Criminal Justice (Money Laundering and Terrorist Financing) Bill 2009: Second Stage.

Minister for Justice, Equality and Law Reform (Deputy Dermot Ahern)

I move: "That the Bill be now read a Second Time."

The main purpose of the Bill before the House today is to transpose the third EU money laundering and terrorist financing directive into Irish law and to comply with the recommendations of the financial action task force, FATF, third round mutual evaluation report on Ireland. The Bill will also give effect to certain provisions of the United Nations Convention Against Transnational Organised Crime including Article 6, and the relevant parts of Article 15.

This Bill was published in July and since then a number of representations have been made to my Department by interested bodies regarding aspects of it. I am considering a range of amendments on Committee Stage to reflect some of those views and to introduce certain technical and drafting amendments which are considered necessary. I will mention the more significant intended amendments during the course of this speech. The aim of the Bill is to combat the efforts of criminals and their associates to conceal the origin of the proceeds of criminal activity or to channel money obtained lawfully or unlawfully for terrorist purposes. The problem of money laundering has been with us for a very long time. What makes money laundering such an important issue in the modern world is the increasingly sophisticated nature of this kind of crime. That fact, allied with the increasing globalisation of both the financial and business worlds and the internationalisation of a great deal of criminal activity makes the crime of money laundering more prevalent.

Part 2 of the Bill deals with the main offence of money laundering occurring in or outside the State. It is an offence under the terms of this Bill if a person conceals or disguises the true nature, source, location, disposition, movement or ownership of property, including money, which is the proceeds of criminal conduct. Converting, transferring, handling, acquiring, possessing or using such property is also an offence, as is removing the property from or bringing it into the State. The offence applies to a person who knows or believes, or is reckless as to whether the property is the proceeds of criminal conduct.

The seriousness of the offence of money laundering is underlined by the level of the penalties which a person may face who is found guilty of the offence. On summary conviction, the guilty party could face a fine of up to €5,000 and a term of imprisonment of up to 12 months. On indictment, an offender found guilty could be jailed for up to 14 years or be fined or both. It should be noted that a reference to a person knowing or believing that property is the proceeds of criminal conduct also applies to a person who knows or believes the property is probably the proceeds of crime.

This country already possesses anti-money laundering legislation, which primarily is contained in the Criminal Justice Act 1994, as amended. This legislation is being repealed and consolidated in the Bill before the House today. The Government recognises that the increasing facility with which money can be transferred from one country to another and from one financial institution to another along with the generation, through criminal activity, of significant proceeds which require to be laundered needs to be addressed by way of new updated and strengthened legislation. This is what is intended in this Bill.

A key element in this legislation is the application of customer due diligence measures on the part of the designated persons covered by the Bill, which include requirements to identify the customer and any beneficial owner and to verify that identity. The directive provides that the customer due diligence provisions of the Bill should be applied to existing customers at appropriate times on a risk-sensitive basis and the Bill is intended to reflect this requirement. The list of designated persons covered by this Bill is extensive and includes bodies such as credit and financial institutions, which are made up of banks, building societies, credit unions, insurance companies and intermediaries, bureaux de change, money transfer businesses, and An Post, as well as independent legal professionals, including both barristers and solicitors. It also incorporates a trust or company service provider, which is defined in section 24(1) of the Bill. This includes company directors but not all company directors. The Bill applies only to a person who acts as a company director by way of a nominee of a third party and by way of business.

Members are aware of the existence of private members' gaming clubs and, therefore, those directing these clubs are covered by the provisions of the Bill in respect of the gambling activities which take place there but only in the context of the requirements of the money laundering legislation. The provisions of the Bill also apply to dealers in high value goods and specifically to those who may receive payments in cash of at least €15,000 whether in a single transaction or in a series of transactions which are or appear to be linked. In addition to those categories specifically set out, the Bill confers a power on the Minister for Justice Equality and Law Reform to prescribe other classes of persons who could be covered by the provisions of the legislation.

Deputies will note from the extent of the designated persons covered by the requirements of the Bill that the proposed legislation will affect a very wide variety of activities. What is being proposed in this Bill is a new and strengthened regime to combat money laundering and the financing of terrorism. Deputies should also note, however, that the Bill recognises, as does the Directive which is being transposed, that the risk of money laundering and terrorist financing is not the same in every case. Designated persons can apply a risk-based approach in dealing with their customers. The identification and verification of customers is required in all cases but simplified customer due diligence is provided for in appropriate cases.

Equally, the Bill recognises the reality that certain situations present a greater risk of money laundering or terrorist financing. While there is a requirement in every case to identify and verify customers the legislation provides for the application of enhanced due diligence in certain situations where more rigorous procedures are called for. An individual who is not physically present when opening an account for example, would come into that category. The Bill introduces the concept of the politically exposed person who resides outside the State and the enhanced customer due diligence measures will apply to those people and to the immediate family members and close associates of the person as defined in the Bill. These provisions arise directly from the requirements of the Money Laundering Directive and the implementing directive. I will bring forward an amendment on Committee Stage to section 37 of the Bill to take account of concerns expressed about the practical difficulties in refusing to open an account for a person when it has not been ascertained finally that the individual is in fact a politically exposed person.

Enhanced due diligence will also apply when a credit institution, a bank, enters into a correspondent banking arrangement with another credit institution situated in a place other than a member state of the European Union or a state which is recognised as having equivalent requirements. In addition to the role of designated persons, the Bill also provides in chapter 8 for the role of competent authorities, they are the supervisory authorities for each of the designated persons covered by the Bill. In that regard the competent authority for credit and financial institutions is the Financial Regulator. In the case of a designated person who is a solicitor, the competent authority is the Law Society. In the case of a designated person who is a barrister, the competent authority is the Bar Council. In the case of a designated person who is an auditor, external accountant, a tax adviser or trust or company service provider and who is a member of a designated accountancy body, that body is the competent authority. For some of the designated persons covered by the Bill such as dealers in high value goods and trust and company service providers and tax advisers who are not accountants or solicitors, the Minister for Justice, Equality and Law Reform will be the competent authority. A unit within my Department will act as a monitoring and authorising body for these groups for the purposes of money laundering.

The function of a competent authority for the purposes of this Bill is to effectively monitor the designated body for whom it is a competent authority and to take whatever measures are reasonably necessary to secure compliance with the provisions of the Bill. The measures which could be taken may include reporting to the Garda Síochána and the Revenue Commissioners any knowledge or suspicion the competent authority has that a designated person for which it has responsibility has been or is engaged in money laundering or terrorist financing. Under the provisions of our current anti-money laundering legislation many competent authorities compile guidelines for their members on the operation of the legislation. Courts can have regard to these guidelines in considering matters relating to a prosecution for money laundering which may come before them.

This Bill will make provision for the Minister to approve such guidelines for the purpose of guiding the designated persons to whom each set of guidelines applies. Having considered the matter further, I will introduce an amendment on Committee Stage to have the codes of practice referred to in section 107 referred to as a "guideline" which is closer to the terminology in use. The Bill provides for the approval of these codes of practice by the Minister for Finance. Following discussions between my Department and the Department of Finance on this matter, I intend to introduce an amendment on Committee Stage to the effect that such approval would be given by the Minister for Justice, Equality and Law Reform in consultation with the Minister for Finance. Nothing in the Bill will limit the matters to which a court may have regard in determining whether a person took all reasonable steps and exercised all due diligence to avoid committing an offence.

This Bill contains not only criminal law provisions but also many provisions relating to changes in financial regulation in so far as it impacts on the question of money laundering and terrorist financing. The Bill contains 121 sections, set out in five parts. The largest, part 4, is divided into ten chapters. It is not essential, nor is there sufficient time today to provide the House with details of each section. I wish, however, to outline the various parts of the Bill, the salient sections in each part and to indicate significant changes to the existing laws in this area which are being proposed.

Part 1 of the Bill contains the usual provisions setting out the short title and commencement provisions, the interpretation section, the Minister's regulatory powers and the expenses arrangements. Section 4 provides for the repeal of the existing anti-money laundering provisions contained in the Criminal Justice Act 1994. I will bring forward a technical amendment to section 2(1) on the definition of the Third Money Laundering Directive to take account of provisions of recent EU directives in the financial services sector which amend the Money Laundering Directive.

Part 2 of the Bill deals with the main offence of money laundering. I have already outlined some of the provisions of this part. The part was drafted subject to the advice of the Attorney General and is somewhat different from the provisions currently contained in the Criminal Justice Act 1994. Our legal advice is that the provisions now set out in the Bill will be more effective in ensuring subsequent prosecutions of the offence in court. As I have mentioned, the penalties for the offence set out in section 7, particularly for a conviction on indictment, reflect the gravity with which we regard the crime of money laundering. A good deal of Part 2 of the Bill relates to the aspects of the offence of money laundering which take place outside the State. The penalties for the offence committed outside the State are identical to the penalties which apply to the main offence of money laundering which takes place in this jurisdiction. The application of jurisdiction for an offence occurring outside the State is a feature of many criminal law statutes. Money laundering is a crime which very frequently has an international dimension. On Committee Stage I will bring forward an amendment to section 8 on the extra-territorial jurisdiction issue on the basis of advice received from the Office of the Attorney General.

