Money-laundering draft laws published

LONG-AWAITED legislation against money-laundering is expected to reduce the administrative burden on financial services providers and improve the experience of their customers.

However experts warn that financial services institutions, particularly smaller enterprises, face a challenge if they are to implement the necessary changes before the draft legislation is passed into law. This is expected to happen in the autumn.

Colm McDonnell, partner at accountancy firm Deloitte, stressed the need for financial services institutions to begin work immediately.

“With . . . the short timeframe of only a few months before it becomes law, it will certainly put pressure on Irish organisations to have their new processes and systems in place to support these more complex requirements.”

One of the most significant changes contained in the draft legislation, published yesterday by Minister for Justice Dermot Ahern and which will lead to the transposition of the third EU anti-money-laundering directive into Irish law, is a move towards a risk-based approach to the prevention of money-laundering and terrorist financing.

Businesses covered by the legislation range across the financial services sector from banks to accountancy and law firms, estate agents and tax advisers. Under the proposed change, they will now have the discretion to reduce the level of customer due diligence carried out to match the perceived level of risk.

“The new approach will redirect resources within financial institutions to areas of higher risk,” explained Sinéad Ovenden, direction of compliance and regulation at Deloitte.

“Additionally, the new requirements will improve the customer experience when purchasing financial services products, previously burdened by significant documentation requirements.”

A second change to the current regime is the proposed obligation to undertake enhanced due diligence for “politically exposed persons”. This refers to individuals carrying out “prominent public functions” and their immediate family members and close associates.