Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020: Committee Stage

We now have 90 minutes to deal with the Criminal Justice (Money Laundering and Terrorist Financing) Amendment Bill 2020 on Committee Stage. Does any Member wish to speak on section 1? No.

Section 1 agreed to.
NEW SECTION

We move now to section 2 and to amendment No. 1 in the name of Senator Ward. Acceptance of this amendment involves deletion of section 2 of the Bill. Can I ask the Senator to move his amendment?

I move amendment No. 1:

In page 5, between lines 21 and 22, to insert the following:

“Amendment of section 2 of Act of 2010

2. The Act of 2010 is amended by the substitution of the following section for section 2:

“Interpretation

2. (1) In this Act—

‘Data Protection Regulation’ means Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation);

‘Fourth Money Laundering Directive’ means Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC;

‘Fifth Money Laundering Directive’ means Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU;

‘Minister’ means the Minister for Justice, Equality and Law Reform;

‘money laundering’ means an offence under Part 2;

‘personal data’ means personal data within the meaning of—

(i) the Data Protection Act 1988,

(ii) the Data Protection Regulation, or

(iii) Part 5 of the Data Protection Act 2018;

‘prescribed’ means prescribed by the Minister by regulations made under this Act;

‘property’ means all real or personal property, whether or not heritable or moveable, and includes money and choses in action and any other intangible or incorporeal property;

‘terrorist financing’ means an offence under section 13 of the Criminal Justice (Terrorist Offences) Act 2005;

‘Third Money Laundering Directive’ means Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, as amended by the following:

(a) Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC;

(b) Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC.

(2) A word or expression used in this Act and also used in the Fourth Money Laundering Directive has, unless the contrary intention appears, the same meaning in this Act as in that Directive.

(3) In this Act a reference to an Appeal Tribunal shall be construed as a reference to the Appeal Tribunal established under section 101A (inserted by section 24 of the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2020).”.”.

I have tabled a number of amendments to this Bill, not just to this section but to a range of sections, and they all essentially seek to do the same thing. It relates to a matter that I raised on Second Stage, which is a tremendously important one nobody would dispute. It puts in place a streamline that is welcome and implements the provisions of the fifth directive from the European Union, which is important as well as being legally obligatory.

However, this is the third Bill in this vein. We had an initial Bill in 2010; it was amended in 2018, and is now being amended again, with the result that the final Bill which may be passed now will essentially amend the 2010 Act. It will be an extremely cumbersome instrument because anybody reading it must essentially refer to three Bills simultaneously to ascertain exactly what the Act we pass in the Houses under this guise will say and how exactly it will implement the directive.

I understand why that happens and there is a practice in these Houses that when we amend legislation, we put into the amending Bill the exact provision that is being changed and how it is being changed. What we do not do is list the new section and how the new section has been changed, or even the new subsection, with the result that one may have a single line in an amending Bill. The point that I made on Second Stage is that that makes it very difficult, if not nigh impossible, for an ordinary citizen or indeed any non-lawyer - although I suspect many lawyers as well - to read and understand the legislation without significant study and effort.

In this amendment, I have simply set out what the interpretation of section 2 of the of the 2010 Act would look like if the amendment of this Bill were put in place as we know or expect it will be. Essentially, I have restated section 2 of the 2010 Act as it will look after this legislation passes.

I am absolutely indebted to the work done by the Law Reform Commission in this regard. Members will be aware, as I have mentioned it in this House before, that the commission carries out a hugely important civic function by putting together consolidated Acts where we have amending legislation. Where there is a sequence of amending legislation, the Law Reform Commission undertakes a project to make freely available online the consolidated Act, as amended. It will show each step of the way through why, how and what operation has been done to change the Bill. That is very valuable, particularly for Senators and Deputies, but also for members of the public.

The argument I am making here is that we should be doing this all the time and going out of our way to make legislation accessible for everyone, and for people who have to read and live by the terms of the legislation. There are many issues involved in this. I am not even talking about any particular issue, merely about the accessibility and legibility of the legislation that is passed by these Houses.

The series of amendments - I am only going to speak on this one because I do not wish to delay the House - that I have tabled are to show how that can be done. I am just one person and I do it myself and I have prepared it in time for this Committee Stage. The Department with its vast resources - I am aware of the armies of people that the Minister of State has at his beck and call every day - could give effect to this relatively easily, but particularly where the Law Reform Commission has already done the work. It did not take very much for me to go on to their website to look at their work and to transfer that into amendments to this Bill. It can be easily done.

I understand the Department is reluctant to do this for a whole range of reasons. There is, for example, the loss of the legislative history which is one of the things that we can look at in this House. In the past year, for example, we have twice amended the Health Act 1947 with two successive Bills and it is very easy to go back and trace how the Health Act has changed since the1940s. There is, however, another way of doing that. We do not have to record that in successive amending Bills. We can simply have, as we used to have, the chronological tables, for example, on the Statute Book that is available online and we could easily create a section which shows the progress of a piece of legislation, how and when it has changed, etc. It could be linked into the debates that are recorded, again freely, on the Oireachtas website.

I do not really accept that as an argument for not doing this. As I said on Second Stage, there is an administrative argument. It clearly creates an administrative burden on the Department and presumably on the Office of the Attorney General, which carries out the technical amendments and drafting of the Bill. I can see how the generation of paper etc. might be a problem. However, we must decide if that difficulty outweighs the benefit of having legislation that is much more accessible to members of the public. I am sure there are other administrative problems.

My fundamental reason for tabling this and succeeding amendments is to put down some kind of marker to let people know we no longer want to have a raft of legislation. In certain areas this is obvious, for example, in road traffic legislation. In the 1990s, we consolidated social welfare legislation. We could take many other steps. Certain streams of legislation are largely inaccessible to members of the public because of how we are passing them in these Houses. In tabling these amendments I am trying to say to the Minister of State, his Department and the people within government who are responsible for legislation that we should be taking steps to make legislation more legible and more accessible to the public and everyone else. I do not propose to press the amendment. I am tabling it really to have an opportunity to raise the point with the Minister of State.

I agree with the Senator on the matter. We have the Statute Law (Restatement) Act. It is desirable to have an official version of the legislation to which the ordinary man or woman can have instant access. If we take the money laundering and terrorist financing legislation as a code, it should be available at all times in a readable form without having to do research. I strongly support that restatement should be done as often as possible.

I notice that the restatement provision, which was introduced, I think, in the early 2000s, really has been replaced by relying on the Law Reform Commission to do the restatement process. Therefore, there are issues such as production in court of a consolidated version. The Law Reform Commission report seems to have that status and it requires judges to agree to accept that as the law on the assumption that the Law Reform Commission has done its job. The statute law restatement legislation required courts to give recognition to a restatement issued by the Office of the Attorney General as if it were the law and to accord it the same degree of authenticity. I just make that point.

I accept what Senator Ward says that an administrative burden is cast on any Department to keep that work up to date. It is strange that it is effectively now delegated informally to the Law Reform Commission to carry out this work, whereas the proper way to do it is not done. I agree with the Senator's amendment.

I welcome the Minister of State back to the House. We are blessed to have such expert legal minds as Senators Ward and McDowell among us. I certainly do not speak as one of those; I speak as a layperson. It is striking that we are so far behind the curve on what Senator Ward mentioned. I compliment him and the Law Society on their work in this regard. I agree that the restatement should be done as a matter of course in future. I look forward to hearing the Minister of State's comments in this regard. I believe legislation passed by both Houses should be accessible and understandable to any individual in the State. I would like to see this moving forward and I again compliment Senator Ward's work in this area.