Part 3 of the Bill deals with directions and orders in the context of an investigation of the offences covered by the Bill. Section 17 provides that a member of the Garda Síochána, not below the rank of superintendent may direct a person not to carry out a service or transaction for a period not exceeding seven days. The same section provides that a judge of the District Court may order a person not to carry out a specific service or transaction for a period not exceeding 21 days, if satisfied on information given by a member of the Garda Síochána that the service or transaction may comprise or assist money laundering or terrorist financing. I propose to increase this period to 28 days and I will bring forward an amendment on Committee Stage to this effect.

Section 19 provides that a judge of the District Court may revoke a direction or order if he or she is satisfied that the circumstances envisaged under Section 17 do not or no longer apply. Section 20 provides that a judge of the District Court may, on application by any person affected by a direction or order, make any order appropriate in relation to any of the property, if it is necessary to do so to enable the person to discharge the reasonable living and necessary expenses incurred or to be incurred in respect of the person or in respect of his or her dependants.

Part 4 is the longest and most extensive part of the Bill. It is divided into ten chapters covering sections 24 to 109. This part is concerned with a range of provisions relating to the financial services industry, professional service providers and others. It also contains the provisions for the application of the all-important customer due diligence measures and the various degrees of customer due diligence which apply in different circumstances. Customer due diligence is divided into four distinct parts in this Bill, basic customer due diligence, simplified customer due diligence, enhanced customer due diligence and monitoring of customer transactions. Chapter 1 deals entirely with the interpretation of the various terms which are essential to this part and to the Bill as a whole. The key terms defined in section 24 include the following: beneficial owner; business relationship; competent authority; credit institution; financial institution; designated person; professional service provider; property service provider; tax adviser and trust and company service provider. I will be bringing forward an amendment on Committee Stage to define the term Electronic Money Directive, which is relevant to this section. In addition to some drafting changes to this section I also propose to include An Post within the definition of financial institution for clarification, by way of amendment on Committee Stage.

Section 25 sets out the meaning of the term "designated person", which I have already outlined. A designated person refers to all of those individuals or bodies to which this legislation applies. This section also gives the Minister for Justice, Equality and Law Reform powers to prescribe a class of persons as a designated person if he or she is satisfied that any of the business activities they engage in may be used for the purposes of money laundering or terrorist financing.

Section 28 defines a "trust", meaning a trust that administers and distributes funds. A beneficial owner of a trust means an individual who is entitled to a vested interest in possession, remainder or reversion, whether or not the interest is defeasible, in at least 25% of the capital of the trust property; a class of individuals in whose main interest the trust is set up or operates; any individual who has control over the trust; or an individual who is the beneficial owner of a body corporate that is entitled to a vested interest of the kind referred to in section 28(2)(a).

Section 29 provides that a beneficial owner with regard to an estate of a deceased person in the course of administration means the executor or administrator of the estate concerned. In section 30, a beneficial owner with regard to a legal entity or legal arrangement with some exceptions means an individual who benefits from the entity or arrangement to the extent of at least 25% of the property; individuals who benefit from the entity or arrangement in whose interest the entity or arrangement is set up or operates; or an individual who exercises control over at least 25% of the property.

Chapter 3 deals with the issue of customer due diligence which relates to the identification and verification of customers and beneficial owners. It sets out the procedures which designated persons must follow if they are to adequately identify and verify their customers, including existing customers. The measures set out in this Part are to be applied, in most cases, prior to the establishment of a business relationship.

Section 33 provides for the identification and verification of customers and beneficial owners and the application of certain aspects of enhanced and simplified customer due diligence. Section 33(2) sets out the particular measures which should be applied. It sets out the kinds of documents or information which can be relied upon to confirm the identity of a customer including documents from a Government source or a prescribed class or a combination of documents.

Section 33(4) sets out the measures which should be applied where a customer is not physically present for verification. There is provision for verification to be taken during the establishment of a business relationship, rather than prior to it, if there are reasonable grounds to believe that to do so before that time would interrupt the normal conduct of business, but only where there is no real risk.

Section 34 provides for exemptions from the requirements for customer due diligence. Such an exemption will apply to the beneficial ownership of money held, or proposed to be held, in trust in a client account. Section 34(4) provides that a credit institution may apply the exemption to money held in trust in a credit institution, if satisfied that the information on the identity of the beneficial owners of the money is available on request.

Section 35(3) relates to the monitoring of the business relationship including scrutinising transactions with the object of obtaining information reasonably warranted by the risk of money laundering or terrorist financing. Section 36 provides that a designated person may be exempt from the requirements of section 35(1) if there are reasonable grounds to believe that the customer or the product concerned is a specified customer or a specified product in the meaning of section 34. A specified product is a life insurance policy having an annual premium of no more than €1,000 or a single premium of no more than €2,500 and an insurance policy in respect of a pension scheme that does not have a surrender clause and cannot be used as collateral.

Section 37 provides for enhanced customer due diligence for politically exposed persons residing outside the State. The section provides that a designated person shall take steps to determine whether a customer or beneficial owner residing outside the State is a politically exposed person or an immediate family member or a close associate of a politically exposed person. These steps are reasonably warranted by the risk that the customer or beneficial owner is involved in money laundering or terrorist financing.

Section 38 sets out the conditions under which a credit institution shall enter into a correspondent banking relationship with another credit institution in a place other than a member state of the European Union or a state with equivalent anti-money laundering requirements.

Section 42 requires a designated person to report to An Garda Síochána and the Revenue Commissioners any knowledge or suspicion which they may have that a person is engaged in money laundering or terrorist financing. I will table an amendment to section 43 on Committee Stage to include the Revenue Commissioners as a body to which reports shall be made in the case of reports in respect of transactions with certain jurisdictions.

Section 45 enables information included in a report to be used in an investigation into money laundering or terrorist financing. Sections 48 to 53, inclusive, deal with the prohibition of tipping off by a designated person, as well as with defences to a charge of tipping off in particular circumstances. Section 49 prohibits a designated person from making any disclosures likely to prejudice any ongoing or future investigation into money laundering or terrorist financing. Section 49(3) sets out the penalties for failing to comply with this provision.

Chapter 6 deals with internal policies and procedures as well as training and record-keeping. Section 54 directs that a designated person shall have policies and procedures in place in their business to prevent and detect money laundering and terrorist financing. It also provides that the designated person shall detail the type of policies and procedures to be implemented. Section 55 requires a designated person to keep records of the procedures applied and the information gathered on each customer.

Chapter 7 deals with special provisions applying to credit or financial institutions. Section 56 requires that a credit or financial institution have systems in place to enable them to respond efficiently to inquiries from An Garda Síochána about its business relationships.

Section 58 prohibits the setting up of anonymous accounts or the provision of anonymous passbooks by credit or financial institutions. Anonymous or numbered bank accounts or passbooks have not been a feature of the Irish banking system, although they have been a feature in those of some other jurisdictions. The section's purpose is to transpose the requirements of the money laundering directive. It also complements and reinforces the customer identification requirements of the directive. Section 59 prohibits a credit institution from entering into a correspondent banking relationship with a shell bank.

Chapter 8 deals with monitoring by competent authorities with section 60 explaining the meaning of the term "competent authority". Section 60(2) lists persons or entities that may be considered a competent authority and section 60(3) provides that in certain circumstances the Minister may prescribe a competent authority for a class of designated persons. Section 62 lists the competent authorities which may be referred to as State competent authorities and provides the circumstances in which the Minister may prescribe a competent authority as a State competent authority.

Section 63 sets out the functions and duties of a competent authority. I will bring forward two minor drafting amendments to section 63(2) on Committee Stage.

Section 67(1) permits a State competent authority to direct a designated person to provide information or documents as specified by written notice. Section 67(2) sets out the penalties for failure to comply. Section 67(4) provides that the State competent authority should specify the manner and time in which the information is to be furnished and that a person should only furnish documents in their possession or documents which can be obtained lawfully. Section 68 provides that a State competent authority may direct a designated person to furnish an explanation concerning any documents provided to the authority under section 67 or lawfully removed from the premises under section 78.

The remainder of this Chapter provides, in considerable detail, for the powers which may be exercised by a State competent authority including the appointment of authorised officers, the general powers of officers to enter premises and the entering of residential premises with permission or with a warrant.

Section 81 stipulates that nothing in Chapter 8 requires a person to answer questions if to do so might tend to incriminate them. Section 82 provides that nothing in Chapter 8 requires the production of any document or information that is subject to legal privilege.

Chapter 9 deals with the authorisation of trust and company service providers. Section 84 provides for the authorisation and registration procedures for persons carrying on the business of a trust and company service provider. For the purposes of this section, a trust and company service provider does not include a member of a designated accountancy body, a barrister or solicitor, or a credit institution or financial institution.

