Revised guidelines to control `hot' money


New operational guidelines for the implementation of the anti-money laundering provisions of the Criminal Justice Act 1994 will be in place by early next year.

Department of Finance official, Mr Bobby Carey, who is chairman of the steering committee which oversees the implementation of the legislation, confirmed that the guidelines are to be updated.

It will be the first revision since the legislation came into force in May 1995. Mr Carey said it was being carried out in the light of the experience of the financial institutions and the Garda and problems they have raised at the steering committee. Another influence will be recent recommendations made by the Organisation for Economic Co-operation and Development's Financial Action Task Force. The revision comes as tensions between the financial institutions and the Garda surfaced when the head of the Garda Bureau of Fraud Investigation, Chief Supt Frank Glackin, complained that some financial institutions were not co-operating in disclosing "suspicious transactions".

Aimed at providing new guidelines for situations where difficulties have arisen in practice, the revision will look at problems such as distinguishing between fraud and money laundering - should the lodgement of a stolen cheque be reported under the money laundering provisions.

The OECD evaluation of the Irish system to combat money laundering was carried out in April and the report was considered at OECD headquarters in Paris two weeks ago. The report is confidential until a summary is published next February.

Mr Carey confirmed that sub-committees of the steering group were working on new guidelines for the different sectors covered by the legislation. These include a sub-committee for the banks and building societies, for non-bank financial institutions such as unit trusts and IFSC companies, for the Stock Exchange and for the insurance sector. When new guidelines are agreed at sub-committee level, they will go to the steering group which will bring the guidelines together and ensure there is consistency between all sectors.

According to the Irish Bankers Federation, 200 cases were reported to the Garda Bureau of Fraud Investigation by the banks in 1995 and 500 in 1997. This increase was evidence of their co-operation with the Garda in implementing money laundering legislation, a spokesman said. He accepted that there were "bound to be problems here and there" in implementing the legislation. But he said that "overall, it is working well".

Banks made no secret when the legislation was introduced of the balancing act they felt they would have to perform between their duty of customer confidentiality and the responsibility to report suspicious transactions, he said. "There is a genuine conviction that, by and large, the banking sector is co-operating effectively and efficiently with the money laundering legislation, he insisted. Supt Willie Magee of the Garda fraud bureau said that all complaints to the bureau were investigated. But he pointed out that a suspicious transaction was not necessarily a money laundering offence.

For example, a customer could have an account in a bank and only do a few transactions over a period. Then he sells his car and lodges £10,000 in his account. A few weeks later he buys another car and withdraws the £10,000.

The bank manager does not know about the car transactions and, because the account has been a relatively quiet one with a sudden large lodgement and withdrawal, he may report it as suspicious. "Out of 10 banks, five branch managers might consider this type of transaction as suspicious while the other five would not. The definition of the word suspicious is down to the judgment of individual managers and that is the problem," he explained.

Reports of suspicious transactions from all the financial institutions total 730 so far this year, he said, up from 504 for 1997. But about half of the reports turned out to be legitimate transactions, he estimated. But claims that there were concerns about the operation of the legislation in some building societies were rejected by the two remaining mutual societies.