Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 5 Oct 2022

Politically Exposed Persons: Discussion

Chairman

We will commence our discussion on politically exposed persons with the Departments of Finance and Justice.

Before we do so, I wish to acknowledge that we agreed the minutes of the joint committee meeting of Wednesday, 21 September 2022, at an earlier private meeting.

The format for today's meeting will be that we will have a statement from the Department of Justice after which we can get into a discussion on the general topic of politically exposed persons. I welcome our witnesses, Ms Sinéad Reynolds, Ms Brenda McVeigh and Mr. Brendan Bruen. They are all very welcome. Who wishes to kick off?

Mr. Brendan Bruen

I will start. I thank the committee for its invitation. I am joined by my colleagues, Mr. Brendan McVeigh and Ms Sinéad Reynolds from the Department of Finance.

International standards in respect of anti-money laundering are set and monitored by the Financial Action Task Force, FATF. FATF is an intergovernmental body with 39 members, including Ireland, and a large number of observers and associate members. Over 200 countries commit to implementing its standards.

EU standards generally reflect those of FATF and are currently set out in the fourth anti-money laundering directive of 2015, as updated by the fifth directive in 2018. Ireland is bound by these directives and implements them through the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010. That Act has been amended several times, most recently in 2021.

A politically exposed person, PEP, is defined by FATF as "an individual who is or has been entrusted with a prominent public function". FATF states:

Due to their position and influence, it is recognised that many PEPs are in positions that potentially can be abused for the purpose of committing money laundering (ML) offences and related predicate offences, including corruption and bribery, as well as conducting activity related to terrorist financing.

FATF emphasises that PEP status is intended to apply higher vigilance rather than suggesting that individuals are involved in suspicious activity.

FATF first issued requirements covering foreign PEPs and their family members and close associates in 2003. In 2012 FATF expanded these requirements to domestic PEPs in line with the United Nations Convention against Corruption.

EU requirements for PEPs are now set out in Articles 20 to 23 of the fourth directive, which broadened the application of the EU regime to include domestic PEPs. It came into force in Ireland in 2018. The definition of "politically exposed person" in the directive specifies several categories of PEP, including, for example, Heads of State, members of parliament, members of the governing bodies of political parties, supreme court judges, ambassadors and others. This definition is open: while the categories stated must be included, other persons may also be included on the basis of their holding a prominent public function.

Relevant entities - for example, financial institutions - are then obliged, first, to have in place appropriate procedures to determine whether a customer or the beneficial owner of the customer is a PEP and, second, to apply enhanced due diligence to business relationships with PEPs, including obtaining senior management approval for establishing or continuing business relationships; taking adequate measures to establish the source of wealth and source of funds involved in relationships or transactions; and conducting enhanced ongoing monitoring of those business relationships. These measures also apply to family members or persons known to be close associates of politically exposed persons.

The Central Bank of Ireland publishes guidance on PEPs for financial institutions. This guidance is available on the Central Bank's website. Notably, it provides:

Firms should take adequate measures to establish the source of wealth and source of funds which are to be used in the business relationship in order to satisfy themselves that they do not handle the proceeds of corruption or other criminal activity.

The measures which Firms should take to establish a PEP's source of wealth and source of funds will depend on the degree of risk associated with the business relationship. Firms should verify the source of wealth and the source of funds based on reliable and independent data, documents or information.

When determining the source of wealth and source of funds, Firms should, at least consider:

- The activities that have generated the total net worth of the customer ...; and

- The origin and the means of transfer for funds that are involved in the transaction.

In July 2021 the European Commission published a detailed legislative proposal to replace the fourth directive. That proposal includes replacing the existing directive-based system with a combination of directives and regulations, with a "single rulebook" implemented via a regulation which would be directly applicable across the European Union. That rulebook would largely supersede the national provisions I have set out, which are likely to be repealed as part of the transposition. A new European Union authority, the anti-money laundering authority, AMLA, would lead AML regulation across the bloc. The package remains under negotiation and is handled at ECOFIN. Colleagues in the Department of Finance lead on those negotiations and can address questions the committee may have about the broader package. While the package itself is very substantial and will significantly affect how AML regulation is implemented, the specific requirements set out on PEPs in Articles 32 to 36 of the proposed regulation, as published, are broadly similar to those currently in place. AMLA is tasked with issuing guidelines on assessing the levels of risk associated with particular categories of politically exposed persons, their family members or persons known to be close associates.

The regulation also reaffirms that the requirements relating to PEPs and their family members and close associates are of a preventative, not criminal, nature and should not be interpreted as stigmatising PEPs as being involved in criminal activity. Refusing a business relationship with a person simply on the basis of his or her being identified as a PEP would clearly be contrary to the spirit of the regime.

I am conscious that, with the time available, I have only scratched the surface. I am, of course, happy to answer members' queries in more detail.

Deputy Jim O'Callaghan

I thank our guests for coming before the committee. In this era of transparency, I should announce at the outset that I, like everyone else on this committee, am a politically exposed person. That might be taken for granted but it is worth saying it.

May I ask Mr. Bruen, has the fifth directive been fully transposed into Irish law yet?

Mr. Brendan Bruen

"Yes" is the short answer. There are several elements that have different timelines associated with them. The primary transposition was through the 2021 amending Act. A separate statutory instrument in respect of the beneficial ownership trusts was introduced in April 2021. The Act was commenced in April 2021 as well. Then there have been further measures in respect of the Central Bank account registry, which has been put in place since.

Deputy Jim O'Callaghan

I think I am correct in saying that the fifth directive really just amends parts of the fourth directive and that the fourth directive sets out the substance of what is required. Is that correct?

Mr. Brendan Bruen

That is correct. The fourth directive is the primary instrument on this. That will change with the sixth package, which will replace it.

Deputy Jim O'Callaghan

Looking at our primary law, it is in the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 that the fourth directive has been transposed into Irish law. That is where most of the legislation is contained.

Mr. Brendan Bruen

Yes. It is slightly tricky in that, while the fourth directive replaced the third directive, the third directive was transposed by the 2010 Act and that, in order to transpose the fourth directive, we did not replace the 2010 Act but, rather, amended it. The 2010 Act is therefore the primary legislation on PEPs.

Deputy Jim O'Callaghan

In the Irish legislation, we define "politically exposed person" by saying three categories of person are covered: a specified official, a member of the administrative management or supervisory body of a State-owned enterprise and any individual performing prescribed functions. Is that correct? Then we go on to define what a specified official is.

Mr. Brendan Bruen

Yes.

Deputy Jim O'Callaghan

Are senior civil servants regarded as politically exposed persons?

Mr. Brendan Bruen

The definition is somewhat difficult in that regard in that there is provision for guidance to be issued in respect of other functions. Clarification of that has been under discussion. It is important to say that the status of performing a prominent public function does not involve a closed definition. Somebody may be interpreted as holding a public function even though not within those categories.

As a matter of practice at present, I understand that senior civil servants, certainly Secretaries General and deputy Secretaries General, would be interpreted as being a prominent public function that would be subject to politically-exposed persons, PEPs, requirements.

Deputy Jim O'Callaghan

If you look at the definition that is relevant to that question, the only way they would come under the legislation is if they fitted within the definition of "a member of the administrative management or supervisory body of a State-owned enterprise". As an example, not for any specific reasons, look at something like An Bord Pleanála, would the people in charge or who are members of An Bord Pleanála's board be viewed as PEPs?

