspect that a money laundering offence or an offence dealing with customer identification/record retention has been or is being committed.
The role of the Money Laundering Reporting Officer
It is the Money Laundering Reporting Officer who will have the responsibility in financial institutions before communicating reports of suspicious transactions to the Garda Siochana and the Revenue Commissioners and who will provide the liaison between the institution and the Gardai and the Revenue Commissioners.
The type of person appointed as Money Laundering Reporting Officer will vary according to the size of the relevant institution and the nature of its business, but he or she should be sufficiently senior to command the necessary authority. Larger institutions may choose to appoint a senior member of their compliance, internal audit or fraud departments. In smaller organisations it may be appropriate to designate the Chief Executive.
Case example of Money Laundering
Account opening with drafts
An investigation into part of an international money laundering operation involving the UK revealed a method of laundering which involved the use of drafts from Mexican exchange bureaux. Cash generated from street sales of drugs in the USA was smuggled across the border into Mexico and placed into exchange bureaux (cambio houses). Drafts frequently referred to as cambio drafts or cambio cheques, were purchased in sums ranging from $5,000 to $500,000, these were drawn on Mexican or American banks. The drafts were then used to open accounts in banks in the UK with funds later being transferred to other jurisdictions. And indeed nearer to home there was a case taken some years ago against an Exchange Bureau operating on the Louth/Armagh border.
Responsibilities of the Financial Services Regulator
The Financial Services Regulator, as part of its supervision process, assesses the adequacy of procedures adopted by the institutions, which it supervises to counter money laundering and the degree of compliance with such procedures. The Financial Services Regulator uses the Money Laundering Guidance Notes as criteria against which it assesses the adequacy of institutions internal controls, policies and procedures to counter money laundering.
The Financial Services Regulator will, from time to time, conduct inspections of institutions to assess their compliance with the Guidance Notes.
The Central Bank/Financial Services Regulator is obliged by the Criminal Justice Act 1994 to report to the Garda Síochana where it suspects that an offence under Section 31 or 31 of the Act has been, or is being, committed by an institution under its supervision (Section 57(2) of the Act).
It is an offence punishable by imprisonment of up to five years or a fine, or both, for the failure of the Central Bank/Financial Services Regulator to comply with this requirement (Section 57 (5)).
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