I, too, support Senator Ward's amendments and the intention and spirit behind them. I have raised the important issue of codifying our criminal law to ensure consolidation of criminal statutes over a number of years in successive Seanad terms. There are some glaring areas of criminal law, not just money laundering and financial offences as Senator Ward will appreciate, such as, in particular, sex offences, where the law is unnecessarily complex and we have never had a single codifying Act of the sort we saw in England and Wales some years ago. There is clearly a need for that sort of consolidation to be carried out. I echo the praise for the Law Reform Commission and its great work on this, and indeed for the codification group. Every time we have a criminal law Bill before us, these amendments are a source of concern and frustration. Miscellaneous provisions Bills are the worst. They are the most difficult to incorporate into the body of any substantive area of criminal law. It is long overdue for more general reform. I appreciate that the Senator is not going to press the amendments but it is important to make these points in the course of the debate.

Like my colleagues, I will be brief because I agree with the sentiments expressed about the complex and technical nature of this. Like Senator Gallagher, I do not have the legal background and expertise of others present, so I am acutely aware of the need to address the complex nature and tone of the legislation that comes before us and how we can support the work of ensuring that the public can absorb and understand this important and broadly encompassing legislation in a more informed way. While I appreciate that Senator Ward has indicated that he will not press his amendments, I commend him on a strong point, well made, and like other colleagues, I look forward to hearing what the Minister of State has to say.

I thank Senator Ward for the amendments that he has tabled. I agree with the principle and intention behind them. As someone who has practised as a barrister for 14 years, I know the difficulty for ordinary citizens and for practitioners in trying to establish exactly what amendments have been made and where. It impacts on accessibility. When that is compounded with the sister to accessibility, which is the need for greater use of plain language, then we need consolidated Acts and plain language. This is, unfortunately, reflected across every Department. As Senator Bacik has pointed out, this is before we get into miscellaneous provisions Bills. One or two will be brought forward from the Department of Justice in the next year or two for those matters which really need to be addressed, but there is no question that they add to the greater complexity of accessibility.

It goes without saying that Bills of this nature are difficult to read and they have many short, and in some cases very consequential, amendments that only become clear when read in context. When added to that is the task of seeing what is in the fifth directive and how that amended the fourth directive, the whole process becomes even slower. The challenge in creating a consolidated Act is that it takes a long time. We have to make sure that every single comma and bracket is correct, because if we want to change the consolidated Act, having made a mistake, it will require amending legislation. The Government needs to look at how we will address these many amendments in future. Compared with 20, 30 or 40 years ago, the Legislature is passing much more legislation, which is compounding this issue.

The difficulty with the approach taken is that, on a practical level, I am not sure that anyone looking at the amendments without being aware of the context would be able to tell what was going on or, more to the point, what has actually changed, which might create another separate problem. When we consider the changes introduced by the amending Bill and making them comprehensible, we need to see what is changing, what the changes mean for the principal Act in context, and what the end result will be.

An even more complex process is probably needed. This would not only consolidate matters but would allow one to see what changes are being made. This is something at which the Department and the Government need to look with a view to future amendments. A body of work needs to be done in that regard.

I would like to see at least some Bills incorporate a version of the principal Act with the changes tracked. This would clearly show what was being amended in the existing text. It is not straightforward but it should be achievable. Officials are working on this at the moment. I believe the plan is to see if the system used by the Law Reform Commission to create revised Acts could be used at earlier stages as Bills are brought through. That would be very useful. When a Bill is brought before the House for debate, a document tracking any changes or amendments would be presented along with it. This might be in the form of an attachment to the Bill or some other format. It would make it easier for legislators to see what is being proposed, what amendments do and what effects they would have in real life. The Department of Justice is talking to the Law Reform Commission about its system and about whether it could be incorporated into the Department's system for future legislation. That would be very useful for these debates.

I welcome what the Minister of State said and I am delighted to hear that the Department of Justice is liaising with the Law Reform Commission. The commission does tremendous work and is often under-recognised. It has a small team and I marvel at the amount of work it gets through. The suggestion the Minister of State made regarding an official version of the principal Act with changes tracked and showing what it would be like when the legislation is passed is very valuable. That would be very helpful for Members and could also be made publicly available. I am not sure what is the best way to go about doing this but I welcome the suggestion and, on that basis, I will withdraw the amendment.

Amendment, by leave, withdrawn.
Section 2 agreed to.
NEW SECTION

I move amendment No. 2:

In page 6, between lines 5 and 6, to insert the following:

“Amendment of section 3 of Act of 2010

3. The Act of 2010 is amended by the substitution of the following section for section 3:

“Regulations

3. (1) The Minister may, after consulting with the Minister for Finance, by regulations provide for any matter referred to in this Act (other than section 106ZC (inserted by the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2020)) as prescribed or to be prescribed.

(2) Regulations under this Act may contain such incidental, supplementary and consequential provisions as appear to the Minister (or, in the case of regulations under section 106ZC, the Minister for Finance) to be necessary or expedient for the purposes of the regulations.

` (3) Every regulation made under this Act shall be laid before each House of the Oireachtas as soon as may be after it is made and, if a resolution annulling the regulation is passed by either such House within the next 21 days on which that House has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything previously done under the regulation.”.”.

Amendment, by leave, withdrawn.
Sections 3 and 4 agreed to.
SECTION 5
Question proposed: "That section 5 stand part of the Bill."

On Second Stage, I raised an issue regarding the proposed amendments to section 25 of the Act of 2010. The figure of €10,000 is mentioned in section 5. Certain obligations are to be placed on art dealers and letting agents involved in transactions that amount to more than that figure over the course of a year. I have not put an amendment down but I suggested that we look at index-linking that figure because I suspect it will become outdated quite quickly. Has the Minister of State given any consideration to that suggestion?

I thank Senator Ward. He mentioned this issue on the last Stage. I will give it some consideration and come back to him

Question put and agreed to.
Section 6 agreed to.
SECTION 7
Government amendment No. 3:
In page 9, to delete lines 1 and 2.

This is simply a technical amendment to remove an incorrect cross reference.

When this amendment is made, this Bill will have to go back to the Dáil. I believe that everybody wants the Bill to go through quickly. We do not want to delay it in any way, shape or form.

However, in those circumstances, I ask that the amendments and the debate on them here today be fully considered. First, if this amendment is accepted we are not operating on the basis now that the Bill will go through without ever seeing the Dáil again. If it is going back to the Dáil, I ask that the Report Stage, insofar as we do not deal adequately with Committee Stage amendments here, should be sufficient to address the issues which may arise in the course of debate and certainly some of the concerns that I propose raising with the Minister of State. I know the Department wants this measure to be passed but, on the other hand, if it has to go back to the Dáil, let this House at least throw its measuring tape over a few of the provisions to see if this Bill can be improved.

I will certainly give consideration to the Senator's proposals.

Amendment agreed to.
Section 7, as amended, agreed to.
Section 8 agreed to.
NEW SECTION

I move amendment No. 4:

In page 10, between lines 32 and 33, to insert the following:

“Amendment of section 36A of Act of 2010

9. The Act of 2010 is amended by the substitution of the following section for section 36A:

“Examination of background and purpose of certain transactions

36A. (1) A designated person shall, as far as possible, in accordance with policies and procedures adopted in accordance with section 54, examine the background and purpose of all transactions that—

(a) are complex,

(b) are unusually large,

(c) are conducted in an unusual pattern, or

(d) do not have an apparent economic or lawful purpose.

(2) A designated person shall increase the degree and nature of monitoring of a business relationship in order to determine whether transactions referred to in subsection (1) appear suspicious.

(3) A designated person who fails to comply with this section commits an offence and is liable—

(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months (or both), or

(b) on conviction on indictment, to a fine or imprisonment for a term not exceeding 5 years (or both).”.”.

Amendment, by leave, withdrawn.
SECTION 9
Question proposed: "That section 9 stand part of the Bill."