Mr. Brendan Bruen

I would be reluctant to comment on a specific question on that, but in the reading of the Act, I would-----

Deputy Jim O'Callaghan

I can understand Mr. Bruen's reticence because, just looking at it, it is difficult to determine who is covered by it. We know that a Member of Parliament is covered by it because it expressly states so, but when it says a "member of the administrative management or supervisory body of a State-owned enterprise", I do not know how that law is being implemented. Is anyone issuing guidelines in respect of it? Who is ultimately responsible for supervising this legislation?

Mr. Brendan Bruen

This comes in at a couple of different layers. In terms of what is or what is not a prominent public function, there is provision in the Act for guidance to be issued. I think the intention would be that guidance will be issued on that. I do no think it will change or take anybody out of it, but it will clarify the application in respect of-----

Deputy Jim O'Callaghan

Who will issue that guidance?

Mr. Brendan Bruen

That will be from the Department of Justice. There is provision within section 37(12) of the Act for the Minister for Justice, in consultation with Minister for Finance, to issue guidance in respect of the scope of prominent public function.

Deputy Jim O'Callaghan

This legislation has been here since 2018. I would have thought it is important for financial institutions and for State bodies to be aware of whether the people who are on the boards or are managing them are PEPs. It seems to me that there is no certainty as to whether they are or they are not.

Mr. Brendan Bruen

In practice - colleagues in the Department of Finance may have comments on this - individual institutions are expected to have risk-based procedures in place. It is not necessarily a black and white question of whether someone is a PEP and therefore enhanced due diligence should be applied. It is rather a case that if a person is holding a position which is, by its nature, high risk, then there is an obligation on a bank to take appropriate and proportionate steps in response to that. We can become very focused on whether someone falls into a PEP bracket or not. It is more that, for each client relationship across all of money laundering, not just in respect of PEPs, a risk-based approach should be taken. The risk associated with the person should then be identified and further due diligence measures taken, if necessary.

On the guidance on this, provision 37(12) was actually added in the 2021 legislation. We have been conscious that, soon after that legislation was enacted, the sixth package was published. We are conscious of not putting in place something that will not last so that if, as is highly likely, the Irish rule book is replaced by a cross-European rule book, we want to have something in position that is consistent with the direction of travel. It is something we have been conscious of the European developments on. The worst thing we could do would be to wade into definitions, guidance and practices on a firm-by-firm basis for perhaps two or three years before it all changes again on a European level.

Deputy Jim O'Callaghan

Ultimately, it is for a financial institution to get its own legal advice to assess whether or not its customers come within the definition of a PEP.

Mr. Brendan Bruen

Yes, I would agree. I would also say that it is that broader process of risk evaluation that should happen for all customers. It is not a black and white case of somebody being in one case and having no requirements and in another case having very onerous requirements. A risk-based approach should be taken to what the relationship is and what documentary requirements are necessary. Ms McVeigh may want to come in.

Ms Brenda McVeigh

What underpins all asset and liability management, ALM, considerations is the appropriateness for each institution to take its own risk-based approach and decide for itself its own exposure to financial irregularities, if one wanted to call it that. Specifically, the European Commission has said that no member state should be overly prescriptive because, as Mr. Bruen said, goal posts change and each institution has to be able to set its own risk appetite. Just this morning, in an experts group meeting, the Commission let us all know that the 27 member states have now come back with their own lists, guidelines and views on what a PEP is. The Commission had hoped to do that job earlier as part of the new package and rule book. They had hoped to consolidate lists across member states to provide pan-European guidance on what a PEP is, but it has not done it yet. The Commission told us this morning that it is now in the process of doing that. It has admitted that it has been a very difficult process. Different member states have different views about what a PEP is and what an associate of a PEP is, but it is there now. The next step will be for the Commission to analyse that and then, under the directives, namely Article 28, I think, endorse it and give its view on what a PEP is, based on the feedback from member states. The Commission hopes to issue a consolidated list - in the context of guidelines - about what a PEP will be by the end of the year. There will be a pan-EU basis for it.

Deputy Jim O'Callaghan

Under the directive, a spouse or somebody who in effect is your spouse is covered; a child is covered and the spouse of a child is covered. Has all of that been transposed into Irish law? There is an ability, I think, under the legislation for the Minister to define "immediate family member". Has that been defined?

Mr. Brendan Bruen

I do not believe there has been any specific definition on that.

Deputy Jim O'Callaghan

So a statutory instrument could be introduced by the Minister, giving effect to that.

Mr. Brendan Bruen

In respect of "immediate family member", I believe so, I would have to check-----

Deputy Jim O'Callaghan

If you look at subsection (11) of the section that contains the definition of PEPs, it says "the Minister may prescribe a class of family member of a politically-exposed person, for the purposes of paragraph (g) of the definition of “immediate family member” ... only if the Minister is satisfied that it would be appropriate for the provisions of this sections to be applied..." No such instrument has been-----

Ms Brenda McVeigh

I do not think it would be timely at the moment of the Minister for Justice to do that, because the new package is under negotiation at the moment and there is an anticipation that we will have the new package and the new rule book in place in the next few months. The new package does contain a definition of what family members-----

Deputy Jim O'Callaghan

I am not criticising the Minister for Justice, I am just saying that since 2018, no such statutory instrument has been signed by the Minister.

Mr. Brendan Bruen

No. I would say that would be expanding the definition "immediate family remember", rather than defining it. It could only add to the provisions in Paragraphs (a)-(f).

Deputy Jim O'Callaghan

Looking at the research document produced by the Oireachtas Library and Research Service, I have not had any personal difficulties in terms of being a PEP, but one of the issues raised by some individuals is that their children who are involved in banking arrangements or looking for loans have been questioned as to whether or not they are the child of a PEP. I would have thought, from the perspective of those children, that it would be fairer if there was certainly brought to this, so that people know when they are becoming customers of a bank that they have to fill out a specific form as to whether or not they are the child of a PEP which, under law, they are required to be categorised as. Would Mr. Bruen agree with that?

Mr. Brendan Bruen

I very much take the point that as much clarity in the area as is possible would be desirable. When it comes to family members, there is, necessarily, a different risk categorisation. While there may be a good reason that family members are covered in terms of due diligence, that it is not perhaps on the same automatic basis that it would otherwise be.

Deputy Jim O'Callaghan

We do not engage as much with members of the senior Civil Service as the Department would, but we hear stories from politicians. Is it the case that the children of senior civil servants are subjected to the same rules?

Ms Brenda McVeigh

We have direct experience of it.

Mr. Brendan Bruen

I am contacted on a regular basis to query its application.

Deputy Jim O'Callaghan

It is interesting that it obviously operates across the board, it is not just somebody persecuting politicians.

On the obligations of the financial institution in respect of a PEP, they are set out in Article 20-24, I think, of the fourth directive, which may be amended. In effect, they have to have procedures in place so they can identify a PEP, is that correct? Then, they have to have what they refer to as "enhanced ongoing monitoring of their business relationships".

What is the purpose here? Is it to try to see whether there is something suspicious in the financial arrangements of a PEP?

Ms Brenda McVeigh

It is part of each institution's requirements under risk prevention measures. Yes, it has to continuously review its business relationship. It is not entitled to end the business relationship but it has to keep it under review to establish for itself, on the basis of a risk-based approach, whether that person is an emerging risk to that institution or the financial system generally.