Section 85 specifies certain matters which would disqualify a person from being considered a fit and proper person for the purposes of authorisation as a trust and company service provider. These include a person who has been convicted of money laundering, terrorist financing, an offence involving fraud, dishonesty or breach of trust and an offence in respect of conduct in a place other than the State that would constitute an offence of a kind referred to above, if the conduct occurred in the State. It would also include those with the following characteristics — where the person is an individual and under 18 years of age; the person has suspended payments due to creditors; the person is unable to meet obligations to creditors; the person is an undischarged bankrupt; or the person is otherwise not a fit and proper person.

Chapter 10 deals with other matters including in section 107 the approval of codes of practice or guidelines by the Minister to which, as I have mentioned earlier, courts may have regard in considering whether a defendant took all reasonable steps and exercised all due diligence to avoid committing an offence. Section 109 provides that a person who is a designated person in the context of section 25(1 )(h), that is a person directing a private members’ club, shall register with the Minister in accordance with procedures as may be prescribed or otherwise imposed by the Minister. Subsection (3) of that section provides that particulars shall be entered into a register established and maintained by the Minister for the purposes of this section.

Part 5 deals with miscellaneous matters. Section 110 sets out the requirements in relation to the service of documents and section 111 relates to offences which have been committed by a body corporate or an unincorporated body, where a director, manager or other officer may also be taken to have committed the offence. Section 112 provides that the disclosure of information relating to a suspicion of an offence to a member of the Garda Síochána or another person concerned with an investigation into money laundering or terrorist financing, shall not be treated as a breach of disclosure of information imposed by any other enactment or rule of law.

Sections 113-121 comprise mainly consequential amendments to a number of statutes. However, section 113 will enable the Financial Regulator to inquire into and impose administrative sanctions for breaches of Part 4 of the Bill by credit and financial institutions as required by the directive. Section 114 amends the Courts (Supplemental Provisions) Act 1961.

This measure before the House today is important. It is important for our membership of the European Community that we transpose the directive without further delay. It is important for our financial services sector that we have in place the best possible anti-money laundering and terrorist financing legislation and it is important, in our fight against crime, that we have updated and modernised legislative safeguards to combat money laundering and terrorist financing.

I commend this Bill to the House.

Deputy Charles Flanagan

I welcome the Bill and thank the Minister for his somewhat detailed overview of it. I look forward to teasing out the Bill in greater detail on Committee Stage.

Progress on this matter has been tortuously slow. It is four years since the European Council passed the third EU money laundering directive. This directive was due to be transposed into Irish law by way of legislation in this House by 15 December 2007. The manner in which other EU countries have engaged in the transposing process highlights the delay here. For example, Denmark transposed the directive into its domestic law in 2006. Five other member states succeeded in transposing it in 2007, including our near neighbour and fellow common-law country, the United Kingdom. It is not fair to suggest difficulties were imposed on this Legislature because of our common-law jurisdiction unlike most mainland European countries. Some 13 members states transposed the directive in 2008. In the winter of 2009 we are, unfortunately and regrettably, part of a tiny handful of countries only now proceeding to transpose this directive into our law.

It is fair and reasonable to say that this House is owed an explanation for the inordinate delay in this regard. Our neighbour, the United Kingdom, transposed the directive within two years. Why has it taken us more than twice that length of time to do so? The Taoiseach has frequently spoken of the need for Ireland to be at the heart of Europe, in particular when trying to convince voters to support the Lisbon treaty. Yet, the Government's commitment to the European project has been shown to be sorely lacking when it comes to transposition of this and other directives.

The European Commission was compelled to refer Ireland to the European Court of Justice in regard to our failure to transpose this directive despite repeated requests from the Commission to comply. Unsurprisingly, we lost the case in the European Court of Justice and Ireland was ordered to meet the full costs involved. The European Court of Justice found the Irish Government had failed to provide a legal basis for financial institutions to monitor transactions carried out by so-called "politically vulnerable persons".

On 1 October this year, a second judgment was obtained by the European Commission in respect of Ireland's failure to transpose implementing directive 2006/70, which lays down implementing measures in respect of the third money laundering directive. Only last month, the European Commission announced it has decided to issue a formal letter of notice to Ireland under Article 288 of the EC treaty for failure to execute the judgment of the European Court of Justice in respect of this third money laundering directive. We do not yet know what fine will be imposed. However, we do know the position in terms of our liability in respect of costs of the action. It would appear that the matter of measuring of the fine will result in a further level of embarrassment to this State, brought about by the failure of Government to process this action in a timely manner.

Our failure to transpose this directive has left us not alone humiliated in the European context but subject to international disapproval, in particular from the United States of America. In this regard, the US State Department believes that a number of people based in this jurisdiction have close links to the financing of international terrorism. Hence, a greater and more urgent need for us to transpose this anti-money laundering directive. Last year, Interpol issued an arrest warrant for an Irish national described by the US Government as a central fund-raiser for al-Qaeda in Europe. The international police network issued a warrant in respect of Ibrahim Buisir on foot of a Libyan arrest warrant. This was the first time Interpol had issued a global arrest warrant against an Irish national in respect of alleged Islamic terrorist related activities. The US Treasury Department has identified Buisir, who has lived at addresses in south Dublin, as having directed a European al-Qaeda cell that provided support to operations in Europe by arranging travel and accommodation.

It is clear that we need robust anti-money laundering legislation. Indeed, we know from the situation between ourselves and Northern Ireland of the huge commercial activity that is the racketeering, smuggling, money and diesel laundering which is part and parcel of financing terrorist organisations. Unfortunately, we are witnessing a re-emergence of this by dissident Republicans who finance their terror in this jurisdiction and beyond in this manner. We need the most robust anti-money laundering legislation possible. In this regard, it is to be welcomed that the EU directive provides a framework of common action against terrorism and terrorist associates.

Last year, I received correspondence from an Irish-based financial services provider warning that his company was being damaged by the Government's failure to transpose this directive. That failure had given rise to a situation whereby business is suffering. The businessman stated that the failure of the Government to transpose the directive and the failure of this House to enact this legislation was presenting significant operational difficulties within global financial service firms. These firms are unable to implement the uniform global anti-money laundering programmes demanded by their lead regulatory authorities, such as the Federal Reserve, because Ireland has not adopted the risk-based approach. He went on to state that these operational difficulties are, in turn, causing issues with clients of the company who, as a consequence, may decide to move their business away from Ireland to competitor jurisdictions that have implemented the risk-based approach, including the United Kingdom, the Channel Islands or Luxembourg.

Needless to say, this would have a serious adverse effect on the Exchequer. Ireland's reputation as a well regulated financial services centre is further damaged by our ongoing failure to transpose this directive. I hope the Minister will give a full account to the House in this matter. He has not done so this morning but I ask him to come to committee and give a full explanation of why Ireland risked its international reputation, being dragged before the European Court of Justice, damaging Irish-based financial services companies and potentially facilitating international terrorists, as was the concern not only of the EU but also of the US State Department. The way in which this directive has been handled by the Government is a disgrace.

I welcome the consolidation of the anti-money-laundering legislation in this new Bill. It is more satisfactory than embedding such measures in existing legislation such as the Criminal Justice Act 1994, now that the legislative framework has broadened so substantially. However, some practitioners have complained that the Bill is overly long and unduly cumbersome and will make compliance somewhat difficult. I do not believe that is in the best interests of trade, business or commerce. I ask the Minister to examine opportunities that may simplify aspects of this Bill for Committee Stage.

The central purpose of the Bill is to place requirements on certain designated bodies such as banks, lawyers, accountants, real estate agents and dealers in high-value goods to identify customers and report suspicious transactions to the Garda Síochána and the Revenue Commissioners, and to institute specific procedures to provide to the fullest possible extent for the prevention of money laundering and terrorist financing. It further provides that categories of designated bodies in respect of which there is no supervisory or competent authority — such as tax advisers who are not accountants or solicitors and dealers in high-value goods who may receive cash receipts in excess of €15,000 — will be monitored for the purposes of compliance with the legislation by the Department of Justice, Equality and Law Reform. The latter category includes operators such as car dealers, boat dealers, jewellers and art dealers. We will require some clarification as to how estate agents or yacht owners will be made aware of their new obligations under this legislation when it is enacted, if not later this year then early next year.

There are practical consequences that will require some detailed explanation and clarification. For example, how will the Department of Justice, Equality and Law Reform monitor the compliance of categories of designated bodies in respect of which there are no supervisory or competent authorities, such as tax advisers who may not be qualified as accountants, actuaries or solicitors, or dealers in high-value goods, as I mentioned earlier? It is a broad designation and an appropriate framework is necessary to ensure not only that obligations are met but that those concerned are aware of them. Has the Minister examined comparable systems in other jurisdictions? There will be practical consequences of the obligations the Bill will place on other designated bodies and individuals.