I wish to comment on Senator Ward's withdrawal of his amendment. There are issues relating to politically exposed persons which I wish to consider. Senator Ward's amendment simply sought to consolidate the law in that regard, but in saying I agree to him withdrawing the amendment, I am not abandoning the issue of the need for reform in this area, which I will return to later.

Question put and agreed to.
NEW SECTION

I move amendment No. 5:

In page 10, after line 42, to insert the following:

“Amendment of section 37 of Act of 2010

10. The Act of 2010 is amended by the substitution of the following section for section 37:

“Enhanced customer due diligence — politically exposed persons

37. (1) A designated person shall take steps to determine whether or not—

(a) a customer, or a beneficial owner connected with the customer or service concerned, or

(b) a beneficiary of a life assurance policy or other investment-related assurance policy, or a beneficial owner of the beneficiary, is a politically exposed person or an immediate family member, or a close associate, of a politically exposed person.

(2) The designated person shall take the steps referred to in subsection (1)—

(a) in relation to a person referred to subsection (1)(a), prior to—

(i) establishing a business relationship with the customer, or

(ii) carrying out an occasional transaction with, for or on behalf of the customer or assisting the customer to carry out an occasional transaction, and

(b) in relation to a person mentioned in subsection (1)(b)—

(i) prior to the payout of the policy, or

(ii) at the time of the assignment, in whole or in part, of the policy.

(3) The steps to be taken are such steps as are reasonably warranted by the risk that the customer, or beneficiary or beneficial owner (as the case may be) is involved in money laundering or terrorist financing.

(4) If a designated person knows or has reasonable grounds to believe that a customer is, or has become, a politically exposed person or an immediate family member or close associate of a politically exposed person, the designated person shall—

(a) ensure that approval is obtained from senior management of the designated person before a business relationship is established or continued with the customer,

(b) determine the source of wealth and of funds for the following transactions—

(i) transactions the subject of any business relationship with the customer that are carried out with the customer or in respect of which a service is sought, or

(ii) any occasional transaction that the designated person carries out with, for or on behalf of the customer or that the designated person assists the customer to carry out, and

(c) in addition to measures to be applied in accordance with section 35(3), apply enhanced monitoring of the business relationship with the customer.

(4A) A designated person shall continue to apply the measures referred to in subsection (4) to a politically exposed person for as long as is reasonably required to take into account the continuing risk posed by that person and until such time as that person is deemed to pose no further risk specific to politically exposed persons.

(5) Notwithstanding subsections (2)(a) and (4)(a), a credit institution or financial institution may allow a bank account to be opened with it by a customer before taking the steps referred to in subsection (1) or seeking the approval referred to in subsection (4)(a), so long as the institution ensures that transactions in connection with the account are not carried out by or on behalf of the customer or any beneficial owner concerned before taking the steps or seeking the approval, as the case may be.

(6) If a designated person knows or has reasonable grounds to believe that a beneficial owner connected with a customer or with a service sought by a customer, is, or has become, a politically exposed person or an immediate family member or close associate of a politically exposed person, the designated person shall apply the measures specified in subsection (4)(a), (b) and (c) in relation to the customer concerned.

(6A) If a designated person knows or has reasonable grounds to believe that a beneficiary of a life assurance or other investment-related assurance policy, or a beneficial owner of the beneficiary concerned, is a politically exposed person, or an immediate family member or a close associate of a politically exposed person, and that, having regard to section 39, there is a higher risk of money laundering or terrorist financing, it shall—

(a) inform senior management before payout of policy proceeds, and

(b) conduct enhanced scrutiny of the business relationship with the policy holder.

(7) For the purposes of subsections (4), (6) and (6A), a designated person is deemed to know that another person is a politically exposed person or an immediate family member or close associate of a politically exposed person if, on the basis of—

(a) information in the possession of the designated person (whether obtained under subsections (1) to (3) or otherwise),

(b) in a case where the designated person has contravened subsection (1) or (2), information that would have been in the possession of the person if the person had complied with that provision, or

(c) public knowledge, there are reasonable grounds for concluding that the designated person so knows.

(8) A designated person who is unable to apply the measures specified in subsection (1), (3), (4) or (6) in relation to a customer, as a result of any failure on the part of the customer to provide the designated person with documents or information—

(a) shall discontinue the business relationship (if any) with the customer for so long as the failure continues, and

(b) shall not provide the service or carry out the transaction sought by the customer for so long as the failure continues.

(9) A person who fails to comply with this section commits an offence and is liable—

(a) on summary conviction, to a fine not exceeding €5,000 or imprisonment for a term not exceeding 12 months (or both), or

(b) on conviction on indictment, to a fine or imprisonment for a term not exceeding 5 years (or both).

(10) In this section—

‘close associate’ of a politically exposed person includes any of the following persons:

(a) any individual who has joint beneficial ownership of a legal entity or legal arrangement, or any other close business relations, with the politically exposed person;

(b) any individual who has sole beneficial ownership of a legal entity or legal arrangement set up for the actual benefit of the politically exposed person;

‘immediate family member’ of a politically exposed person includes any of the following persons:

(a) any spouse of the politically exposed person;

(b) any person who is considered to be equivalent to a spouse of the politically exposed person under the national or other law of the place where the person or politically exposed person resides;

(c) any child of the politically exposed person;

(d) any spouse of a child of the politically exposed person;

(e) any person considered to be equivalent to a spouse of a child of the politically exposed person under the national or other law of the place where the person or child resides;

(f) any parent of the politically exposed person;

(g) any other family member of the politically exposed person who is of a prescribed class;

‘politically exposed person’ means an individual who is, or has at any time in the preceding 12 months been, entrusted with a prominent public function, including any of the following individuals (but not including any middle ranking or more junior official):

(a) a specified official;

(b) a member of the administrative, management or supervisory body of a state-owned enterprise;

(c) an individual performing a prescribed function;

‘specified official’ means any of the following officials (including any such officials in an institution of the European Communities or an international body):

(a) a head of state, head of government, government minister or deputy or assistant government minister;

(b) a member of a parliament or of a similar legislative body;

(bb) a member of the governing body of a political party;

(c) a member of a supreme court, constitutional court or other high level judicial body whose decisions, other than in exceptional circumstances, are not subject to further appeal;

(d) a member of a court of auditors or of the board of a central bank;

(e) an ambassador, chargé d’affairs or high-ranking officer in the armed forces;

(f) a director, deputy director or member of the board of, or person performing the equivalent function in relation to, an international organisation.

(11) 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’ of a politically exposed person in subsection (10), only if the Minister is satisfied that it would be appropriate for the provisions of this section to be applied in relation to members of the class, having regard to any heightened risk, arising from their close family relationship with the politically exposed person, that such members may be involved in money laundering or terrorist financing.

(12) The Minister may, with the consent of the Minister for Finance, issue guidelines to the competent authorities in respect of functions in the State that may be considered to be prominent public functions and each competent authority shall have regard to any such guidelines.”.”.