Deputy Jim O'Callaghan

What happens if a financial institution sees a highly unusual lodgement of money into the account of a PEP?

Ms Brenda McVeigh

It is obliged to check the source of that wealth.

Mr. Brendan Bruen

Potentially, it is also obliged to report it as a suspicious transaction.

Deputy Jim O'Callaghan

Would it report it to An Garda Síochána?

Mr. Brendan Bruen

It would report it to FIU Ireland which is part of An Garda Síochána.

Deputy Jim O'Callaghan

Are we any aware of any such reports?

Mr. Brendan Bruen

A significant number of reports are made to FIU Ireland each year. I would not be privy to a breakdown of that.

Deputy Jim O'Callaghan

Put it this way, is Mr. Bruen aware of any prosecutions under it or that have arisen from it?

Mr. Brendan Bruen

In respect of a PEP-----

Deputy Jim O'Callaghan

In respect of a complaint made by a financial institution about a PEP.

Ms Brenda McVeigh

No, we are not privy to that information.

Deputy Jim O'Callaghan

If something unusual is in the account of a person who is a PEP, procedures are in place to report that to FIU and to An Garda Síochána and for that to be investigated.

Ms Brenda McVeigh

There is an obligation to do it.

Mr. Brendan Bruen

Yes, there is an obligation to it, but the obligation is broader than simply transfers to a PEP. In any circumstance, where a transaction has been identified as suspicious on the risk base, it must be reported.

Deputy Mairéad Farrell

It is interesting to hear about this. I used to work in banking and we had to do a course in PEP and anti-money laundering every year, so we could continue working in the bank. It is very important. I know some people have other opinions, but I am one of those people who is in favour of keeping a keen eye on politically exposed persons. It is very important.

I have three questions about how things are dealt with in different ways. Obviously, Bitcoin and other cryptocurrencies provide a kind of anonymised way of making payments. They inhabit a weird space where they are not money, in the sense of being issued by a central authority, but they can be used for making certain transactions and sometime that can also be for illicit purposes. They can also be exchanged into other financial assets. How do we deal with the risk of money laundering when it comes to the likes of cryptocurrencies, specifically regarding PEPs?

Mr. Brendan Bruen

That is a finance question.

Deputy Mairéad Farrell

They are all finance questions. I do not know anything about the legal side.

Ms Brenda McVeigh

Everybody is aware of the alleged higher risk for money laundering in terrorist financing that there is in relation to crypto transfers. A regulation, called the markets in crypto assets, MiCA, regulation, is in trilogues at the moment. It is about to be adopted. It sets out a supervisory regime for the transfer of crypto assets. There is no question about it - we have raised this repeatedly at EU level and we have regular discussions with the bank about it - but it is virtually impossible to screen adequately for crypto transfers. By its very nature crytpo is not supposed to indicate that anything is particularly secretive, but it is meant to indicate that it is confidential. That is the distinction that those who trade in crypto try to make. That means that by its nature it is difficult to regulate. The MiCA regulation will try to bring some regulatory and supervisory framework for those types of transfers. The question of how exactly we can bring some level of transparency to crypto comes up daily in the EU negotiations, although it flies in the face of what crypto is about.

Deputy Mairéad Farrell

It is interesting. Many things in finance can be quite opaque but specifically that. It must be fascinating to be involved in that and in trying to figure out how it could be done. Obviously those who engage with cryptocurrency might not find that, but as someone who does not, I think it is very interesting.

Another opaque question I will ask involves a hypothetical scenario. If someone wanted to corrupt the political system or was trying to corrupt me and decided to do a direct transfer to me, it would obviously trigger some suspicion. What if they placed the funds in a shell company owned by a legal trust, of which I, as a politician, was a beneficiary? I understand that trusts are required to register with the Central Register of Beneficial Ownership of Trusts, CRBOT, but if they did not, how would one be able to out?

Ms Brenda McVeigh

We have flagged that as a flaw in the system in relation to the beneficial ownership, BO, framework. We have had multiple negotiations and discussions over the past two years with the Commission about trusts and about the fact that, by their very nature, it is difficult to get to the beneficial ownership of trusts. Also in a common law country like Ireland, a trust can be established tomorrow morning in the Dáil. If someone sets up a tea club in the Dáil, that is a trust. Never mind shell companies; it is something as simple at that. To try to understand who is the beneficial owner of that trust is difficult. Anyone who benefits from that tea club is a beneficial owner. Many trusts are established in Ireland, and in common law countries in particular, unknown to the trustees at that, it is a significant fly in the ointment of the BO framework. The Commission has become more sympathetic to our position on that in the past six months of the negotiations under the new package, but it has not been rectified. I am not sure how it can be fixed in a common law country where trusts are so widely used.

Mr. Brendan Bruen

It is important to say there are two other elements. The trust and company service providers, the people who manage it on an industrial scale, are subject to their own regulatory obligation, as is the legal profession. Obligations exists about knowing the customer. As Ms McVeigh said, a trust can be set up very easily and almost unintentionally but where it is falling into a pattern, or into the sort of numbers that would be involved in large-scale corruption, money laundering, etc., other people would almost inevitably be involved in those situations. It touches on the crypto question. Sometimes the underlying transactions cannot be regulated but the companies which are facilitating them can be. That all arises in the area of the commercial asset service provider provisions in the 2021 Act and how we deal with trust and company service providers and with the legal profession.

Ms Brenda McVeigh

An issue we have raised repeatedly relates to the section 110s, though not exclusively. With any company, the use of nominee shareholders and nominee directors circumvents transparency of beneficial ownership. Under company law and governance rules, the veil cannot be easily lifted in relation to those individuals, but certainly FATF, and perhaps the EU package, is bringing forward proposals to address that. The section 110s are quite substantial users of nominee arrangements. It is good to be aware of what the problems are but the only way to deal with them is on that pan-EU basis because-----

Deputy Mairéad Farrell

Of course.

Ms Brenda McVeigh

Therefore, it takes much consensus across Europe to get there, but we are aware of it and we are raising these concerns about fixing the flaws in the framework.

Deputy Mairéad Farrell

I have a particular interest in section 110s and I was quite interested to see the review announced in the budget last week. I am interested to see how that will develop. The whole concept of trustees and beneficial owners is that a trustee does not have to be the beneficial owner. The trustee is more an agent. If registering a trustee rather than a beneficial owner, is that something that could be tightened up?

Ms Brenda McVeigh

Ms Reynolds might know more about this because she has been directly involved in the discussions on trusts. When the Commission first came forward with proposals for the definition of a beneficial owner, we found that problematic because it deemed the trustee to be the beneficial owner. We had to point this out as it was not very sophisticated in its knowledge of common law systems and how trusts work. It had deemed trustees to be beneficial owners and we had to point out that was not possible. The definition of a beneficial owner is under discussion at the moment in the package. We have managed to get quite a lot of amendments made to the draft package to make how trusts work clearer. That will also include the definition of beneficial owners of trusts. That is being addressed at the moment.