One issue of particular concern is the absence of certain bodies among the designated bodies under the Bill, although I heard the Minister make reference to the fact that he will introduce some amendments on Committee Stage, which I welcome. I do not see any reference to investment intermediaries, although I may have missed it in the 120 or so sections of the Bill. These are authorised under the Investment Intermediaries Act 1995. If these are not designated under the Bill, it places them outside the scope of the legislation. Given the large scale of investment fund administration business in this country, this may have to be clarified. If, as I suspect, it is an omission, it is a serious one which requires remedying. I would have thought all investment intermediaries would be listed as designated bodies. I welcome the clarification the Minister has given in respect of An Post. Post offices, which do engage in financial transactions, are to be designated, albeit at a later stage.

I understand the Financial Regulator has made a number of comments on the Bill. I wonder if the concerns expressed by the regulator have been considered and acted upon. This is an issue we can discuss again on Committee Stage. These concerns were germane to the legislation and I hope there were appropriate meetings between officials of the Department of Justice, Equality and Law Reform and the Office of the Financial Regulator.

I welcome the inclusion of private gaming clubs in the Bill. The Minister is on record as referring to the "mushrooming" of such clubs in recent years. We should receive a briefing from the Minister on these clubs; how many are in existence and what types of business are being undertaken there? Does the Minister have concerns about their operation, given that they largely operate in an unregulated environment? What action does the Government propose to take with regard to regulating the sector? We have had a number of reports, and reviews have been commissioned and undertaken, but eventually we must decide on a course of action. In this regard we do not appear to have any knowledge of current Government policy or proposals, if any. In view of the fact that we are enacting this Bill and these clubs are specifically included in the Bill, it is incumbent upon us to engage in a form of regulation that will be both transparent and properly regulated.

The sources of ill-gotten gains are referred to in the Bill. The World Bank has stated that ill-gotten gains are obtained from a wide range of criminal activities, including political corruption, illegal sales of weaponry, and the illicit trafficking and exploitation of human beings. Ireland is unfortunately not immune to any of the criminal activities I mention.

I refer briefly to the illegal sale of weapons. The Minister has taken steps in respect of law-abiding, licence-holding gun owners, and that legislation was enacted early in the summer. However, as we see on a weekly basis in terms of gangland shootings and murders, criminals seem to have little trouble procuring illegally held weapons. Not enough is being done to prevent criminals from acquiring dangerous weapons. This is an area that needs urgent attention. These weapons are being acquired in this jurisdiction after being brought in with illegal consignments of drugs and other contraband on a regular basis. It is an issue that requires an EU-wide approach. I am pleased to be in regular contact with my colleague, the Dublin MEP Gay Mitchell, who has undertaken a number of visits to Eastern European states and raised the issue with members of the European Parliament from particular jurisdictions, including the Czech Republic. Gangsters can afford weapons thanks to the vast sums of money they make from their drug empires. Our Criminal Assets Bureau does great work in its attempt to seize the proceeds of crime but one hopes this Bill will facilitate identifying criminal activity earlier in the chain. From that point of view it is welcome.

The obligations of dealers in high-value goods should be very bad news for criminals who, notoriously, love to spend their money on items of prestige, such as black SUVs with the blacked out windows. As the Acting Chairman may be aware, Irish gangsters are especially fond of owning properties in countries such as Spain and Bulgaria. I hope the attempts by the European Union to prevent money laundering will stymie the efforts of these gangsters to spread their ill-gotten wealth, not only in this country but in other European jurisdictions.

I shall refer briefly to human trafficking. The World Bank commented on the vast sums of money made from human trafficking. Only this week my colleague, Deputy Denis Naughten, introduced a very important motion to the Dáil which, regrettably, was defeated for no other reason than narrow, party-partisan political grounds. This motion noted that, at minimum, 102 women and girls have been clearly identified in a recent report as having been sex-trafficked in 2007 and 2008. Eleven of these were children when they arrived in this jurisdiction. None of these women knew they were destined for the Irish sex trade. Up to 97% of the 1,000 women involved in indoor prostitution in Ireland at any given time are from overseas. They are migrant women. Victims of trafficking are identified by this Government as illegal immigrants first, and consequently are detained and imprisoned. Unfortunately and regrettably, they are identified as victims second.

Several European countries have successfully tackled human trafficking and forced prostitution by introducing legislation that criminalises the buying of sex services. The UK is introducing legislation to reduce prostitution and human trafficking which will impact directly on the Republic. Clearly, criminals are making a great deal of money out of human trafficking in this country. I am hopeful the implementation of the third EU anti-money laundering directive will go some way towards addressing this very serious problem.

I ask the Minister to reconsider the proposals made in the Dáil this week in respect of human trafficking. They include a number of practical proposals, such as moving the focus on human trafficking from the Garda National Immigration Bureau to the Garda Organised Crime Unit, and establishing a high level group to examine our prostitution laws with a view towards preventing the proliferation of sex trafficking in this jurisdiction. We cannot rely on the European Union to solve all our crime problems so a degree of open-mindedness on the part of the Minister for Justice, Equality and Law Reform in respect of proposals from this and other sides of the House would be not alone appropriate but essential if we are to deal with this issue.

I welcome the initiative to transpose this important EU directive, however belated it is. It is essential that we in this country live up to our responsibilities, both nationally through our people at home and internationally to prevent criminals from enjoying the proceeds of crime. It is a matter of regret there has been such a delay in this transposition, thereby undoubtedly harming our reputation within the European Union as well as making life difficult for those engaged in the financial services industry, particularly at a time of economic downturn when business is suffering. There are specific difficulties, some of which I have referred to and others to which the Minister referred by his flagging of amendments on Committee Stage. I am hopeful we can deal with any specific technical details or problems on Committee Stage. The Bill is complex, lengthy and technical. Perhaps parts of it might be examined to ensure its application could be in a less technical and more practical form. I would welcome that. I look forward to Committee Stage of the debate which may take place before Christmas or early in the new year.

Deputy Joanna Tuffy

This Bill has been introduced as a stage in implementing EU legislation on money laundering. As Deputy Flanagan noted, it is at a late stage. We are passing it through the House now, following a European Court of Justice judgment against Ireland on this matter and a formal notice served earlier this year. I have pointed out several times that we must look to how we manage legislation in the House. I realise a committee is examining Dáil reform and how the House operates. We must deal with legislation in a properly organised manner so that we do not spend many months without any significant legislative work while at other times trying to rush legislation through at the end of year.

This is a justice Bill. I am the Labour Party spokesperson on the environment and I know there are many cases in train against Ireland in respect of the non-implementation or transposition of European environmental law. The Government must deal with this issue. There is a great deal of cynicism about politics, most of which is unjustified. However, much of it has to do with how the Oireachtas operates. People take the view that one of our main functions is to be legislators. We must manage how we pass legislation through the House so that we do so in an efficient and timely manner and on the basis of relevance. The Government should ensure that whatever resources are required for legal drafting are provided. It is a very important part of our role and it is important we are resourced properly in that regard.

We are at one stage of this legislative process; there were previous stages and I understand this is the third legislative measure to try to implement these rules. The attempt began with the Criminal Justice Bill in 1994. In terms of our day to day lives, the money laundering legislation passed to date in this country has impacted on the banks and how we all deal with banks in our daily lives. Banks have changed with regard to how they deal with the ordinary public, sometimes not necessarily for the better because they have become much more restrictive in their dealings with the ordinary customer who uses a bank account for salary and mortgage purposes. When we want to open an account we must bring certain documentation to the bank that was not required in the past. I cannot cash a cheque in the bank but must lodge it. There are many more restrictions in my dealings with my bank and that is how most people are affected by the changes in banking practice. I realise that is all necessary and is aimed at preventing criminal behaviour, especially money laundering.

On the other side of the spectrum, while this has all been happening and the European Union and Ireland have been putting all these measures in place to try to deal with money laundering and related criminal activity, it must be pointed out that all the problems created in our financial system, our banks and our economy are not due to the activities of organised criminals. They are not due to the activities of people such as us who deal normally with the banks but are because of financial speculation that was promoted by the banks and facilitated by many Government policies. Much of the activity in question has not been regulated. This is one type of activity among many that should be addressed but are not currently considered as crimes, despite being reckless and the cause of great inequality and deprivation, given the changes being made in public expenditure and so on. Deepening inequality will lead to even more crime and moneylaundering if the Government continues with its approach.

In a way, we are always trying to catch up with the latest initiatives by criminals to launder money without getting caught. We are introducing significant legislative measures to deal with criminals, but it is also important that we address something that we do not currently regard as a crime, including the lack of regulation of banks' day-to-day activities that brought the country to its knees.

I will quote from an article in The Times written by Sir Ken MacDonald QC that I read this morning. He is a member of the Matrix Chambers and was Britain’s Director of Public Prosecutions from 2003 to 2008. He spoke of how banks have not been regulated. He wrote:

If you mug someone in the street and you are caught, the chances are that you will go to prison. In recent years mugging someone out of their savings or their pension would probably earn you a yacht.

This is the type of country that we have allowed to flourish here. It is similar to what has occurred in Britain and elsewhere, so we are not the only ones to have allowed it. It is a European issue. We need Europe to regulate banks, so as that legitimate activities that were nevertheless reckless, endangered our economy and brought it to its knees are not permitted.