Amendment, by leave, withdrawn.
Section 10 agreed to.
NEW SECTIONS

I move amendment No. 6:

In page 11, between lines 19 and 20, to insert the following:

“Amendment of section 38 of Act of 2010

11. The Act of 2010 is amended by the substitution of the following section for section 38:

“Enhanced customer due diligence – correspondent banking relationships

38. (1) A credit institution or financial institution (‘the institution’) shall not enter into a correspondent relationship involving the execution of payments with another credit institution or financial institution (‘the respondent institution’) situated in a place other than a Member State unless, prior to commencing the relationship, the institution—

(a) has gathered sufficient information about the respondent institution to understand fully the nature of the business of the respondent institution,

(b) is satisfied on reasonable grounds, based on publicly available information, that the reputation of the respondent institution, and the quality of supervision or monitoring of the operation of the respondent institution in the place, are sound,

(c) is satisfied on reasonable grounds, having assessed the anti-money laundering and anti-terrorist financing controls applied by the respondent institution, that those controls are sound,

(d) has ensured that approval has been obtained from the senior management of the institution,

(e) has documented the responsibilities of each institution in applying anti-money laundering and anti-terrorist financing controls to customers in the conduct of the correspondent relationship and, in particular—

(i) the responsibilities of the institution arising under this Part, and

(ii) any responsibilities of the respondent institution arising under requirements equivalent to those specified in the Fourth Money Laundering Directive, and

(f) in the case of a proposal that customers of the respondent institution have direct access to a payable-through account held with the institution in the name of the respondent institution, is satisfied on reasonable grounds that the respondent institution—

(i) has identified and verified the identity of those customers, and is able to provide to the institution, upon request, the documents (whether or not in electronic form) or information used by the institution to identify and verify the identity of those customers,

(ii) has applied measures equivalent to the measure referred to in section 35(1) in relation to those customers, and

(iii) is applying measures equivalent to the measure referred to in section 35(3) in relation to those customers.

(2) A person who fails to comply with this section commits an offence and is liable—

(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months (or both), or

(b) on conviction on indictment, to a fine or imprisonment for a term not exceeding 5 years (or both.".".

Amendment, by leave, withdrawn.

I move amendment No. 7:

In page 11, between lines 19 and 20, to insert the following:

“11. The Act of 2010 is amended by the insertion of the following section after section 37:

“Guidelines For Enhanced Due Diligence – Politically Exposed Persons

37A. (1) The Minister, where he or she considers it necessary or expedient, may, with the consent of the Minister for Finance and having consulted the Central Bank of Ireland and such other person or body as he or she considers appropriate, issue guidelines to the competent authorities in relation to the operation by designated persons of the provisions of this Part of enhanced due diligence in respect of customers who are politically exposed persons or their immediate family members and associates.

(2) Guidelines issued under subsection (1) may deal with any or all of the following matters:

(a) whether it is appropriate or necessary to apply enhanced due diligence to conventional personal or domestic transactions of such customers and the extent of such application;

(b) whether it is appropriate or necessary to apply enhanced due diligence to decisions concerning the commencement or continuance of business relationships concerning conventional personal or domestic activities of such customers and the extent of such application;

(c) whether it is appropriate or necessary to apply enhanced due diligence to specified types or classes of persons who may be customers mentioned in subsection (1) and the extent of such application; and

(d) the standard of due diligence and assessment of risk appropriate to enhanced due diligence in relation to such customers or to types or classes of persons who may be such customers.

(3) When issuing guidelines under subsection (1), the Minister shall have regard to—

(a) the terms and purposes of the Fourth and Fifth Money Laundering Directives,

(b) the provisions and purposes of this Act,

(c) the need for the provisions of this Part to be implemented effectively and proportionately, and

(d) subject to the provisions of this Act and the aforementioned Directives, the protected rights and freedoms of customers mentioned in subsection (1).

(4) Competent authorities and designated persons shall have regard to any guidelines issued by the Minister under this section when carrying out their functions or complying with their obligations under this Act.

(5) Nothing in this section or in any guidelines issued under subsection (1) shall operate to derogate from or relieve the general duties of designated persons under this Act to apply due diligence in respect of their business relations or transactions with customers or other persons, or in relation to their obligations in respect of suspected money laundering or terrorist financing.”.”.

The purpose of this amendment is to insert a new section providing for guidelines in respect of politically exposed persons which would issue to the competent authorities for the guidance of designated persons when dealing with politically exposed persons. I will make a few general points at the outset.

There is great dissatisfaction among Members of the Oireachtas with the operation of this directive at present. The reason is that it appears to cast the net of political exposure and, therefore, the duty of enhanced due diligence in a comprehensively excessive manner to people who could not possibly be a risk in the issue of money laundering or, indeed, terrorist financing. It is worthwhile to remind ourselves about what we are dealing with here. Politically exposed persons are defined in the Bill, and I will return to the definition in a moment.

The enhanced due diligence obligation is extended not merely to the politically exposed persons, which includes Members of this House whether in opposition or in government, but to their spouses and civil partners, their parents, their children and the spouses and civil partners of their children. This means that every credit institution and person in Ireland carrying out particular forms of property services, including in certain circumstances insurance companies, is obliged to apply enhanced due diligence to a vast category of people who pose no threat of money laundering or terrorist financing above the ordinary risk of such activities.

To take one example, the legislation in its current form states that a politically exposed person includes a person who is on the governing body of a political party. If one applies the obligations, this means that if, much to the horror of a Member, his or her son or daughter joins a party he or she does not like and, worse than that, is enthusiastic enough to get appointed to its administrative council, Ard Comhairle, national executive or other body of that type, not only will the son or daughter be subject to the requirement of enhanced due diligence, but so too will his or her spouse. Not only that, the parents of that spouse become liable to enhanced due diligence. I cannot imagine how this originally went through at the Council of Ministers for Justice and Home Affairs in Europe at the time. Had I still been Minister for Justice and Equality at the time these things first emerged, my antenna would have been raised to this being absurd. It is an absurdity to provide that in the case of a person on, say, the Fianna Fáil committee of 15, his or her son-in-law or daughter-in-law and his or her parents should be exposed to this provision. It is a nonsense and it has to be called out for what it is. It is a grossly excessive piece of nonsense. How it could possibly be thought that the son-in-law or daughter-in-law of a member of a national political party governing body is, by definition, somebody who deserves higher scrutiny as respects their ordinary financial affairs complete escapes me. It should never have been included in any of the directives. It is a shame that it ever was permitted to be included in the directives at that time. It came in sideways in that it came in extended to people in high-risk countries. In a fit of equality thought and the like, it was applied to members of the European Union without it having been carefully thought through. Some of the older member states, looking at some of the newer member states about which they are a bit sniffy, decided that it might be useful to extend it to countries such as Bulgaria and the like and they could live with it for their own. We need to realise that the actual practical consequences of this are very significant.

On the last occasion, Senator Ward mentioned an issue in respect of which I had forgotten I was in the same boat as him.

One financial institution asked me to provide audited tax returns for some extraordinary period of time - I have forgotten how many years but maybe it was 15 years - in respect of my income as a barrister. There are no such things to start with. I make my tax returns but to find all my tax returns for all those years and to regurgitate them would take hours and hours of work which most young Members of the Oireachtas are simply not in a position to do. To impose this on me is one thing, but to impose it on a child of mine who might be in the same position, say as a barrister or a self-employed person, is another. To require them, whether they are a self-employed barrister, a landscape gardener or whatever else, to produce audited accounts is nonsense on stilts and yet that has been requested by financial institutions.

In my naivety, I wondered whether the British legislature could possibly have the same approach. I discovered that there are financial conduct authority guidelines in Britain which are different from those in Ireland. The Central Bank of Ireland has issued very stringent financial guidelines to financial service providers as to how this Act should operate. The British have a little bit of common sense and have made the point that an opposition Member of Parliament, MP, is of a different order completely to somebody wielding executive power at any given point in time.

One of the things the directive in its present form, and as amended by the fifth directive, requires is that any institution dealing with a politically exposed person or an immediate family member or associate, and this includes all the people I talked about earlier, such as sons and daughters-in-law of, for instance, people on the administrative council of the Labour Party, to ask, whenever such individuals open an account, to explain the origins of their property and wealth. How absolutely crazy is that? It is utterly indefensible because they have been dealing with a bank for donkey's years. By the way, it is not just opening an account that this obligation takes place but it is continuing to have an account. They have been dealing with the bank for years and have been dealing with a mortgage provider for years. They have been dealing with an insurance company for years and a solicitor has been handling their affairs for years. Suddenly it becomes incumbent on all those institutions because the individual's daddy or mammy gets elected to the administrative council of the Labour Party, or whatever the equivalent is in Fine Gael or Sinn Féin. Individuals are suddenly obliged as a matter of law to carry out a trawl to ascertain where he or she got all their property from retrospectively.

