Earlier today the Central Bank of Ireland (CBI) published a report on Anti-Money Laundering/Countering the Financing of Terrorism and Financial Sanctions (AML/CFT/FS) Compliance in the Irish Life Insurance Sector. While directed at the insurance sector, many of the issues raised in the Report are said to be relevant to the broader financial services sector in Ireland. This Report bears some similarities with AML/CFT/FS reports issued by the CBI last year in the retail banking and investment funds sectors, in particular in the area of governance with strong messages around the importance of robust board oversight and record keeping. This Report is based on a combination of on-site inspections and off-site desk top reviews conducted by the CBI over the course of 2014 and 2015. The inspections focused on all aspects of AML/CFT/FS Compliance and comprised a review of relevant policies, procedures, risk assessments, interviews, review of relevant third party reliance arrangements and outsourcing, on-site walk- throughs of key AML/CFT and FS processes and sample testing of relevant documentation.
The following is a summary of issues identified which are representative of issues identified across all the firms included as part of the review. These include:
- non- adherence to stated AML/CFT/FS policies;
- weaknesses in the suspicious transaction reporting process. In particular a lack of documentary evidence of the assessment and adjudication performed by the MLRO on the rationale for reporting or not reporting to the relevant authorities;
- deficiencies in the ongoing customer and transaction monitoring processes;
- insufficient evidence of firms giving sufficient consideration to the requirements of Section 33(1)(d) of the CJA so as to determine the adequacy of documentation and/or information held for existing policy holders on boarded pre-July 2010. Where trigger events were in place to collect or update CDD, these were deemed insufficient;
- deficiencies in the policies and processes in place relating to third party reliance and outsourcing arrangements;
- deficiencies in the policies and procedures in place with respect to the definition and identification of PEPs and application of enhanced due diligence including the obtaining and timing of senior management approval and failure to sufficiently identify, verify and document source of funds and source of wealth;
- failure by firms to fully consider, qualify or document the criteria and process for the identification, recording and application of enhanced due diligence to high risk policy holders.
The Report acknowledges that in many instances, a firm had satisfactory procedures and systems in place. However, the issues identified highlight that further enhancements could be made by firms to strengthen their existing AML/CFT/FS frameworks. The Report notes that although the inherent risk of AML/TF may be lower in the insurance sector than in other sectors, firms need to be aware that there are products, customers and geographic regions that present a higher risk of AML/TF. While the insurance sector is the specific focus of the Report, many of the issues raised are relevant to the broader financial services sector in Ireland .