Ms Sinéad Reynolds

It has been a long road trying to gain, I suppose, understanding because since the UK left we are the only common law member state left in the EU so we can be seen as being a bit niche and civil law jurisdictions just do not understand what a trust is and how it functions. We have had a lot of discussions with the EU about what a beneficial owner is and that it is not just the beneficiary of a trust but it is also who controls, because control is also a form of ownership. We have been looking at that very closely but in terms of trusts, we have explained what a trustee is. In terms of nominees, one of the current proposals being discussed is that perhaps if it is a nominee who is acting for a trust, that would be noted in the trust's register. At least we will know how much activity is being carried out by a nominee rather than by a beneficiary or a trustee.

The aim of this new package is to gain clarity on exactly who owns what not just in a trust but across all entities. In terms of trusts, yes, there will be, we hope, a lot more clarity but also practical clarity. It will not be legislation for legislation's sake it will make a difference and get to the bottom of who benefits from what. As Ms McVeigh said, it is very difficult. One has to balance this right under corporate law to use a nominee. We cannot lift that veil so one has to get creative to see how one can get around it. Trusts have been a sticky issue the whole way through this package but it looks likely that we will settle on a practical, enforceable arrangement.

Deputy Mairéad Farrell

That is fantastic. I thank the Ms Reynolds. That is very interesting.

Chairman

Can I just go back to the beginning on this? I have is no difficulty with the initiatives being taken around anti-money laundering. That is not what I am questioning. I want to understand where all of this stuff comes from. Who established the Financial Action Task Force?

Ms Brenda McVeigh

I think it was a G7 initiative.

Chairman

G7, was it?

Ms Brenda McVeigh

It might have been G10, but I think it was G7.

Chairman

Ireland bought into that.

Ms Brenda McVeigh

We became a member probably two to three years after. Many other EU member states would like to be a member but cannot be one. It was quite a big deal to get membership.

Chairman

What sort of timeframe was that?

Ms Brenda McVeigh

It was in the late 1990s.

Ms Sinéad Reynolds

I think we joined in 1991.

Ms Brenda McVeigh

It was in the 1990s anyway.

Chairman

Was it 1991?

Ms Sinéad Reynolds

It was around that time.

Chairman

It was the mid-1990s. Some 200 countries are committed to adopting whatever comes out of that task force.

Ms Brenda McVeigh

Yes.

Chairman

While the task force is an intergovernmental body made up of 39 members, what qualifies you to be a member? Who is a member? Is the Minister a member? Is it the Minister's nominee a member?

Ms Brenda McVeigh

It is the country that is a member. Senior officials tend to heads delegation and members of delegation. Ireland's delegation includes the Department of Finance, the Department of Justice, the Financial Intelligence Unit, FIU, and the Central Bank of Ireland. I think that Revenue was a delegate at one point. I am not sure whether it is now. Those would be-----

Chairman

It is the Department of Finance, the Department of Justice-----

Ms Brenda McVeigh

The FIU.

Chairman

What is that?

Ms Brenda McVeigh

The Financial Intelligence Unit in An Garda Síochána.

Chairman

Yes.

Ms Brenda McVeigh

The Central Bank of Ireland.

Chairman

They are all officials. There is no political membership.

Ms Brenda McVeigh

No. Although the Minister for Finance attends the spring meetings of the Financial Action Task Force, FATF, in Washington DC.

Chairman

That is just a once-off.

Ms Brenda McVeigh

There is a ministerial plenary, certainly once a year and maybe twice a year. I think it is once a year. The Minister for Finance attends that. Decisions are taken at ministerial level in relation to FATF. However, the day-to-day-----

Chairman

The task force meets and it is made up of the officials Ms McVeigh has just called out.

Ms Brenda McVeigh

Yes, in terms of Ireland but some delegations send ministers to FATF.

Chairman

Okay. Some attend.

Ms Brenda McVeigh

Some.

Chairman

They discuss the issues of the day and the solutions to problems as it were-----

Ms Brenda McVeigh

Yes.

Chairman

-----and they make recommendations.

Ms Brenda McVeigh

Exactly, they make recommendations. They are not a legislative body and they cannot compel any country to adopt the standards but it is highly persuasive because it is considered the global standards setter.

Chairman

I understand that.

Ms Brenda McVeigh

Yes.

Chairman

Once it makes the recommendations, it is making them to the 39 member states but also to 200 other countries. Anyone else who wants the standard picks that standard.

Ms Brenda McVeigh

Yes.

Chairman

How is it then decided on?

Ms Brenda McVeigh

It is decided-----

Chairman

Is a set of recommendations agreed by the task force?

Ms Brenda McVeigh

Yes.

Chairman

Who signs off on those? Is there a political sign-off on those?

Ms Brenda McVeigh

Yes. There is a plenary twice a year, so FATF will put forward proposals for recommendation at plenary. Then they are decided by the member states there. For instance, in Ireland's case, we have to approach the Minister for Finance twice a year to get a mandate in relation to the FATF proposals.

Chairman

In attending sessions twice a year, is that where ministers would accept or reject a particular part of a recommendation?

Ms Brenda McVeigh

No. As I said, there is also a separate ministerial meeting. We would mostly talk to EU delegations and we know they all get ministerial clearance for anything being proposed at FATF, or certainly we do.

Chairman

How does one get that? Does one sit down with the Minister?

Ms Brenda McVeigh

Yes.

Chairman

One goes through the recommendations.

Ms Brenda McVeigh

We usually set it out in a submission for the Minister.

Chairman

That is what would happen. The Minister would get that recommendation-----

Ms Brenda McVeigh

Yes.

Chairman

-----and he or she would go through it and would then-----

Ms Brenda McVeigh

Give us a mandate.

Chairman

-----approve it, or not.

Ms Brenda McVeigh

Yes.

Chairman

Was there ever a time that the Minister did not approve one?

Ms Brenda McVeigh

Since I joined four years ago, and I am head of delegation to FATF, I cannot think of anything that the Minister has not approved as yet. Most of them are not very controversial measures and it is rare at plenary that I have ever come across a time where there was a lack of consensus. The most recent one has been the issue of Russia and about the blacklist-----

Chairman

Yes. We will stick to the politically exposed persons, PEPs.

Ms Brenda McVeigh

Okay.

Chairman

The recommendations go back to the Minister who would approve them. What goes on at these plenary sessions for ministers?

Ms Brenda McVeigh

Again, they are not necessarily for ministers they are for heads of delegation plus the delegates. Some ministers attend depending on the country and who the country sends. Decisions are taken at those in relation to FATF recommendations, which would also include-----

Chairman

In relation to what, sorry?

Ms Brenda McVeigh

It would be in relation to FATF recommendations or new proposals. A lot of the time what happens at plenary is that a particular country would be getting assessed on its anti-money laundering, AML, framework and members would be asked to decide based on FATF's findings and on peer assessment findings whether or not we all agree that a country has or has not met deficiencies in its framework. A large part of what plenary does is look at a countries' AML framework.

Chairman

Has the Minister for Finance, Deputy Donohoe, attended all of those plenary sessions?

Ms Brenda McVeigh

No, he has attended the spring meetings in Washington DC of the ministerial plenary, which is a specific meeting. He has attended that. Those are done at the same time as the International Monetary Fund, IMF, and World Bank meetings.

Chairman

We are talking about two plenaries a year.

Ms Brenda McVeigh

Yes.

Chairman

Is the plenary in Washington DC?

Ms Brenda McVeigh

No, it is in Paris. There is one plenary every year to two years in the president's country. The presidency of FATF would change-----

Chairman

What I am trying to clarify here is that the two standing plenaries per year are attended occasionally by ministers and, in particular, heads of delegations, such as Ms McVeigh.