One might say, "For heaven's sake, people are not that unreasonable" but I know of my own experience. One credit institution had provided me with, I think, a 20 year mortgage, of which 18 years had elapsed when I received a letter. It had worked out that I was a politically exposed person because I was a Member of the Seanad. Frightened of the consequences of not making inquiries, it required that I should explain where the money had come from for paying the mortgage for the 18 years, when it was on a direct debit from my main bank account. The ridiculous thing was that it threatened to cut off any relationship with me as mortgage provider. I made it clear to it that if it did, then that would be the end of my mortgage. I did not give a damn if it did not want to provide me with a mortgage anymore.

I would not make any further payments to it in such circumstances and I was not going to pay for an early determination fee of my mortgage because it was interpreting the law in that respect. However, it did not merely want audited accounts, as Senator Ward said. It wanted copies of wills under which I had inherited anything. My parents are long since dead. What possible interest was it to it to ascertain what I had inherited 18 years ago? This was how it interpreted the Central Bank guidelines.

The Central Bank guidelines on designated persons state:

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. [In order to satisfy itself that it is not handling corrupt money or criminal activity money, it has to find out where I got all my money over my life.] 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.

That is not the person, but the business relationship. One might think paying off a mortgage would be very low on that. Current advice to these institutions is that "[f]irms should verify the source of wealth and the source of funds based on reliable and [wait for it] independent data, documents or information." I thought it was a bank gone slightly crackers, demanding to see wills and tax returns, but it was not. The Central Bank of Ireland is telling the bank it must do so. How bad can that be? It is not enough to take somebody's word for it but it is obliged to verify it. One is asked to show the documents that show how one came into possession of the property one owns. It has to be independent data, documents or information.

It is not just me taking exception to a letter which might appear to all of us as being slightly over-officious. This is what the Central Bank has directed every bank to do in respect of every Member of this House, Member of Dáil Éireann, their children, their parents and every member of every governing body of any political party. This is what the law, as interpreted by the Central Bank, now requires.

The Central Bank guidelines further state that "[w]hen determining the source of wealth and source of funds, the Firms should, at least consider: the activities that have generated the total net worth of the customer (that is, the activities that produced the customer's funds and property);" The least they must do is assess the activities that have generated the total net worth of the customer. They have to ask one one's total net worth before they do anything else. Then they have to decide to start assessing that. The guidelines refer to "the origin and the means of transfer for funds that are involved in the transaction". I have no objection to that except for a matter I will come back to. If one has a main bank and is paying for a credit card, a mortgage and an insurance policy, politically exposed persons cannot delegate the function of monitoring to the main bank whereas non-politically exposed persons can. The British FCA admitted that the capacity to delegate due diligence of one's accounts to other institutions is expressly excluded in the case of politically exposed persons.

Ulster Bank is my main bank. If it is feeding money into a mortgage payment or a credit card in a different institution, it is specifically stated that it cannot just take the fact the Ulster Bank has my main bank and that this comes in by direct debit.

It must independently examine this issue.

The provisions in the Act which allow for lesser institutions to rely on other institutions and to delegate the due diligence to them, which affects every normal person, is excluded in respect of politically exposed persons. All of that is simply wrong. I am not imagining it because when I looked at the guidelines I found that the Central Bank of Ireland is demanding these measures of credit institutions in Ireland whereas they are not being demanded elsewhere in the world. That is the background to this amendment.

I know the Department of Justice of old and admire it hugely. I presume that it does not want to get its fingers caught in the mangle of high finance and all the rest of it. However, the Minister for Justice is the one responsible for the operation of this Act. Ultimately, it is not good enough to say to Members of this House that the Central Bank has written a set of guidelines and she is sorry they are having the effect they are but there is nothing she can do about it. There is something the State can do about it. That is what this amendment to the proposed new section 37A is all about. It states: "The Minister, where he or she considers it necessary or expedient, [it does not oblige the Minister] may, with the consent of the Minister for Finance and having consulted the Central Bank of Ireland and such other person or body as he or she considers appropriate, issue guidelines to the competent authorities in relation to the operation by designated persons of the provisions of this Part of enhanced due diligence in respect of customers who are politically exposed persons or their immediate family members and associates." It is simply saying to the Minister that he or she can, if it is expedient or necessary, opt to do it. If the Central Bank saw sense tomorrow and wrote to every bank asking it to lay off the daughters-in-law of those on the administrative council of the Labour Party. It is an absurd requirement that they should be the subject of enhanced due diligence in anything except the most alarming circumstances in which there are reasons to suspect them of anything. The Central Bank could do that but it has not. It has said that every PEP is to explain the source of all his or her lifelong wealth, where it came from and to verify it by independent documentation. Since that is the view of the Central Bank at the moment, somebody has to say this nonsense must end.

The amendment states:

(2) Guidelines issued under subsection (1) may deal with any or all of the following matters:

(a) whether it is appropriate or necessary to apply enhanced due diligence to conventional personal or domestic transactions of customers and the extent of such applications...

In other words, if one has a Visa card, a Mastercard, a PayPal account or whatever it may be, is it really necessary, given that it is probably fed by a direct debit from another source, for an institution of that kind to delve into one's lifelong property history further?

The amendment further states:

(b) whether it is appropriate or necessary to apply enhanced diligence to decisions concerning the commencement or continuance of business relationships concerning conventional personal or domestic activities...

In other words, nobody in this House will get a letter from an institution proposing that it will no longer do any business with him or her unless and until that person documents for it where all his or her money has come from. It is not just reasonably well-to-do barristers I am talking about but self-employed people of whatever kind, and even employed people. They are expected to show where they got their money over the years. I am also talking about farmers. Are they to prove how they got the farm, how they have been doing over the previous X number of years, how much money has come in from Common Agricultural Policy payments and how much from selling heifers or whatever else, what profits and losses they have had and all the rest of it, and to produce audited accounts? Are they to do this? It is absurd.

The third proposed territory for the guidelines is whether it is appropriate or necessary to apply enhanced due diligence to specified types or classes of persons who may be customers mentioned in subsection (1) and the extent of such application. For instance, why in the name of heavens is it appropriate to ask Members of the Oireachtas, who have a mortgage on an apartment in which they live, to explain their wealth throughout their life before giving them a secured mortgage on a property they own? It may be an 80% mortgage or whatever.

The final point relates to the standard of due diligence and assessment of risk appropriate to the enhanced due diligence in regard to such customers or classes of persons who may be such customers. In other words, unless there is something remarkably suspicious or eyebrow raising about the daughter-in-law of a member of the Fine Gael national executive, forget it and do not even go there. Do not write any stupid letters.

These credit institutions are obliged to find out themselves. It is a duty of theirs to find out who is on the administrative council of the Labour Party and who is on the Ard Chomhairle of Sinn Féin. I will not say anything further about that. They are obliged to find these things out for themselves. They are not entitled to say nobody ever told us that, by a quirk, Michael McDowell is now on the Ard Chomhairle of Sinn Féin. They are obliged to go and find that out for themselves and to go hunting around for the information. Presumably, from time to time they are supposed to ask people who are the members of their family, who are their sons and daughters, where are their parents and are their parents still alive. This is the kind of nonsense that we are dealing with now.