The Minister could take on board something else stated by Sir Ken MacDonald:

In Britain we had an additional burden: legislators who preferred criminal justice to be an auction of fake toughness, so long as the toughness was not too tough to design. So no one likes terrorists [this is relevant to the Bill]? Let's bring in lots of terror laws, the tougher the better. Let's lock up nasty people longer, and for longer before they are charged .... And they didn't want to tackle the more complex issues that really affect safety in people's lives. It was easier to throw increasingly illiberal sound bites at a shadowy and fearsome enemy.

Nothing was being done about financial speculation.

Deputy Dermot Ahern

It sounds a little like he was giving his own a soundbite. One would wonder what he was doing for those five years.

Deputy Joanna Tuffy

Perhaps it is a soundbite, but it is relevant. Maybe he has learned something that the Minister, who promotes an image of toughness on crime, should also learn. What about what has been going on? Sir Ken MacDonald stated: "In Britain, no one has any confidence that fraud in the banks will be prosecuted as crime". The same situation obtains in Ireland. The people on the street do not believe that anyone will be brought to justice for what transpired in the banks in recent years.

Deputy Dermot Ahern

One cannot bring people to court based on what the people on the street believe.

Deputy Joanna Tuffy

One cannot, but there is considerable wisdom in what they believe. The Minister reacts to much of it.

Deputy Dermot Ahern

Of course there is, but one cannot bring people to court because of it. The Deputy knows that.

Deputy Joanna Tuffy

Yes. As such, we need legislation to ensure that people do not get away with the types of activity that have been occurring in banks and financial institutions in recent years. This is the least that we should do. The Minister could play a significant role in this regard.

In terms of aims and motivation, there is a strong relationship between the world of organised crime and the world in which the activities I have mentioned are not crimes at all. I read the EU's organised crime threat assessment, a report Europol published earlier this year. One of its chapters is on moneylaundering and discusses how many of the proceeds of crime are turned into cash. The problem for criminals is that they want to be successful and many view themselves as business people. They want to be seen as being legitimate. Regarding cash, the report states: "They cannot make use of it in longer term strategies or extend the quality of their criminal lifestyle; nor can they improve their status in society or legitimise themselves with cash derived from criminal proceeds".

Elsewhere, the report discusses how moneylaundering is a key component of criminal activities. We can be sure that many of these criminals use our financial system despite our laws. Irrespective of which laws we have in place, they will always come up with more sophisticated ways to get around them or use loopholes. However, they want status and to be seen as legitimate, for which reason they launder money. They are also subject to the profit motive. Newspaper reports outline how they have the fantastic houses. Many live in Spain, for example, and have lives that people would envy. They want the type of lifestyle desired by many of our business people.

We should be wary of another issue raised in the report. Criminals will try to take advantage of our economic crisis. They will use the black market and, given the unemployment problem, irregular or undeclared labour. If the black market grows, there will be an impact on entrepreneurs who want to be legitimate and law-abiding citizens, but might become more open to colluding with organised criminals if they are in trouble. Inequality and alienation in local communities are also exploited to help criminals make a profit. For example, they exploit communities in which drug addiction is rife.

There is a considerable relationship between organised crime and the legitimate economy. The Minister needs to examine aspects of the latter that should be considered criminal, and the sooner the better. Our society needs to debate this issue. It should not be the case that the Minister or the Department of Finance will simply present a Bill at some point. It is possible that the Minister will deal with some of these issues. Our society needs to consider carefully how it wants to move forward in terms of banking regulation and which aspects of financial speculation should be criminalised. The Minister should consult before introducing a Bill. Interested parties could appear before the House's committees and Opposition Members could be heard.

Other countries have experienced economic crises and financial scandals and speculation, but they have learned and introduced tougher regulations. They have not been hit as hard by the current financial crisis. We must ensure that we put similar measures in place in our financial system.

According to the Europol report, one way to launder money was for organised criminals to invest in construction, real estate and land speculation. I do not know the Irish picture. If the Minister has any information in this respect, I would be interested in getting it. The report shows the interface between legitimate speculation and illegitimate activities. Ireland must examine this matter, as we can be sure that some of it was occurring in our country.

Some elements have been common, including the culture behind much of what transpired. I refer to the financial speculation, the lack of regulation and the idea that people should get really filthy rich. The Labour Party in Britain went along with that type of philosophy, and it was wrong.

There was an engine of greed and inequality, which promoted our land and financial speculation and which also promotes organised criminal activity, and that is one of the issues we need to address. I agree with the Minister that he should be tough on crime, but we also need to nip crime in the bud. It is a murky world. Those on whom crime has the worst impact are the ones most disadvantaged in the community, but it also thrives on that type of inequality. In terms of that same report from Europol, these people are linked with many abhorrent criminal activities. Deputy Charles Flanagan mentioned human and sex trafficking activities. Many of them use violence to control communities, to control their people, to dominate in the market. However, these people started out in local communities, which they exploit, which experience inequality and which have drug problems. They themselves were once children for whom there was a little hope and they ended up getting involved in this activity. I have no sympathy for them whatsoever and they should be dealt with toughly, but we need to stop, not only the demand for drugs but also people getting involved in criminal activity.

A report on inequality in Ireland was launched by ICTU yesterday. One of its findings was that the gap between those at the bottom and those at the top in terms of income inequality widened in the years 1987 to 2005, which, presumably, is as far as the report covered. I read the newspaper reports rather than the report itself. That gap widened in other countries as well, such as the United States and Britain. This did not happen in all countries because some countries reduced the gap in income inequality over those years.

There has been much research on the matter and much talk in Britain, and some here. Mr. Vincent Browne, the broadcaster, speaks often about a book in Britain entitled The Spirit Level: Why More Equal Societies Almost Always Do Better. Basically, the book looks at studies in developed countries and 30 US states over the past 30 years and compares them in terms of income equality and then looks at how they fare in terms of life expectancy, health, etc. One of the areas it looks at is how those societies fare in terms of combating drugs and crime. It found, for example, that people in the more unequal countries have higher death rates from drug abuse. Similarly, the countries with more inequality have more people in prison, higher rates of crime, more teenage pregnancies and more mental health difficulties, which is another issue related to crime.

If we want to do something about crime, apart from bringing in legislation we also need to deal with the issue of inequality. Much evidence on inequality is available as a result of substantial research. The evidence about drug abuse comes from the World Drug Report 2007. These are studies that have been carried out from numerous sources and which have been collated in the book to which I referred. If we want to deal with the issue of crime, from minor crime and zero tolerance right up to serious crime, one of the issues with which we need to deal and which the Minister needs to take on board is inequality in society. We need to ensure we bring about more income inequality in any measures, including public expenditure, taken by the Government from here on in. The Minister needs to ensure that the measures to combat drug abuse in communities are not impacted upon by the cuts. We need to keep up the funding for drugs task forces and for other measures which help deal with drug abuse. That is very important. Organised criminals thrive on the sale of drugs and when it comes down to the end of the chain, it affects people in local communities, such as the community I represent. I have seen them myself. When canvassing at certain shopping centres I try to avoid people who are selling drugs. It comes down to people on the ground and we need to do our best to stop the demand for drugs from people who live in local communities.

I will be dealing with this Bill on behalf of the Labour Party. I have not had enough opportunity to really go at length into the specifics of the Bill, but I am interested in the new provision about "politically exposed persons". What about "politically exposed persons" who live in the State? Are they covered already? Why are they not covered by this Bill? That is a matter we might explore on Committee Stage.

On gambling, I received correspondence from the private gaming clubs' representatives that the sector welcomes its inclusion in the Bill. This, in itself, is obviously welcome, but the Labour Party would have concerns about private gambling clubs. We are in tough economic times and some may try to use gambling as a way to get out of their financial problems, and the question of whether it is a good idea to legitimise this type of activity is one we need to discuss further on Committee Stage as well. I look forward to working with the Minister, his staff and the other Deputies on this issue.

Deputy Bernard J. Durkan

I am delighted to have an opportunity to speak on this legislation, which I have encouraged the Minister to bring to the House for many a year and which appears belatedly before us. I note there were other pressing issues, and there will be further pressing issues to distract ministerial attention from time to time.

I welcome the Bill. The Acting Chairman, Deputy O'Connor, and the Minister, Deputy Dermot Ahern, and Deputy Tuffy, know full well the kind of activities that have been taking place in this country over the past ten years which require this kind of legislation for a number of reasons — to protect the general public, to protect legitimate business interests in this jurisdiction and throughout Europe, to prevent the contamination of the entire financial services infrastructure from the activities of unscrupulous people who use every means at their disposal to achieve gains of a greater nature than they have already achieved, ill-gotten though they may well be, and to protect the general public from the threats and implication of threats that go with the kind of operations we have seen throughout this country for some years and which seem to be able to progress unimpeded.

One wonders where some groups, bodies or agencies get hold of the money to run their business, but it is easy nowadays. In today's world of high technology, it is extremely easy and effective to transfer large amounts of money from one corner of the globe to another, and to do so with such rapidity as to make it virtually impossible for any authority to track.

