The Financial Action Task Force (FATF) recently carried out an evaluation of Ireland’s AML/CTF system. Known as the Mutual Evaluation Report (MER), FATF’s review assesses the effectiveness and the level of technical compliance of Ireland’s AML/CTF measures with FATF’s 40 Recommendations.
Who are FATF?
FATF is an inter-governmental body established to set standards and to promote effective implementation of anti-money laundering and counter terrorist financing measures and other related threats to the integrity of the international financial system. FATF also works to identify national-level vulnerabilities with the aim of protecting the international financial system from abuse. FATF’s core 40 Recommendations set the global standard for AML/CTF countermeasures.
The FATF Recommendations are a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing. Whilst acknowledging that countries have differing legal and financial systems the FATF Recommendations set an international standard, which countries should implement through measures, taking into account their particular circumstances. The FATF Recommendations set out the essential measures that countries should have in place to:
- identify the risks, and develop policies and promote domestic coordination;
- pursue money laundering, terrorist financing and the financing of proliferation;
- apply preventive measures for the financial sector and other designated sectors;
- establish powers and responsibilities for the competent authorities (e.g., investigative, law enforcement and supervisory authorities) and other institutional measures;
- enhance the transparency and availability of beneficial ownership information of legal persons and arrangements; and
- facilitate international cooperation.
Key Findings of the recent MER for Ireland
The following is a summary of the main findings. The full report is available on the FATF website.
- Ireland has a generally sound legislative and institutional AML/CFT framework. Ireland has improved its understanding or risks and national coordination and cooperation is a strong point of our AML/CTF system. Further measures and resources are needed to ensure that our system is fully effective and is proportionate to the risks we face;
- National coordination mechanisms supported by the Anti-money Laundering Steering Committee (AMLSC), the Cross Departmental International Sanctions Committee (CDISC) and the Private Sector Consultative Forum (PSCF) were effective in broadening the understanding of the money laundering and terrorist financing risks across relevant agencies and the private sector;
- Ireland delivered its first National Risk Assessment (NRA) in October 2016 which highlighted a wide range of risks and vulnerabilities. FATF found that while Ireland has a good understanding of money laundering risks linked to domestic crime, more could be done to identify our international money laundering risks. This is especially true given our high levels of economic interconnectivity, our open economy and large financial sector in relation to GDP;
- FATF found that the private sector’s understanding of money laundering and terrorist financing is mixed with some members having a better understanding than others. The private sector has a close relationship with supervisors and law enforcement, particularly the Financial Intelligence Unit (FIU) and the assessors found that with further outreach activities the overall level of understanding should improve;
- Issues identified in the previous MER in relation to the resources and capabilities of the FIU continue to persist, with the lack of sophisticated IT software limiting the ability of the agency to conduct strategic analysis. FATF did however also note that the positive steps that had been taken to strengthen IT capability including access to forensic accounting expertise; and
- FATF noted that Ireland’s system for targeted financial sanctions is generally sound and deficiencies with the EU system mean that assets are not frozen without delay. Work needs to be done to implement proportional measures regarding not-for-profit organisations who are vulnerable to terrorist financing abuse.
It is worth noting that FATF found that whilst the Central Bank has issued a number of sanctions against regulated firms, Ireland could do more to secure convictions in respect of money laundering and terrorist financing noting that Ireland had not demonstrated an ability to identify, investigate and prosecute in relation to cases of predicate crime and 3rd party money laundering. FATF noted their expectations in this regard against the background of Ireland’s substantial international financial services sector. As part of the follow up process Ireland is obliged to report to FATF on progress in 2 years’ time. There will be another assessment carried out by FATF in Ireland in 5 years to check progress on moderate outcomes.