Subsection (3) of the proposed new section states:

When issuing guidelines under subsection (1), the Minister shall have regard to—

(a) the terms and purposes of the Fourth and Fifth Money Laundering Directives,

(b) the provisions and purposes of this Act,

(c) the need for the provisions of this Part to be implemented effectively and proportionately, and

(d) subject to the provisions of this Act and the aforementioned Directives, the protected rights and freedoms of customers mentioned in subsection (1).

Members will note that it is stated in the directives that these measures respect the rights and freedoms of citizens of the European Union under their charter. They claim that but do they really respect citizens' rights?

Subsection (4) provides that competent authorities and designated persons shall have regard to any guidelines issued by the Minister under this section and carrying out their functions or complying with their obligations under the Act. Subsection (5) states that nothing in this is intended to reduce in any circumstances the amount of due diligence that is applied to a PEP below that which is applied to anybody else in the community. Those are, I respectfully submit, reasonable provisions. They do not offend European law because the Minister is obliged by the terms of the proposed section to have regard in making any such guidelines to the terms of the money laundering directive. It does not entitle the Minister to tear it up but it does entitle him or her to give guidance along the lines of what has happened in the United Kingdom.

I took the time to look at the British House of Commons' provisions. This probably applies to some Irish citizens also who are Members of the House of Commons. Whether they take their seats or not, it applies to them all.

Everything I said about family members also applies to people described as close associates. For instance, they apply if one is a solicitor with partners. They are people who are required to be the subject of enhanced due diligence. How ridiculous is that. If Senator Ward and I were members of the other side of the legal profession and we were elected to the Seanad, suddenly our partners in a solicitors firm, wherever they might be, would somehow be the subject of enhanced due diligence. The bank or building society would be obliged to regard our partners as requiring enhanced due diligence in case somehow somebody would fund corrupt money to a Member of the Seanad via their partner. That is utterly ridiculous.

One of the things I find disturbing is that a Senator or a Deputy is fair game because they are out there and there is no doubt about who they are or what they are. Nobody asks if other people in the community are the brother, the partner, the parent or the son-in-law of somebody else. We, however, are in the firing line for this.

With regard to public servants, the first paragraph of Article 20a of the fifth money laundering directive requires that "Each Member State shall issue and keep up to date a list indicating the exact functions which, according to national laws, regulations and administrative provisions, qualify as prominent public functions". The directive refers to members of courts for which there is no appeal, such as constitutional courts, and which would apply to the Supreme Court and perhaps the Court of Appeal in Ireland.

I do not know how we decide whether a principal officer in the Civil Service is above or below the line but it is open to member states to do so provided that they publish that information.

There are, however, many functions. Consider, for instance, membership of An Bord Pleanála. I am casting no aspersions whatsoever against its members, but I would imagine they are much more likely than any Member of Seanad Éireann to make decisions affecting the wealth of others. There must be other administrative tribunals that have the same function, such as members of the agencies involved in employment dispute resolution, the Labour Court and so on. They are much more in the firing line but I cast no aspersions on any of them, nor on any Senator in this House. However, sometimes it is well worth reflecting on how little power we have in this House. If one gave Senators €1 million each, I do not believe we could achieve very much by way of corrupt activity that would influence anything in the way in which legislation is passed or the way in which we carry out our constitutional functions.

No matter what is said, the Department of Justice, and the Minister of Justice for the time being, is the political person to whom the Irish State has conferred responsibility for the operation of the money-laundering directives. It is put down as criminal justice measures; not a kind of Central Bank and Minister for Finance measures. It is within the bailiwick of the Department of Justice. All I am seeking to do by this amendment is to ask that the Minister of State, Deputy Browne, who is present, accepts the proposition that the Minister can lawfully issue reasonable guidelines for the guidance of the various institutions, be it the Law Society, auctioneers, banks, insurance companies, building societies, deposit takers of whatever kind or credit card providers of whatever kind, in default of the relevant authorities doing so themselves. I would normally say that one could depend on the common sense of people not to do this. That was my belief until I got a letter asking me to provide audited accounts of my Bar career to date. Senator Ward received a similar letter. One cannot depend on common sense in this instance. When one looks at the requirements of the Central Bank, one sees that the relevant authorities are mandated by the guidelines issued by the Central Bank to require independent verification of these things.

It is difficult enough to get decent people into politics and keep them in politics and it is difficult enough for them to explain to their family members - their spouse, children or parents - that they are motivated to serve the public good and to seek election at the will of the people or otherwise become Members of the Oireachtas. We should not deliberately pile on top of that obligations which make life very difficult for them and their spouses. What does my spouse have to do with any of this? What does the spouse of Senator Bacik have to do with any of this? I congratulate the Senator on her recent marriage. This is nonsense. We are not protecting ourselves or those who will wish to go into politics in the future from unreasonable requirements because the Department of Justice is not issuing guidelines.

I ask the Minister of State to accept the spirit of the amendment and the responsibility which his Department has to protect us from unreasonable enhanced due diligence of the grotesque kind that I have described in proposing the amendment to the House.

I thank the Senator. He has opened up a very important debate with his contribution.

I should have welcomed the Minister of State to the House in my earlier contribution. I support the spirit behind the amendment tabled by Senator McDowell and I thank him for putting it forward. On Second Stage, I agreed with him and, indeed, with other colleagues who also raised this concern about what I might describe as an overreach of provisions relating to politically exposed persons. As I stated on Second Stage, I was not aware of how far the measures extended until I heard the comments of my colleague, Deputy Howlin, in the Dáil concerning a member of the Labour Party national executive who had discovered themselves to be included within a definition of a politically exposed person. As Deputy Howlin stated in the Dáil, he was approached by the member, who asked what this meant and what it entailed for the member.

As Senator McDowell stated, this exposes an overreach that may have the very unfortunate effect of deterring people from getting involved in national politics. It may not deter people from entering politics and being elected. All those present are elected persons and it is clear that we are politically exposed. However, to deter people from being involved in the internal workings of political parties seems to be somewhat over zealous. I am not sure whether I would describe it as equality thought - I think that is the term used by Senator McDowell - but it does call into question the necessity of the reach of these provisions.

In tabling the amendment, Senator McDowell has done us a service in enabling us to interrogate how far these measures should extend.

We all know the reasoning behind these measures and the importance of having strong and robust safeguards in place against political corruption, but there is a question mark as to how far these measures need to extend. As I said, until Senator McDowell spoke about his adult children being covered, I had not been aware of that aspect of the reach. I think all of us are aware that it extends not only to us but also to our partners and spouses. This can lead to serious implications in deterring people from coming into political office. Is this really necessary to guard against corruption? That is the question, particularly when one considers, as Senator McDowell so eloquently put it, our lack of executive power as Senators and indeed our lack of power in general, one might say. There is a question certainly about ensuring we distinguish appropriately between those who hold executive power and those who hold legislative power and indeed, in the Upper House, lesser legislative power, one might say, that is, power only to delay and amend, not power to veto legislation.

I also wish to draw a comparison involving this sort of overreach, as I have described it, and very zealous coverage of persons' partners and children and members of national executives and so on. An unfortunate comparison can be drawn in respect of the overreach of the measures to those people who are indirectly connected. The contrast I am drawing is between that and the appalling lack of sanction, it appears, against seriously corrupt and egregious breaches of human rights practices in other jurisdictions. I am thinking in particular of Russia. In my contribution on Second Stage I raised the need for us in Ireland to have a Magnitsky Act to ensure we have here the sorts of robust powers we should have to impose sanctions where we are concerned about serious breaches of human rights.