Ms Brenda McVeigh

Yes.

Chairman

Decisions are taken at those plenaries.

Ms Brenda McVeigh

Yes.

Chairman

What happens at the Washington DC one?

Ms Brenda McVeigh

A large part-----

Chairman

Is that a separate one once a year?

Ms Brenda McVeigh

It is once a year. What happens at that is that generally the FATF strategy for the next two to five years, or whatever it may be, is set out and ministers are asked to decide on it.

Chairman

They are not dealing with the micro end of it but are dealing with more the macro.

Ms Brenda McVeigh

Certainly at those meetings, they are dealing with the macro end. They are dealing with the strategy. For instance, at the moment, the USA wants us to look at anti-corruption measures which is something broader than just AML. A decision around that would have been taken, at least in principle, at the last ministerial meeting, which was last April. That will be coming up again for decision at the plenary, based on what the ministers said in relation to the strategy meetings.

Chairman

Is that plenary attended by the Minister separate from the two Ms McVeigh described?

Ms Brenda McVeigh

Yes.

Chairman

There are three plenaries.

Ms Brenda McVeigh

I think they call it the ministerial meeting. I am just saying that one could call it a plenary-----

Chairman

There is a ministerial meeting once a year.

Ms Brenda McVeigh

Yes, in Washington DC.

Chairman

That is generally attended by ministers.

Ms Brenda McVeigh

Yes. That is always attended by ministers.

Chairman

I am sorry. Is it attended by our Minister?

Ms Brenda McVeigh

Yes. Our Minister goes to that. It is at the same time as the IMF and World Bank meetings.

Chairman

Okay.

Take me through how we move from there to an EU directive.

Ms Brenda McVeigh

As FATF is considered the global standard-setter on AML matters the EU would certainly take account of any recommendations or findings of FATF when it is developing a directive. The directive is always developed in what are called the experts' group meetings and that is where, as I said, draft proposals are put together. There is no question but that FATF is highly persuasive on that. Those proposals, in the same way as any directive is put together, are considered in the experts' group. By the time a final draft package is put together you get into Council working party meetings, so the Council has an involvement at that point before and then you go to trilogues of the Parliament as well and then the directive, whatever the final consensus is, is adopted.

Chairman

Okay, so the directive is arrived at in that way. When does it get approved by elected Members of Parliament?

Ms Brenda McVeigh

In the trilogues.

Chairman

In the trilogues.

Ms Brenda McVeigh

Yes. That is where they have their input. They can have input before that of course but they have input then, yes.

Chairman

Where is the input before that?

Ms Brenda McVeigh

Again, I have been at experts' group meetings where Members of Parliament have turned up.

Chairman

Okay. It is at experts' group meetings. Then the Members of Parliament vote on these at some stage.

Ms Brenda McVeigh

Yes.

Chairman

Okay. That is fine. I just wanted to get to where we are at with all this stuff.

Then there is the legislation, which we will take as a given. These directives are then transposed into legislation and that is how we arrived at the PEPs.

Ms Brenda McVeigh

Yes.

Chairman

When you are a PEP, then comes the definition Deputy Jim O'Callaghan asked for. The question arose in some of these meetings - do not ask me which layer it came up at - but certain civil servants were excluded from being considered as PEPs. It is in the minutes of those meetings. It was civil servants who made the decision around that. If I wanted to found out how that arose, why it arose and why they were excluded, where would I get that answer? Are the minutes of all these various plenary sessions and experts' group meetings available, so one can trace back originally how the suggestion originated, how it became a directive and how the content of that directive was decided upon?

Ms Brenda McVeigh

Obviously, the experts' group meetings are run by the European Commission and while it certainly produces records of the discussions of those meetings I am not sure whether they are made publicly available. I do not know but I could check and see.

Chairman

Will you check?

Ms Brenda McVeigh

I will check, yes.

Chairman

Are the minutes of these important plenary sessions and of the task force itself available?

Ms Brenda McVeigh

Some of the plenary sessions are closed sessions so I do not think those will be available. Some of them are public as journalists sit in on part of those meetings as well. I have to assume the closed sessions would not be available.

Chairman

Why are there closed sessions?

Ms Brenda McVeigh

Those are FATF's rules. FATF is a body that follows OECD rules. It is a body that is, if you like, hosted by the OECD and the OECD is, I assume, the body that-----

Chairman

Why have secret meetings?

Ms Brenda McVeigh

As I said, some of these meetings are in closed session.

Chairman

Ms McVeigh is just giving me information here.

Ms Brenda McVeigh

Yes, I know. The Chairman is asking me the why and I am saying I am not quite sure what the why is.

Chairman

I am going through the Ladybird version of all this so I can understand and those who are interested in the topic can understand. It appears to me there is an involvement of elected public representatives, be they ministers or Members of the European Parliament, at a high level but at the level many of these recommendations come from, there is very little political input. By political input I mean that sometimes when you are sitting around the table with officials and politicians you tend to be able to find an area the officials have perhaps overlooked or maybe one the politicians do not understand and out of the conversation comes clarity.

Ms Brenda McVeigh

Yes.

Chairman

That brings me to my concern. When you have an EU directive being transposed it is in the fog of this House and it gets transposed. Where it all comes from nobody knows, believe it or not, in this House. I will not say no one but there are quite a number of people, including myself, who would like to get back to the origin of this idea. I would like to understand how it arrives at a point where it is being transposed without that much scrutiny in this House.

Ms Brenda McVeigh

On that, with the development of a directive you have got 27 member states sitting around trying to reach consensus. If you look back at how a directive is developed, there is always going to be compromise in that. It is not always going to be what is necessarily in Ireland's best interests. There is going to be that when it comes to transposition. The only time transposition comes into play anyway is with a directive and the PEPs will be in a regulation, actually, so there will be no discretion with it. There is flexibility with the transposition of a directive, as I am sure the Chairman knows. There might be something that sets out why a given member state, including Ireland, would transpose in a certain way but as I said, that is a negotiation itself in the development of the directive itself. I can only speak from Ireland's point of view and from my time being involved in this, but there may be something particularly controversial we think Ireland is going to have to get into a big compromise on, like for instance when we were pushing very hard back with the Commission in development of the trusts beneficial ownership framework. We pushed extremely hard at the highest levels of the Commission to get something in place there that would suit Ireland. We certainly would speak to the Minister and set out very clearly for them why we think we need to do this but the Minister takes the decision if we are going to go back into any kind of dispute, let us call it, with other member states or with the Commission on those provisions.

Chairman

Okay. Maybe the best thing to do is get to the issues within all of this now that I know it is dealt with in the main by senior civil servants at European level. I would say there is little political input and I am going to find that out with a bit of research.

Ms Brenda McVeigh

Okay.

Chairman

That is my view. It is not a criticism of Ms McVeigh.

Ms Brenda McVeigh

I know; I accept that.

Chairman

I am just amazed we have arrived at this point in relation to politically-exposed persons. I accept I am a politically-exposed person. It should be that senior civil servants, right down maybe to middle management in the Civil Service and the chief executives of certain agencies and local authorities are politically-exposed persons.

Ms Brenda McVeigh

I might point out one thing on that. I was speaking to my colleague about this just before we came in. Ireland is a very small country and because the framework for PEPs also includes associates of PEPs, when the Chairman talks about middle management in the Civil Service, they are going to be an associate of a PEP. In a small country like this, this is going to be something that affects absolutely everybody.