The Minister in his speech carefully set out the issues that confront society. I am not certain whether the Bill will be capable of dealing with the job facing it, particularly because of the magnitude of the task in hand. I note that in the aftermath of Lisbon II it should be easier and I hope that the institutions anticipated under Lisbon II become fully and forcefully effective.

The money laundering now taking place comes in many shapes and forms. It is big business and is significantly remunerative and tax-free. It is 100% profit-related in all cases. It is built on fear, terror and exploitation, and that is the way it continues. It is a huge industry. The various things to which previous speakers referred are valid. How effective will this be?

The drugs industry is a good example where those involved have to legitimise their activities by routing their finances through legitimate businesses. Legitimate businesses are effectively used as a front for these activities. In some cases, it is impossible to prove the existence of very substantial sums of money that can be transferred in a series of moves right across the globe. However, modern police methods are catching up and we hope that the degree of co-operation that is required between the EU member state police forces will be forthcoming because if that is not the case this legislation will not work.

Instances of large scale money laundering and protectionism have been brought to my attention. Threats of violence and intimidation are used to ensure that this kind of activity goes on. In the last few years, some so-called businessmen have been associated with doubtful financial transactions. This would raise the question as to how much we can depend on the information that we get from some groups and agencies.

I have no doubt this Bill will be effective against what may be termed the "small people". If a person applies for local authority housing, let us consider the volume of correspondence he or she must produce before he or she can even get on the list. That is where the Bill seems to have most effect, and I cannot understand why that should be the case. If students apply for higher education grants, we all know from our constituency clinics about the amount of correspondence with which they must deal. I met with somebody the other day who was applying for a grant and, while I appreciate that the identify of the person concerned must be verified, I have never come across a case where the level of scrutiny might be warranted. Yet, I have found many cases where there was no need for it at all. It was only effective in slowing down the administrative process. A little bit of common sense is no harm in order to ensure that the real work of this Bill is carried out effectively.

The enforcement of legislation is another issue. There is not much sense in having legislation on the Statute Book unless it is put into operation. Everybody rushes for the legislative book when something happens that should not have happened. Was there sufficient legislation in place to deal with the issue that arose? In this case I do not think that there was. This is a new Bill and its effectiveness will be dependent upon the degree to which it is enforced and the degree to which the police authorities in all the member states of the EU and elsewhere will co-operate.

Detection needs to become much more sophisticated. This can lead to the erosion of people's rights, something I would not like to see happen, but common sense can do much in these situations. We all know businesses that are completely legitimate, but we also wonder how other businesses continue to exist. The answer to such questions will concentrate the minds of people. If the Bill is to become effective against the worldwide travellers who launder and invest money, it will be down to the degree to which the individual member states across the EU and countries across the globe are prepared to get involved.

The Minister states in his speech:

The problem of money laundering has been with us for a very long time. What makes money laundering such an important issue in the modern world is the increasingly sophisticated nature of this kind of crime. That fact, allied with the increasing globalisation of both the financial and business worlds and the internationalisation of a great deal of criminal activity makes the crime of money laundering more prevalent.

That is very valid. The Minister went on to state:

I can see problems with the phrase "a person who knows or believes", because modern criminals use innocent people to carry out their crime. They use innocent couriers to carry out their crime. They particularly target people who are in financial need or who are financially embarrassed, and they will use them to convey or launder their money, or to do anything else that is required. They will do this in as large a scale as it takes to do the job.

The next part of the Minister's statement is the most important. He states:

I can assure the Minister that the threat of 12 months imprisonment or a fine of €5,000 is of no significance to people in that bracket. It could become an incentive. After all, if the value of the moneys to be laundered is sufficiently high, it would be good value to spend 12 months in prison and be fined €5,000.

Do we really believe a term of imprisonment of 12 to 14 years will deter somebody who has the opportunity to launder €10 million or €15 million or, as in many cases, considerably more? I do not regard this sentence as long enough to deter people from laundering such sums — it might even encourage them.

I am trying to emphasise that there seems to be a problem in Ireland with regard to how one should deal with serious crime. Serious crime requires serious sentencing. If a crime is proven beyond all reasonable doubt by the State, it should not fear increasing the penalty to the required level. The sentences in the United States have not abolished or prevented crime — nobody can — but they certainly increase the risks associated with it. It is not at all unusual for somebody in the United States to be imprisoned for life. A life sentence in that country means life. Sentences of multiples of 50 years are imposed in some cases. Recently, some characters involved in rogue financial dealings learned a harsh lesson in this regard.

While we may have constitutional requirements to comply with, it is high time we realised that if the financial reward is big enough, a deterrent of ten, 12 or 14 years in prison makes no difference. This is well recognised among those concerned. The Minister needs to examine this matter urgently. On Committee Stage, he should consider the prospect of increasing the sentences that apply. This applies all round.

Recently, a retired judge called for the return of the death penalty. I reject this completely. As a civilised society, we have long since gone past that. There is no sense in descending to the level of the criminal by taking a life for a life because this does not work any more, but I see no difficulty in ensuring individuals who have engaged in money laundering, drug smuggling or other criminal activity remain in prison for as long as they live. The quicker we realise that, the better.

In Ireland, the question always arises as to how much it costs to keep a person in prison. The answer is that I do not care, nor does society. If the wrong done to society is sufficiently serious, society must protect itself. There is no other approach and, therefore, I have no hesitation in saying the Minister should consider very carefully the urgent need to ensure that we have a really serious impact on organised crime and create as many disincentives as possible.

Recently, when I was comparing Irish sentencing to that in the United States, somebody said to me the sentences in the United States do not prevent crime. Of course they do not but, importantly, they certainly do not encourage it. For example, nobody can prevent murder. In many other countries, the sentences for murder are very much stiffer than they are here. While such sentences do not prevent the crime, they warn people that there is retribution and that it could be long and severe. We have, unfortunately, strayed from this concept.

I remember a discussion many years ago with a man imprisoned for taking somebody's life. He told me his doing so was not regarded as a serious crime. I would hate to think of what he believes now. The crime has become increasingly less serious. All deliberate crime has come to be regarded as less serious. I do not refer to manslaughter but to the crimes anticipated in the context of this legislation. I refer to crime that can do untold damage to society and leave a blotch on it and to crime that can blight families all over the world. All such crime must be tackled by each state through its institutions. If we do not do so, we will be weak. If society is weak in standing up to the threat of crime, it will suffer as a consequence.

I welcome the legislation. I and Members on this side of the House have called for it repeatedly over recent years. The Garda has done some good and very useful work recently but it and the Criminal Assets Bureau will be employed full-time in dealing with the kinds of issues that are likely to emerge on foot of financial transactions worldwide over the next five or ten years. Ireland and other countries deluded themselves by saying how wonderful and wealthy they were and by believing for a while that nobody would really have to work again. Reality has dawned. In order to protect society, it is essential that this legislation be enforced fully.

Deputy Seymour Crawford

I welcome the opportunity to say a few words on this Bill. As with the Minister, I come from a Border county whose residents were, for many years, extremely well aware of money laundering, cigarette and drug smuggling and all sorts of ways of raising money. It was impossible to find out how this money was used or lodged.

The Bill is being introduced because of European legislative requirements. I welcome this because, as an island and small country, we cannot deal with money laundering or any of the major crimes without the support and involvement of other countries and the structures of the European Union. The Bill is to consolidate all the State's anti-money-laundering legislation in a single statute. It increases the obligations on a wide range of legal persons, including credit and financial institutions, lawyers and accountants. This is crucial. The Bill gives the Garda the power to enter premises and deal with the circumstances that arise as advised.

Tax advisers and all sorts of other individuals are involved in the money market and it is important that they be encompassed by the legislation. I note from comments that have been made that car and boat dealers, jewellers, art dealers and others will be subject to monitoring because all sorts of enterprises are used by criminals to put money away for the future. I welcome the recent strong activities of the Garda, Customs and Excise and all of the relevant bodies and how they dealt with cigarette smuggling issues and other matters in recent times. Until we get those under control, we, as a nation, are losing a lot of taxation from which we should benefit.

Before contributing on the Bill I attended a meeting dealing with the tax differential between both sides of the Border and the massive outflow of goods that results from money leaving this country. Money laundering is an extremely serious matter. We have seen cases of people buying property abroad. At one time I was in an eastern European country on an Oireachtas trip and we ended the day in what seemed to be an Irish pub. However, it was clear to me that it was being used for other purposes. Those are the type of things that were happening. I hope that when it is enacted the Bill will ensure that justice is meted out to the people who are involved in such crime and that they are given proper sentences.

I agree with Deputy Durkan's point on the level of fines proposed in the Bill. I spoke recently to a small farmer who, as a result of an animal health problem, failed to comply with some regulations. He was not fined through a court process but a deduction of €11,000 was made in his payments in future years. I have come across many other farmers who were involved in infringements beyond their control and they lost all their payments for the years in question. In that context, we must revisit the imposition of a fine of €5,000 for what is, in effect, the sabotage of our nation.