As this debate has been proceeding, I have been asked, as I am sure others will be, by people connected with Bill Browder to sign a letter initiated by a cross-party group of MEPs across Europe. The letter asks parliamentarians to express serious concern about the sentencing of Alexei Navalny, the opposition figure in Russia, and concerns about the breaches of human rights and the serious inroads into democracy we are seeing being perpetrated by the regime in Russia. That is where we see the sharp end of breaches of human rights and democracy, and of corrupt practices. It is really unfortunate that there seems to be a lack of capacity to impose sanctions in that context yet we are looking at Central Bank regulations that seem to go beyond what is necessary in the fight against corruption.

I renew my call for us to introduce a Magnitsky Act here that enables us in Ireland to implement a regime of targeted sanctions. I said on Second Stage that we have seen such legislation brought in in the US and in other European jurisdictions, including Britain, and it is long overdue here. I was happy to have heard Bill Browder speak in Leinster House some years ago, I think, about the need for such legislation. I know there is cross-party support for the sort of legislation that should be brought forward. Deputy Howlin and others have spoken on it in the Dáil. I thank Senator McDowell for tabling this amendment and enabling us to have this debate. I hope we might see a positive response from the Government, particularly on Report Stage of the Bill.

I draw the House's attention to the fact that the debate will conclude at 3.05 p.m. so we have a limited window of opportunity for people to contribute. I ask Senators to bear that in mind.

I agree with what other speakers have said about this amendment. I raised this on Second Stage. This is a very reasoned approach to solving this problem. I recognise the difficulty with enshrining into primary legislation aspects that are not necessary to transpose the directive and update the law in this area. However, I also acknowledge and agree exactly with what Senators McDowell and Bacik have said. Perhaps most acute is the fact that we talk so often in this House about encouraging people to get into politics yet we seem happy to pass legislation that makes it exceedingly difficult for ordinary people to do so. The example given was of self-employed people who are required to account for income going back ten, 12 or 15 years, which is more than the Revenue Commissioners would require if an audit were conducted, for example.

It seems quite unrealistic and counterproductive. The suggestion of Senator McDowell in terms of empowering the Minister to make rules in this regard seems to be the right answer. I also call into question how effective the Central Bank is in this regard, a point I raised on the Order of Business this morning. The Central Bank acts as a regulator and should be a servant of the people and the citizenry of the country as well. It does not seem to be doing the latter well.

Senator McDowell mentioned applications for mortgages. I regret to say that I am going through such an application myself at the moment and I have been at the wrong end of trying to gather documentation to satisfy the bank even that I am who I am, notwithstanding the fact that I have been banking with the bank for over a decade. I encountered an issue with the fact that the Central Credit Register included an entry about me that should not have been there and that was incorrect. Trying to get such an entry removed takes weeks. There seems to be a glacial aspect to bureaucracy in this regard.

None of us deny the importance of having in place measures that catch everyone in terms of ensuring that everyone is within compliance with the European legislation and that in a practical sense no one can be in a situation of getting away with any of the aspects this legislation is designed to tackle. I believe we can learn lessons from what those responsible have done in UK - it is seldom I say that in this House. On the Order of Business this morning I made reference to the FBD case in the High Court last week. The Financial Conduct Authority in the UK brought the case instead of leaving it to individual businesses to take the case here. I believe there is a gap at the moment between the principle, which we all support, of enshrining procedures and practices that protect and insulate the State from the practices the legislation is trying to tackle, and on the other hand the practice that is done in a way that actually takes into account the practical implications and what effects this onerous legislation can have. Allowing the Minister to make regulations to give guidelines to the Central Bank is an effective solution. I hope the Minister will give it serious consideration.

Given the advice from the Leas-Chathaoirleach around the impending conclusion of this Stage I will not take a prolonged period to speak. I believe colleagues have raised eloquently many of the concerns we have. My guess is that many Oireachtas Members are not even aware of concerns about how intrusive elements of this guidance appear to be. That is why it is welcome that Senator McDowell, through this amendment and his contribution on Second Stage, has at the least begun a discussion around these issues.

Other colleagues have made the relevant points well. Without rehashing the arguments, the key component for me is that we have agreed in this House and in the other House to try to work with the Minister of State and his officials to get this legislation through in a timely and orderly fashion. This amendment does not impede the sentiment, aspiration or practical outworking of this legislation in any way. I appreciate that it has injected a bespoke and nuanced element to it. A little common sense is required to move forward.

I will not prolong the debate. I am keen to hear the response of the Minister of State and I hope he can work with the amendment, Senator McDowell and all of us to ensure we can address this well.

I too will be brief bearing in mind the clock is ticking and that we have to conclude at 3.05 p.m. I wish to acknowledge the contribution of Senator McDowell. As on Second Stage, his contribution went some way to educating me in respect of the far-reaching extent of this legislation. I was smiling to myself when I heard the Senator use the phrase "nonsense on stilts". That sums up much of what we are talking about. Senator Bacik talked about overreach and excessive provisions and I agree wholeheartedly with all those comments.

Most reasonable individuals who have listened to this debate will clearly see that this is far-reaching and excessive, to put it mildly. I look forward to the response of the Minister of State. The fact is that this is an EU directive.

What flexibility do we have to take on board and act upon the common sense proposals that have been made this afternoon?

I will be brief because the ground has been well covered. I followed the debate on Second Stage remotely and from my recollection, there was a further example given of a member of school board of management being put through the hoops on this. As has been said a number of times, a member of the national executive of the Labour Party - and, no doubt, of the Green Party even though we do not take corporate donations - will be fair game for this unnecessary nonsense.

The credit institutions are sending out what have been described as stupid letters. I would love to know the expenses incurred by consumers for these. Our interest rates are among the highest in the EU. If this so-called nonsense on stilts and steroids is causing a lot of unnecessary letter-writing, I would be interested to know if there are any indirect, negative or unintended consequences on banking charges for consumers.

I am also very concerned about the potential for what have been described as impositions on the daughters-in-law of democratically elected representatives. This is happening at a time when, if we do not move in respect of county councillors, I predict we will soon see the day where only four people will be interested in seeking election in local electoral areas with five seats. This is because we are putting up so many obstacles and not making these roles attractive. The proof is in the pudding as we are losing county councillors who just cannot financially stay around.

That is not the only issue. In Ireland there is a culture of pernickety form-filling and this is a great manifestation of it. Many years ago, I tuned into a contribution by the then Senator, Brian Hayes, who stated he was coming down with forms, including SIPO forms. This year, a deadline has just passed by which I was required to account for two years as a county councillor. I had to get peace commissioners to sign the form. A number of signatures were needed to become a general election candidate and, as a Senator, I had more forms to fill in last week. We are coming down with form-filling culture.

This matter has been teed up very nicely today by the use of the word "reasonable". It is in the spirit of being reasonable. No one wants to throw out the proverbial baby with the bathwater. By all means, go after those who must be gone after with full vigour and all available resources. The Minister of State has not yet indicated if he will accept the amendment. If not, can he provide any succour or assurance that enough is enough and this must stop because it is a waste of resources? The Government should by all means direct more resources to where they are needed but it should not waste resources or direct them in ways that are not fruitful and cannot be justified. As countless Members have said today and on Second Stage, it is a nonsense and these letters are stupid.

I thank Senator McDowell and his colleagues for raising this very important point. We had a good discussion on this matter on Second Stage as well. I relayed my experiences of being the chairperson of the board of a primary school which received requests. I find it somewhat interesting that I have accounts with two banks and while one has been quite vigorous on this issue, I have not heard from the other about it at all. One would, therefore, wonder about the different approaches to the issue.

(Interruptions).

That is possible. The account with the latter institution, even though I use it to this day, was opened when I was a student at Waterford Institute of Technology, so perhaps it still has those details for that account. I might check that.

I have a concern, as I previously expressed, about a chilling effect on people going into politics. It is a concern not only at a national level but also at a local level. At the most recent local elections, none of Fianna Fáil, Fine Gael, Sinn Féin and the Labour Party had a contested convention in County Wexford. That would have been unheard of 20 or 30 years ago because people would have been climbing over each other. There is a problem developing in this country of people not going into politics. We should encourage people to go into politics.