Chairman

That is what I am coming to.

Ms Brenda McVeigh

Yes.

Chairman

The question then that is put to me as a member of this committee, by colleagues in the Houses, is whether it is right that the sons, daughters and family members are all treated as having equal status as a PEP. I have had Members of the Houses come to me to say their staff, their children have gone for loans and mortgages in the normal practice of day-to-day life and once it is discovered they are a PEP, they are then put through a different approval process.

They feel that is highly invasive to their children's lives and I can understand that. Other Members have come to me to say that in transferring money from a regular account into a current account, the transaction is often held up because the financial institution is trying to get in touch with the PEP. There is a clear question as to where they got the money but it might be part of their salary being transferred to their current account. While they are waiting for that to happen, particularly in these times of financial pressures, their direct debits may be stopped and all sorts of things may happen.

The consequences of the actions taken by civil servants and politicians in regard to the politically exposed person issue trickle down to family members and people who do not even consider themselves associates of a PEP. It is causing an awful lot of difficulty for families. It may be a civil servant whose son or daughter applies for a mortgage and suddenly has to fill out another 20 pages. There is also the grey area, which Deputy Jim O'Callaghan referred to, whereby there is not enough definition of what a PEP is, what the Central Bank should do or how it should be interpreted down the line at the coalface. There are consequences of this for Ireland and, as Ms McVeigh rightly said, this is a small country and we all will be PEPs. It is strangling the ability of ordinary family members going about their lives in a normal, standard way, without feeling they are some sort of criminal or that there is some doubt about their character.

I accept why Ms McVeigh made the point she did - it was made for perfectly legitimate reasons - but we should not drag all those people into this, where they do not want to be. They do not want to be near politics. They have a regular life, and it has been irregularised by virtue of the fact they are impacted on by this type of legislation. It is my concern that, in some way, they should be separate. I am talking about people who have absolutely no worries. They are not concerned about anything and they just want to get on with their life. They probably despise the fact a member of their family is a politician and would like to distance themselves a little bit from it. That is a fact in Irish life. Those family members will then say, "Look at what you got me into here; I have another 20 pages to fill out." Surely at ministerial level or high Civil Service level, there has to be an injection of common sense into the thought process on this before we all get strangled in something unintentionally, but that is what is happening.

Ms Brenda McVeigh

Originally, this was a directive but it will become a regulation. Insofar as these issues are there, they are coming to the fore now. I have sat in EU meetings where every member state has raised the issue of family members and associates, what constitutes both those things and how far we should go. This issue is not just local to Ireland; all member states are feeling the pain of this. The consensus seems to be that in a balance of interests, family members and associates have to be included. My sense of it, although it is only my sense, is that means that enhanced due diligence, which is what we are talking about here, is going to become more the norm. It will not just be experienced by, for instance, as the Chairman said, potentially the child of a politician. I think it will become more the norm for everybody.

Chairman

The message, therefore, is that if we think it is bad now, it is going to get worse.

Ms Brenda McVeigh

I think it is possible. I think fingers have been burned.

Chairman

Ms McVeigh is at the centre of it now. I am not holding her to account, but we have to be straight with people.

Ms Brenda McVeigh

I am trying to be straight. As I said, we are still in the negotiating phase and all member states are feeling this pain. Fingers have been so badly burned, by various money laundering scandals and the collapse of the financial system several years ago, that the risk appetite is very low. I can speak only about financial institutions but this applies across the board and is not just about banks. The risk appetite is now so low, and banks have to take their own decisions in regard to the customers and business relationships they will take on, that they will not take a lot of risk on it.

Chairman

My point is that the Department is making these decisions.

Ms Brenda McVeigh

No, I am not making these decisions-----

Chairman

I refer not to Ms McVeigh but-----

Ms Brenda McVeigh

I know, but I am saying it is a pan-European decision.

Chairman

That is fine, but just because it is pan-European and just because there is consensus on this issue does not mean it is right.

Ms Brenda McVeigh

I am not saying it is right but a directive-----

Chairman

Who is arguing that case?

Ms Brenda McVeigh

A directive, a regulation or a FATF recommendation, which is highly persuasive, as I keep saying, as is a FATF standard, all are arrived at on the basis of compromise and then consensus. It is never going to suit everybody around the table.

Chairman

Who is going to stand up for decency in Irish politics and in normal family life?

Ms Brenda McVeigh

I can say that, personally, I have done it and I believe colleagues with me have done it, including those in the Department of Justice. We have absolutely raised all these types of concerns in those negotiations. Again, on a pan-EU basis, we have got to get to the point of compromise. All member states are feeling this.

Chairman

No regulation or legislation will force a vulture fund to come before us as a finance committee to discuss all the issues vulture funds are imposing on Irish people, such as repossessing homes and so on. On the other side of this, there is all the legislation we are discussing, which can be simply imposed in member states without due consideration for the honesty of family members who are caught up in this. I would prefer if the EU directive stated that everyone is in this and outlined how we are going to proceed. I do not wish to be categorised - I say this to our guest from the Department of Justice - under the Criminal Justice (Money Laundering and Terrorism Financing) (Amendment) Act 2010. It should be taken out of that and imposed directly and rigidly on politicians, but we should be told it is about that. I should not be linked to that legislation. I am not a terrorist and I do not launder money.

I am only outlining what has been said to me by Members of this House. Others are quite afraid to say it for fear it might be interpreted as them having concerns. Some members of this committee are sitting around the table and I am sure the other members are listening to the debate in their rooms, and I can explain why they are listening. They are afraid to say it themselves in case they are misrepresented. Therefore, because of the way this whole saga has been set up, it is back to officials saying they will not accept the consensus and that, perhaps, politicians should be rigidly examined and scrutinised. I accept all that - in fact, I would want it - but I do not believe it should extend to my family members, and there are others who feel the same.

Is a drug dealer a politically exposed person? He or she would have the wherewithal to buy political favouritism.

Ms Brenda McVeigh

That clearly depends on who the drug dealer is.

Chairman

That is my point. Officials know my son and daughter but they do not know the drug dealer. It is weighted in such a way that makes it very strange for those who come under the legislation or the EU directive to accept it. I do not accept it. I accept the principle of what our guests are trying to do but I do not accept the way this is being addressed.

I am asking you as the officials who are central to this within the EU - and I am taking it up politically with the Minister - to look at this or give voice to the concern of honest individuals who are in parliaments everywhere. This is a further indication to those who cynically look at politicians and say they must be up to something because they are being dealt with under the money laundering and terrorist financing Act. The Department official said earlier that it is not meant to do that. This, however, is the consequence and this is what happens.

I have been a practising politician for a long time. I am annoyed with the EU and the way it is doing this. I am annoyed with our own MEPs because when I put it to them they said that they did not vote for it, when actually they did. They did not even know that they did. The sad thing about it is how all of these different EU directives find their way into Irish legislation without the due diligence of public representatives. I not blaming the officials but I am just interested in this whole position. I recall a very senior politician taking me to task in this House over what I had said about how politically exposed persons were being treated. He told me I was wrong. In fact, not only was I right, but it has since been compounded by other missiles that come in our direction from the European Union on this issue. As I said, I will take it up politically. These are the reasons the departmental officials are here - not to hold them to account, but simply for me to get to where this began, how it is all coming into operation and why it is like this.