The Minister referred to the seriousness of the issue and outlined that, on indictment, an offender who is found guilty could be jailed for up to 14 years, be fined or both. A presumption is made in the Bill that a person knew or believed that the property was the proceeds of criminal conduct or that it was probably the case. The difficulty in this situation is that we have to use the word "probably". There seems to be less effort to trace property than to pursue a person who does not pay an element of tax. There is no problem in following taxation right down the line. That has been evident in the past ten years in terms of amnesties and other issues. People have had to go back several years to prove their innocence; otherwise, they were considered guilty. Why is it that we seem to have difficulty dealing with persons who are laundering money from illegal endeavours? That provision must be strengthened.

I welcome the Minister's reference to the fact that he is considering Committee Stage amendments following the representations made to him since the Bill was published in July. I am not as legally educated as my colleague, Deputy Charles Flanagan, but I understand that it is vital for the Minister to go into the committee process with an open mind and that he take into account the representations that have been made to him.

This is critical legislation. It reminds me somewhat of the Bill required to transpose the nitrates directive. It took us 12 years to put that through the system and in the end the negotiations were held literally in court rather than in private. We did not get the best deal on that occasion. We seem to have a habit of leaving things until the last minute. Once again, it is clear from the information available that the Bill has antagonised some of our European colleagues. The European Commission is to take legal action against member states suspected of violating European law. It is obvious that we have not dealt with the matter as we should have. I hope we get it through the system with reasonable speed so that we meet our European obligations.

We should not forget that without Europe we would be in a very poor situation. As one who went out publicly and campaigned for the Lisbon treaty on both occasions, I get annoyed when I see the lax attitude we adopt to dealing with issues coming from Europe. Without the support of the European Central Bank structure, we would not be able to get money at the current rate of interest. During the previous period of economic difficulty, we had our own currency and interest rates climbed to 23%. I paid 23% for long-term money. We have obligations to try to address matters in a timely fashion in line with requests from Europe. That does not mean we have to bow down to Europe, but it is evident that our Ministers have agreed with European powers that the Bill should be enacted. We should be better at dealing with the issues that we are requested to address.

When one considers what has happened in the past, such as money laundering and other criminal activity, it is clear that it is conducted on an international basis. The Minister referred to the ease of electronic banking transfers. It is important to remember that 30 years or 40 years ago there was no problem dealing with Libya and other areas. People could get what they wanted and find a way to do it. Crime crosses borders and oceans. It is important to work with our European counterparts and others to ensure that the tightest possible legislation is in place to curtail and minimise money laundering and such activities in so far as that is possible. Having lived in a border region for all my life — I will not say how long that is — I am not so stupid to think we can ever curtail all such activity. It is our duty as legislators to ensure that the law is as tight as possible. It is also our duty to ensure the personnel are in place to implement it.

From a farming point of view, a Bill was brought through this House by a former Minister for Agriculture, former Deputy Michael O'Kennedy, to deal with the meat and bonemeal issue. I believe that was in 1989 but, unfortunately, the personnel were not put in place to police that area and the provender industry continued using it. It was not until bovine spongiform encephalopathy, BSE, was discovered and a great deal of damage done that it realised that the legislation was not implemented.

We are good at doing that in this country. We bring in legislation and make a big fuss about the fact that we are doing the right thing. As far as speed cameras are concerned, we brought in legislation and the only areas speed cameras were ever introduced, and it worked, was in the north east. I believe there were three speed cameras moved from box to box but that did not happen in other areas. Six years later I believe the provision is now being put in place. When this law is enacted the Minister should ensure that we have the personnel in place to implement it.

We recently learned that many of our senior and possibly our best gardaí are taking early retirement because of their concerns about what might happen to their pension lump sums. We must ensure those people are replaced and that the Border area in particular has a sufficient number of gardaí to ensure everything is done to minimise crime.

I say that for another reason also. We had a bomb defused in Forkhill and another in Donegal town. Other criminal activities have taken place that put our country in danger. It is important that the people who are engaged in those activities have their funds taken from them by whatever means, be it by addressing the cigarette smuggling problem or whatever.

I will never forget visiting the home of the late SDLP councillor, John Fee, who was left for dead at the bottom of his own avenue. Fortunately, he survived. He told me he knew a lot of information about the people who did that to him but he did not hold anything against them because they were sent to do it and they had to do it. He also told me that the people who were sent to do that to him will try to find other means, even though there is peace in the country, to fund their lifestyle. Poor John has since passed away but the situation is still relevant in that there are people whose only interest is in having a high lifestyle by whatever means. The CAB and other groups have done a wonderful job in many areas. I support them. I support this legislation and I hope that whatever amendments are necessary to make it as workable as possible will be dealt with on Committee Stage and that the personnel will be provided to ensure the objectives of the Bill are implemented, not just at Irish level but at European level and worldwide.

Deputy Michael D. Higgins

I welcome the opportunity of speaking in the debate on this legislation, which is welcome. It must be put in context. It is important that we are bringing forward this legislation and it is even more important that we use this debate as an opportunity to declare an intention to be part of further initiatives at the level of the European Union and globally.

One of the greatest failures of the international financial system is that it has chosen to be silent on the issue of what one might call the transmission of dirty money in the world. By that I mean that demands have been made in different parts of the planet to deal with the issue of hot money, as it is sometimes called, or dirty money as I call it, but we find that people in the banking system internationally will use the resources of law, as they have in many different countries, to try to invoke principles of secrecy for accounts and so forth. This arose in a case in the United States, for example, until the Supreme Court finally struck down objections to laws which facilitated some equivalent measures in the United States.

I welcome this legislation but what does the literature tell us about money laundering? This Bill refers, for example, to the proceeds of drugs and of terrorist activity. The literature tells us that so-called hot money or dirty money, which is the phrase I will use, and money that is the proceeds of drugs and different illegal arms exports and sales travel are on the same track, so to speak. If there is a lesson in that it is that the drugs barons realise they can transfer the proceeds into a form of tax evasion, which usually begins as tax avoidance. A deadly set of transitions, therefore, are all travelling on the same track. The failure to address tax avoidance and evasion creates the infrastructure for the more visible forms of the proceeds of drugs to be changed, even in regard to the arms trade.

The literature also tells us something else that is significant, which forms the background to this legislation. This legislation is to give effect to the transposition of the third EU money laundering and terrorist financing directive into Irish law and also relates to the United Nations convention against transnational organised crime and Article 6 thereof. It tells us also that the movement of the money to which I have referred is finding a home more frequently in Europe in recent years than elsewhere.

For example, the hot money is calculated on the basis of the US dollar-euro exchange rate, which has made it attractive for those wishing to operate in Europe. I therefore welcome that part of the Bill that refers to activities, both national and international. It is my hope that the international side will be addressed.

I was recently looking at a book on this matter by Raymond Baker, entitled Capitalism’s Achilles Heel, which advocates how capitalism can save itself. The Achilles’ heel to which it refers is corruption. When one reads that book, and I have looked at those figures that have come out, one finds a list of different things that happen.

The area about which I have been concerned for some time is the cost of dirty money to some of the poorest states in the world. It is interesting to look at foreign affairs and the development area. How is it that one could have, for example, an increase in oil production and oil sales out of the so-called liberated Russian economy post-1988 and at the same time have the average income deteriorating? The answer is corruption.

Equally, one might ask why Nigeria does not move from the bottom six countries in regard to the international indicators while at the same time there is an export of more than 2 million barrels of oil a day. The answer is the same.

It is fascinating how the international banking system has facilitated dirty money. If we take the example of Nigeria in the period between 1993 and 1998, during the rule of Sani Abacha, one of its most notorious dictators, who was educated in Sandhurst and where he got a reference that said he should not be promoted above colonel, he made himself a general and took over the running of the Nigerian economy. In his case, when the Swiss Government was approached and when Credit Suisse was eventually fined, it was found that he had 120 accounts in Switzerland, with a minimum of $670 million, with $650 million in Luxembourg and a further $100 million in Liechtenstein. His son would later be arrested with suitcases containing $100 million.

There is an abhorrent tendency, however, to view this as an African style of behaviour. It is not, because it was the Swiss banks that were facilitating this. The same customer was able to use 23 banks in London to lodge $1.3 billion. In Mexico, Raúl Salinas was able to move $300 million into the western banking system, while in Indonesia the Suharto family moved between $15 billion and $35 billion. The Marcos family moved between $5 billion and $10 billion while in more recent times, it is calculated that Fujimori, during his period in office in Peru, moved $600 million.

The interesting side of that is that all this money found a safe home in the western banking system. It includes institutions that would later become notorious when they turned to damaging their own citizens, such as Citibank and others.

Researchers working in the area of international corruption have made another finding. The new technology that enabled money to be transferred in real time has been used principally by two groups, those interested in hot money and the drug industry. State systems have been trying to catch up with this technology that allows this money to flush through the world with disastrous consequences.

