The Central Bank of Ireland (Central Bank) has issued its long awaited Report on Anti-Money Laundering, Countering the Financing of Terrorism and Financial Sanctions Compliance in the Irish Funds Sector.

The report is based on Funds sector on-site inspections carried out by the Central Bank over the course of 2014, supplemented by Risk Evaluation Questionnaires completed by Firms and submitted to the Central Bank for assessment. While the Funds sector in Ireland is the specific focus of the report, many of the issues raised are relevant to the broader financial services sector in Ireland. This is the third in a series of reports issued by the Central Bank on the topic of AML/CFT this year.

The Financial Action Task Force, the inter-governmental body developing and promoting policies to combat Money Laundering/Terrorist Financing recommends that relevant competent authorities co-ordinate and share information. This report is also informed in part by the Central Bank’s interaction with other competent authorities.

Head of Anti-Money Laundering at the Central Bank, Domhnall Cullinan, said:

"Latest figures show that Irish domiciled funds have a net asset value of almost €1.8 trillion, making the Irish funds industry a significant part of the Financial Services sector. Any business with such a large variety and amount of customers, high values and volumes of transactions and a cross border nature is attractive for money laundering/terrorist financing.

The Central Bank acknowledges that many firms had responded positively to previous Central Bank communications but, as the report identifies, more work is required by firms in Ireland to effectively manage money laundering/terrorist financing risk. The Central Bank expects all Funds and Fund Service Providers to carefully consider the issues raised in the report, and to use the report to inform the development of their AML/CFT and FS frameworks."

Issues identified in the report include:

  • Insufficient evidence that the requirements of the CJA 2010 were implemented and that adequate risk assessments were performed in a timely manner;
  • A lack of oversight from the Firms (meaning Funds and Funds' service providers) of service providers carrying out AML/CFT functions on behalf of the Firm;
  • Reliance on third parties to conduct elements of CDD in circumstances where not all the conditions set out in Section 40 (4) of the CJA 2010 have been fully met;
  • Insufficient evidence of effective on-going monitoring of investor transactions;
  • Insufficient documentation being retained to support the application of simplified customer due diligence (SCDD);
  • A lack of procedures and controls for ceasing the provision of services to, or discontinuing business relationships with, investors who have failed to provide the required or updated CDD documentation or information requested by Firms;
  • Weaknesses in the suspicious transaction reporting processes and procedures and the record keeping associated with these reports;
  • Deficiencies in the on-boarding process of PEPs, including the failure to sufficiently identify, verify and document Source of Funds (SOF) and Source of Wealth (SOW);
  • Insufficient evidence that new PEPs (and existing investors re-categorised as PEPs) are subject to senior management approval and the completion of enhanced due diligence (EDD);
  • Insufficient evidence that all members of the Firm’s board and/or staff at the Firm had received instruction in the law relating to AML/CFT issues;
  • Documented policies and procedures not being adhered to in all cases.