I saw an article recently from a particular part of the financial sector that was giving its interpretation of what a politically exposed person is and what should be done. If I were to boil it down, I would say that the article said to be careful, to treat all of them with suspicion and, if they are politically exposed persons, to examine them at every quarter and make sure they are okay. When one goes into one's local credit union for a loan, it is not dealt with by the credit committee - it is dealt with by the board. One does not have to fill out one sheet; one must fill out 20 sheets. This is the consequence of the decisions that are being made over there. I want to catch the baddies just as much as the officials who are present do. I want to take the risk out of the financial institutions just as much as they do. I want to see those institutions scrutinised, perhaps a lot more than the officials do. I want to see them put in their place. At the same time, I do not believe that those of us who represent the public should be treated like this. I do not believe that family members should have to bear the consequences of their family member being a politically exposed person, a civil servant or whatever it might be. We have to be careful about these things. I am delighted that the officials are here before the committee.

Deputy Bernard J. Durkan

I agree entirely with the Chairman. I was one of the first people in this House to take issue with this directive. Other colleagues at the time said they did not know about this directive. They did not know about it, but it is there. I find it unfair because those who fall into this category, such as politicians and their families and associates, are treated more stringently and aggressively than a person who is not deemed to be politically exposed although he or she may be interested in politics as well. What kind of politics can one be associated with without being accused of being politically exposed? Are there any such politics? I assume the answer is "No".

I presume that the financial institutions, as the Chairman has said, have a lot of control now and by comparison the political institutions do not have as much. As time follows, the political institutions are on a losing game and the financial institutions are gaining. I do not accept that and I will always fight against it, as the Chairman has done. I opposed it from the beginning. There are people who did not know they were voting in favour of it. It is a weakness of the European Union that legislation can be introduced in this fashion without some discussion beforehand and without some way of seeing if it complies with our Constitution. The basis of our Constitution is that everybody is innocent until proven guilty. In this particular case, however, all of those who are politically exposed are potentially guilty and must prove their innocence. This is in stark variation with our Constitution. I believe this must be dealt with at a much higher level.

I acknowledge that the officials have said that the European courts can deal with this and have dealt with this, and that they have dealt with a lot of other extreme cases also. It would appear that a citizen of this State who happens to be a public representative will be under suspicion no matter what happens - the Chairman has referred to this, quite correctly - and a person who is a relative, a friend or an associate of a public representative is on to something as well. That kind of allegation has often been made around the House, as we know, when one party or another wants to land a slur on somebody else. The matter under discussion today, however, is in the real world. To presume that we are potentially guilty of something is, to my mind, a violation of our rights and a handing over of citizens' rights to financial institutions. I do not need to be encouraged to talk about financial institutions because, like the Chairman, I have engaged with and opposed many of them. Some of them are good to deal with and some of them are not. Some of them are secretive. Some of them ignore public representatives, some of them challenge public representatives, and some of them clearly indicate that they do not give a damn about public representatives. They are their own bosses, and they are quite happy in that position.

Chairman

Is there a question, Deputy?

Deputy Bernard J. Durkan

I will be happy to hear a response to my outburst. It is not something I oppose lightly. I opposed it from the beginning. Family members opposed it too. They feel that they should not be accused because somebody in a high vaulted tower accuses me, for example. I do not encourage and I do not involve myself in any kind of financial manipulation. If anyone wants to accuse me of that, let them come forward or leave it.

On the question, I accept what the officials are saying with regard to the reasons for it. There are reasons for everything and there are ways and means of dealing with issues. Like the Chairman, I do not happen to agree with the application of this particular rule as it is, just as I did not agree with the GDPR. I opposed that from the beginning on the basis that I was an elected public representative, elected by the people in a way that does not apply in most other EU countries, which is the single transferable vote. This does not require me getting permission from anybody to rise on their behalf or against them. There is a distinct difference in the way governments and people look at this in other countries. In other countries there are people who hold public office who are never elected anywhere. They could be associates of anything. They were never elected anywhere by anybody. They now have the same powers that we have. By "we", I mean elected public representatives. They do not have to admit anything, they do not have to do anything, and they just serve their time. Some of them get into some funny scrapes from time to time. Do not forget, however, that they were never elected.

In the heel of the hunt I would like more of an explanation as to why it is thought that politicians have to be treated in a different way as politically exposed. Lots of other people are politically exposed by virtue of whom they associate with one way or another. Nobody has applied any kind of restriction on their behaviour as has been the case with politicians in this country. I am willing to hear from anybody

Ms Brenda McVeigh

I can only repeat what I have said and I do not want to irritate anybody with some of these repetitions and with what my colleague from the Department of Justice has said. There is no insinuation of guilt in respect of being deemed a PEP. It is about preventative measures; that is number one. I feel the pain because I hear this even from colleagues. I have been lucky that I have not had to experience it yet. I have not had to do anything with my bank in quite a while other than day-to-day business, but I do hear from colleagues who are experiencing this pain so I do get it. I also hear from EU colleagues that this is a pain felt everywhere. There has been consensus across the EU that this is necessary to protect the integrity of the financial system and, indeed, the broader economies of member states. The Deputy has inferred several times maybe that directives are reached in a somewhat obscure way but they are not. I have said repeatedly, and I have also said it in relation to FATF. We get mandates from the elected Minister regarding any controversial measures that are going into directives, and we are open to scrutiny by the Parliament here to come in and discuss anything in a draft directive or draft package of any nature. Ultimately, it is elected representatives in the European Parliament who sign off on these directives, who signed off on the previous five AML directives, and who will be involved in the sign-off for the new package and new rule book, which is both directives and regulations. We deal with parliamentarians in Europe who are constantly asking what is this or that. Commissioner McGuinness is very hands-on because with the Commission seat she holds she has a very strong interest in what is being developed in this package. It would not be factual to say that elected representatives are not effectively the sign-off and the ultimate authority as to what goes into a directive at EU level.

Chairman

Except that they do not seem to know that.

Deputy Bernard J. Durkan

The European Parliament has new powers.

Ms Brenda McVeigh

I cannot answer for what they do or do not know, but I can say they get very well briefed. They have their advisers, they have to do the sign-off and they have to decide for themselves what their own due diligence is in signing off on a draft directive. I cannot dictate that to them.

Chairman

Can I ask Ms McVeigh about the single rule book?

Ms Brenda McVeigh

Yes.

Chairman

Will that be signed off?

Ms Brenda McVeigh

Yes.

Chairman

What stage is that at?

Ms Brenda McVeigh

As I said they hope to get it finished under the current Czech Presidency of the EU, but I think we are getting a bit late in the day for that. It probably will get signed off either during this or the next Presidency, which is the Swedes.

Chairman

Is it months of months?

Ms Brenda McVeigh

I would say months.

Chairman

That rule book must almost be prepared then.

Ms Brenda McVeigh

Yes, and it will be in the form of a directive and a regulation. The regulation will take direct effect as the Chairman knows. The directive will then have to be transposed.

Chairman

Is it possible to get a copy of that rule book?

Ms Brenda McVeigh

Yes.

Ms Sinéad Reynolds

It was published in July 2021, when the package was published.

Chairman

It has been amended since. I am talking about the final version of it.

Ms Brenda McVeigh

I mean that is the ongoing negotiation. It gets amended all of the time.