It is calculated that letters that are sent out which ask people to provide their bank details in return for 20% or 30% of accounts lodged elsewhere secure returns of about $1 billion per year. A person would be asked to put up a few thousand dollars to get details. Many people have gone to Nigeria, sometimes without visas, ending up losing what they put up, but having to bribe their way out of the country.

It gives me no pleasure to say this but when I looked into it I saw a need for an integrated approach through the Department of Finance and the nomination of directors to the World Bank and the International Monetary Fund to be able drive on Ireland's reputation. That is why I welcome this legislation at the level of the European Union and internationally.

This is the point of the structure of international capitalism in the post-technological era in which we live. Many people celebrated the 20th anniversary of what they refer to as the fall of the Berlin Wall and the collapse of the communist system. What has happened since 1989? The Russian mafia has taken over the resources of that country, operating initially as Manuel Castells work shows, by selling off the natural resources of the country to those who later became known as the oligarchs. It later moved to a position where resources were sold to their owners, an abuse of transfer pricing. Recently there has been a huge amount of money skimmed off the top. All of this is related.

What does this mean? The Minister has a real difficulty. We are right to bring in this legislation, but it is only a small part of a larger problem which has clear interconnection. Let us pause and think about what this tells us. It tells us about Bernie Madoff, the international banking system, international regulation and the refusal of the World Bank and the International Monetary Fund to deal systematically with this issue.

These institutions I have just mentioned, known as the Bretton Woods institutions, were at a particular time responsible to the Secretary General of the United Nations. If they had stayed within the remit of an institution responsible to the global community, anti-corruption measures could have been driven on globally. There are no global measures and only limited continental measures. Within the greater blocs, there are many multinational companies that are either before the courts or awaiting to be fined for their deals.

It is entirely wrong to look at corruption from one side only. For every bribe taken on the continent of Africa, there is an executive from a western company handling the bribe. To their credit, there have been fines in the US courts for people handing out more than $100 million for contracts. People can find some of the details of these cases in Raymond Baker's Capitalism’s Achilles Heel, published by John Wiley and Sons in 2005.

There are other issues. Often when corrupt money flows out of a country it comes back as foreign direct investment. Looking in detail at the investment that took place in Russia, Nigeria or other countries, this money often went out first in dubious circumstances before coming back under a different cloak. The international development bodies are unable to say what is clean foreign direct investment and what is recycled corrupt money.

What does the west do? The International Monetary Fund and the World Bank lay down how poor countries must reschedule their debt repayments and accept conditions because the institutions regard the debts, loans and borrowings of the dictators who robbed their own people as debts that must be serviced by those who came after them. This is immoral but a topic on which people stay extraordinarily quiet. In this regard it speaks for itself given the different developing countries that were allegedly modelled on western development. I have said enough about Nigeria, but Indonesia would be similar, where the Suharto family ended up in 1992 with 16.6% of the entire market economy. There is a question political personages here, throughout the European Union and internationally must ask themselves, namely, are we helpless in the face of all of this and are our actions in any way adequate? Do we really want to change all of this? One should start with what we could examine, namely, the contaminated debt or the debt that should never be paid by citizens, who will be paying it at the cost of investment in health, education, clean water and so on, as is happening in many African countries. They are being required to continue to pay the debts ratcheted up by these people I have mentioned.

It is calculated that in Russia, in 1988-89, the cost of what was looted out of the country was around €20 billion, and that it settled at about €20 billion a year for the following five years. In defining the consequences and the participants in such exploits, we need to realise that anyone who touches this money, whether to facilitate banking institutions or as regards borrowings and investment — the people who provide the professional shelters for its recycling — has to be hit.

I want to be very positive about this legislation. It could be a small step towards reputational recovery. This is what we should do now. We should just move on and try to establish a reputation for Ireland as being strongly in favour of an accountable system. People should not just rely on my description of all of this. I have not said anything that Joseph Stiglitz has not said about the country I described, in relation to Nigeria. I am trying to be very fair.

Switzerland is very slow to open up its system to any type of scrutiny. It should be put under relentless pressure, particularly by the European Union. As a person who often criticises some aspects of the foreign policy of the United States, I believe there have been prosecutions there. There is the 1970 Racketeer Influenced and Corrupt Organisations Act and the Treasury Department amended legislation under the Money Laundering Control Act 1986. There is the Money Laundering Prosecutions Improvements Act 1988 and then there is the deep form financial task force set up in 1989.

It would be a better world, in terms of the 8% of GDP that has been lost by the continent of Africa and the real investment needed to create jobs and employment on the planet generally, if there was an international effort aimed at identifying hot money and dirty money and their consequences, through, for example, the Tobin tax, as suggested such a long time ago. It is also very urgent that we examine what is genuine debt and what is contaminated debt as regards the national financial institutions.

I pay tribute to the Minister for introducing this legislation, but I strongly urge him to drive the thinking that must be at its core onto the Department of Finance. That Department, in turn, should present that thinking to the board of the IMF and to the World Bank, which are disgracefully silent on this issue.

Minister for Justice, Equality and Law Reform (Deputy Dermot Ahern)

I thank the Deputies for their remarks and for their positive contributions. Some were not so positive, in that people were complaining about the delay in introducing the legislation, with the implicit suggestion that we did not have this type of legislation on the Statute Book already. We have very robust legislation. This Bill is attempting to transpose the latest and most modern legislation encapsulated in the EU directive.

It is a significant legislative proposal. I agree with all the comments made by Deputies as regards the whole issue of laundering, generally, particularly money laundering. We must have ever-tighter controls because of the globalisation of financial transactions around the world.

A number of Deputies mentioned the delay in bringing forward the legislation. Deputy Charles Flanagan has castigated us on the basis that the UK brought it forward sooner. The UK brought it forward by regulation, not by primary legislation. The Deputy would complain if we brought in something of this import by regulation. Given that it was primary legislation, we had to interact with the practitioners, the various designated bodies and, obviously, that took up considerable time.

A number of Deputes wanted to know why gaming clubs were involved. As the House knows, I have been looking at the whole issue of gaming and we have a number of substantial reports. These private members' clubs are locations where large amounts of money could be put through, and it is only right and proper that they should be among the designated bodies, and regulated. As regards the type of facilities to be regulated under the legislation, there is of course the wider issue of gaming and gambling to be considered. This will be done in other legislation, but given that this Bill was coming to its final throes of publication, I believed we should take the opportunity to include the private gaming clubs in that respect.

Deputy Charles Flanagan

What does the Minister mean when he talks about the "final throes of publication"? The Bill is just on Second Stage.

Deputy Dermot Ahern

When I was coming to finally publish it, within the Department we were also looking at the issue of gaming and gambling, and obviously that legislation will be somewhat longer, particularly because of the lack of co-operation, with Fine Gael Members speaking out of both sides of their mouth, and because of the lack of co-operation by the Labour Party. I decided I had to introduce legislation and——

Deputy Charles Flanagan

I believe that it should be recorded — as it will be — that the Minister is talking about co-operation.

Deputy Dermot Ahern

That is what I inherited, but unfortunately when the Labour Party tried to suggest I was in favour of fixed odds betting terminals, Deputy Charles Flanagan decided to jump ship as well, much to the annoyance of some of his own members, one of whom was even going to be the chairperson.

Deputy Charles Flanagan

I was never on that ship, flying under rogue colours.

Deputy Dermot Ahern

Ask the Deputy who came to me and encouraged me to get on with it.

Deputy Charles Flanagan

No, we were never on that ship.

Deputy Dermot Ahern

The Garda has been constantly investigating the issue of money laundering and I am told that approximately 14,000 suspicious transactions were looked at last year. Some people have raised the issue of the politically exposed person. It does not apply to anyone residing in Ireland, but in any event the directive mandates us to implement this. The concept comes from the directive and will apply if there is some public knowledge of a person's status as regards being involved in money laundering.

Deputies Crawford and Durkan mentioned the issue of fines and sentencing. The point in relation to the provision dealing with the fact that money might be the proceeds of criminal activity is that it increases the likelihood of conviction for the offence because a person cannot say he or she was not sure the money was the proceeds of crime. A crime should be committed if the money was probably the result of the proceeds. I believe this to be a highly important provision.

Deputy Higgins gave a number of examples of political figures who made large bank deposits. I refer to the Bill's provisions regarding politically exposed persons who reside abroad. Under the Bill, the type of individuals mentioned by the Deputy would have enhanced customer diligence applied to them. The onus would be on the institution to make substantial due diligence when dealing with a transaction coming from such people. The beneficial owner of the money would have to be identified and, if necessary, a report made to the Garda, were there a suspicion that it was the proceeds of crime.

This is a detailed Bill, which I greatly welcome. I am glad to have the opportunity to bring it before the House. I hope it can pass through Committee Stage and through the House as quickly as possible. I appreciate the general remarks made by Members on the other side of the House.

Question put and agreed to.

Dáil Éireann debate - Thursday, 19 Nov 2009

Criminal Justice (Money Laundering and Terrorist Financing) Bill 2009: Second Stage.

Dáil Éireann debate -
Thursday, 19 Nov 2009