Chairman

When will the final version be signed off?

Ms Sinéad Reynolds

When it is agreed after trilogue stage by MEPs, the Commission and national experts. That is the EU process.

Chairman

I have just found that quote from Mr. Bruen: "Refusing a business relationship with a person simply on the basis of them being a PEP is clearly contrary to the spirit of the regime." There are Members of the Dáil who have highlighted that particular aspect of this to me, and have said that when they were approached to invest in a company and went about doing it, there was no doubt created over them except that they were stopped for further scrutiny and, therefore, could not reach the deadlines for investing. Afterwards their colleagues asked them what the story was with their interest and they had to explain how they had just found out they were a politically exposed person. One of the secretaries in Leinster House, and it was not known until it happened to her, rightly told all of her colleagues that they are all politically exposed persons, and she was treated poorly by the bank. I do not think that is in the spirit of this directive, but yet that is what is happening.

Mr. Brendan Bruen

I completely understand the point. There is nothing in the directive or the 2010 Act that provides a basis for a bank or another designated person to refuse to do a transaction based on somebody being a PEP. That is very well established.

Chairman

Does Mr. Bruen understand what I am saying?

Mr. Brendan Bruen

About the practical implication of a delay.

Chairman

It delays the legitimate process.

Mr. Brendan Bruen

Yes.

Chairman

Then it creates doubt over their character.

Mr. Brendan Bruen

The challenge at the coal face, as the Chairman said, is whether standards are being applied properly or due diligence is taking place quickly enough, or the information being required is disproportionate. Those are all live questions that each customer has to deal with.

Chairman

Another live question relates to financial institutions that are extremely reluctant to have anything to do with those who are described as PEPs. They would prefer if they did not open an account with them. Maybe I am wrong, but I think Deputy Durkan raised that issue at a previous meeting.

Ms Brenda McVeigh

I get what the Chairman is saying. There have been noises. We have heard about that, but we have no evidence of that. I spoke with the Central Bank before I came today, and they are telling me that only one institution so far, which they have not named as we should not know that, has so far had pushback with one customer regarding the enhanced due diligence measures that bank has requested and put in place for that particular customer who, I understand, was a so-called PEP. That is as much as we are hearing. We are hearing of aggravation and irritation that this new regime is in place, but there has not been any significant pushback according to the Central Bank in relation to financial institutions.

Chairman

The financial institutions do not want you if you are a PEP. That is a fact.

Ms Brenda McVeigh

I am taking the Chairman's word if he is saying that to me. I am simply saying-----

Chairman

Colleagues around the Houses have come to me because both Deputy Durkan and I have spoken publicly about this. We want to get this right, but the consequence of the decisions to date are such that they create fear regarding the description of a PEP, what people think of PEPs within banks and just with what is going on generally. The banks do not want the scrutiny and they do not want too many of these accounts; they prefer not to have them. That is the reality. That is the consequence of the decisions that have been made. The decisions and the directives are affecting people's lives in a way perhaps that was not intended and, therefore there is an obligation on all of us to take that unintended consequence and to deal with it in whatever way this new single rule book is going to say. It is probably going to take the worst-case scenario and build rules around that rather than acknowledge that not every PEP is a criminal.

Ms Brenda McVeigh

The Chairman has kind of hit on it there in a way. The new rule book is about all AML rules. Their basic premise is about taking a risk-based approach to all types of transactions.

What is also so entrenched in that framework is KYC, or "know your customer". It is not something, in terms of what the institutions are doing now, that is specifically focused on politically exposed persons. It is focused on the general anti-money-laundering rules and, unfortunately, those rules have resulted in banks and other institutions having a much lower risk appetite now for fear of any kind of money laundering activity. That is not something they are saying is necessarily just focused on politically exposed persons. It is focused on every customer of those institutions.

Chairman

Every customer of an institution is not treated like a politically exposed person.

Ms Brenda McVeigh

The Chairman is saying that but I have heard from colleagues who would not necessarily be technically deemed to be politically exposed persons that they are also experiencing the new reality of the anti-money-laundering rules.

Chairman

Can Ms McVeigh tell us anything about the UK experience? UK banks are now charging politically exposed persons for the handling of their accounts.

Ms Brenda McVeigh

No, I am not aware of that.

Chairman

I would like her to check that out.

Ms Brenda McVeigh

I will do so.

Chairman

UK banks may not be in the EU but facts are facts and they can charge significant amounts for handling the account of a politically exposed person because of the extra scrutiny and regard they have to give to the circumstances around it.

Ms Sinéad Reynolds

Is a specific fee being charged because they are politically exposed persons?

Chairman

No, it is based on the level of management that they have to apply to an account. Colleagues in the UK told me about this and I asked them to come back to me with further information on it. If it starts happening there, it could very well begin to happen here and we have no control over these things.

Ms Brenda McVeigh

We certainly have no control over private institutions like banks in terms of their day-to-day functions but if it is simply on the basis of applying anti-money-laundering rules, it would be a slippery slope for them because those rules are supposed to be applied on a pan-EU basis. Institutions across the EU would be doing the same thing but I am not hearing that anywhere across the EU. We can certainly check it out.

Chairman

Look into it and get the information because-----

Ms Brenda McVeigh

I accept what the Chairman is saying about the UK-----

Chairman

I am trying to approach this in a constructive way, as are Deputy Durkan and other interested parties. Every turn of my analysis of this just throws up more problems and more possibilities for negative consequences for those affected. That is all I am saying. I do not have any more to say on it because I have said enough.

Deputy Bernard J. Durkan

I am concerned about lending institutions being not politically exposed but acting politically. That is something that myself and others have referred to in the past. They are strict and ruthless in the way they handle the powers and information they have over individuals. That would be justified on the basis that they need to know what people are doing but nobody knows what the banks are doing. When the financial crash came, nobody knew what they were doing until it dawned on us all and fell on our doorsteps all at the one time. The very fact that they do not seem to be in need of any kind of scrutiny other than to be able to say that politicians are dangerous and could do all kinds of things, so they want to make sure that does not happen. If anybody else does it, the lending institutions have been economic with the application of the rules that are there to protect customers. The conclusion that I come to in that regard is a serious one, which is the fact that customers do not matter anymore. Anything is justified in achieving their results. I am increasingly concerned about the extent to which they are open and willing to discuss matters with public representatives acting on behalf of the public. While some are happy to do so, a minority of institutions refuse to engage. They give no information, have no address, and will facilitate no meetings. They say, "Send us the proposal and we will have a look at it". That is very old fashioned law and it does not apply here yet. The EU should be cautious about allowing those kinds of things to happen because, ultimately, it can turn people against the EU, rightly or wrongly. I have said my piece on this many times before. I do not like secrecy.

Chairman

We have come to the end of our exchanges on this. I ask the witnesses to inform the committee whether we can get those minutes, if available, at the various levels they have described. If available, please send the links to us so we can see how detailed the discussions were. Any further information on this new rule book that they can give us would be appreciated. Maybe the Department of Justice could look at how it puts a name on these Bills and take an understanding from what I said earlier in terms of getting all of that legislation relating to politicians and putting it under a reasonable heading. I ask that the Department would keep us informed of any developments in this matter. I thank the witnesses for attending and for the information provided.

The joint committee adjourned at 3.06 p.m. until 1.30 p.m. on Wednesday, 12 October 2022.