The first point I will raise is that Ireland has very limited discretion under the directive. The fourth directive, implemented by the 2018 Act, broadened the application of the politically exposed person, PEP, regime to include PEPs from Ireland. What is considered a PEP is set out in detail in the directive, and while there is provision that the exact functions will be clarified by guidance, some categories are set out unambiguously, such as the members of the national parliament, members of political party executives and so on. We may well have views that it extends too far when applied in an Irish context, but these are international standards that are conceived broadly. Article 3 within the directive includes members of parliament as prominent public functions. Article 3 also provides that "family members" includes children and spouses of such members. Article 20 provides that enhanced due diligence is required in respect of PEPs, and article 23 provides that due diligence in respect of PEPs shall also apply to family members. The directive has been quite specific on this matter. We cannot, therefore, simply exclude or modify the application of the directive in respect of Members of the Oireachtas or the other categories that are required, and once a person falls under the definition, his or her family members are also automatically brought within its scope. Unfortunately, we cannot decide to change that in this case.

That does not mean that exactly the same measures must be applied in all cases. However, sources of wealth must be identified and senior management approval is required. That is also provided for in article 20 of the directive and we do not have discretion in that matter.

The rationale that has been put forward for the very wide application, despite the real inconvenience that it causes ordinary citizens, especially the children of a politician or senior civil servant, is that the nature of the anti-money laundering, AML, regime more broadly requires the policy decision to apply on an international level. The inconvenience is, therefore, warranted by the objectives of tackling money laundering and political corruption. If there were significant national discretion to disapply these measures, those countries to which they most need to apply would probably be the first to disallow their application.

I have no doubt that it is true to say that most people in politics are not at high risk, and that is particularly true of their children and spouses. However, we have seen examples of assets being transferred between family members under questionable circumstances. It is sometimes the most obvious means of circumventing enhanced due diligence, and one of the many issues that both the EU and the Financial Action Task Force are moving to address is the capacity to address money laundering on an international basis.

The application of enhanced due diligence to domestic PEPs is still a relatively new development. The 2018 Act brought domestic PEPs into the enhanced due diligence requirements for the first time. It is clear from our discussions that practical issues are arising in many cases. That being said, I remain to be convinced that the issue is with the legislation itself. It is perhaps more to do with the application by the Central Bank or financial institutions under its guidance.

As Senators are aware, the AML regime operates at multiple levels. The directive and the Act are at the top level. The regulation of banks and other financial institutions in how they implement the provisions sits with the Central Bank of Ireland, which also provides guidance to the firms it regulates. I understand the Central Bank of Ireland conducted a formal public consultation on the guidance that it provides under this regime. However, the ultimate responsibility for identifying a PEP sits with a designated person, for example, a bank. One is obliged to gather sufficient information to support identification and to apply appropriate measures thereafter.

In my view, the legislation takes a reasonable and measured approach in section 37. It appears to me that the issue is with how the legislation and the guidance are applied by individual banks in individual cases rather than with the Act itself. That being said, I acknowledge the point of the amendment and share the concerns of the Senators. I am also particularly conscious that the obligations on PEPs run wider than financial services and it is not only for the Central Bank to address these issues. Other designated persons and competent authorities are involved and I want to see a consistent and proportionate application of these requirements across the board. I have taken in the Senators' concerns and intend to look at inserting a subsection (13) to section 37 of the 2010 Act which will provide for the Minister, with the consent of the Minister for Finance, to issue guidance to all competent authorities where it is necessary to promote consistent, effective and proportionate application of the section.

The hope is that guidance would not be issued and it certainly would not be issued in the short or medium term. We expect competent authorities and designated persons to develop an appropriate and reasonable approach without top-down guidance. However, the provision would be there should it ultimately be needed by the Minister and if it were required, having seen how the regime develops.

There is a balance to be struck. I cannot in good faith put an amendment down that implies we could disapply measures like determining sources of funds or that we could decide that enhanced diligence is not needed where it is clearly required by the directive. Similarly, the Minister for Justice is not the appropriate person to be issuing detailed operational instructions to financial services firms. These are matters for the Central Bank. That is not her intention. However, I also do not envisage an extended delay in respect of this issue. We are consulting the Department of Finance, the Attorney General and the Office of the Parliamentary Counsel on this drafting. I expect to be in a position to have a final decision by Report Stage in the Seanad.

As regards the prominent public function guidance, Senator McDowell raised the issue of POs, An Bord Pleanála and even reports by people at other levels. Under section 10, prominent public function guidance is due to be issued after the commencement of the section. There will be strong guidance as to who should or should not be included within that.

Senator Bacik referred to the Magnitsky Act. The Department of Justice is seriously considering Deputy Howlin's and the Labour Party's proposal in that respect and it is with the Attorney General. It is a very important proposal and should be facilitated.

I thank the Minister of State and I understand that he could not take the amendment on board. I am not proud of any particular version of it but the idea that there should be some way in reserve of bringing common sense into the administration of this legislation is important. In the amendment, I tried to tiptoe through the minefield of not offending European law in doing it.

I will say two things by way of a footnote to all of this. I welcome what the Minster of State is doing and thank him for listening to us. One of the most amusing aspects of this is that organisations write one a letter saying that one is a PEP and the first thing they ask for is proof that one is the person to whom they are writing, which is a complete joke.

Second, I ask the Minister of State to take a look at the provisions of section 40 in respect of the capacity of one institution to take on board the due diligence of another. It applies to everybody in the community except PEPs. When it comes down to opening a credit card account, having to prove it all again just because someone is the son-in-law of a Senator is excessive. That could be tweaked in the manner I have set out in a subsequent amendment. I am grateful to the Minister of State for his reasonable approach to this and I look forward to being able to deal with this properly on Report Stage.

I also thank the Minister of State for his very constructive response, both in respect of Senator McDowell's amendment, which we all support, and as regards my question about the Magnitsky legislation. I am grateful and delighted to hear that plans are under way to introduce an Irish version of the Magnitsky Act. It is long overdue and my Labour Party colleagues and Deputy Howlin will be very glad to hear it too.

Amendment, by leave, withdrawn.
Section 11 agreed to.
NEW SECTION

I move amendment No. 8:

In page 11, between lines 23 and 24, to insert the following:

“Amendment of section 38A of Act of 2010

12. The Act of 2010 is amended by the substitution of the following section for section 38A:

“Enhanced customer due diligence – high risk third countries

38A. (1) Subject to subsection (2), a designated person shall apply the following measures to manage and mitigate the risk of money laundering and terrorist financing additional to those specified in this Chapter, when dealing with a customer established or residing in a high-risk third country:

(a) obtaining additional information on the customer and on the beneficial owner;

(b) obtaining additional information on the intended nature of the business relationship;

(c) obtaining information on the source of funds and source of wealth of the customer and of the beneficial owner;

(d) obtaining information on the reasons for the intended or performed transactions;

(e) obtaining the approval of senior management for establishing or continuing the business relationship;

(f) conducting enhanced monitoring of the business relationship by increasing the number and timing of controls applied and selecting patterns of transaction that need further examination.

(2) Subsection (1) shall not apply where—

(a) the customer is a branch or majority-owned subsidiary of a designated person and is located in a high-risk third country,

(b) the designated person referred to in paragraph (a) is established in a Member State, and

(c) the branch or majority-owned subsidiary referred to in paragraph (a) is in compliance with the group-wide policies and procedures of the group of which it is a member adopted in accordance with Article 45 of the Fourth Money Laundering Directive.

(3) In the circumstances specified in subsection (2), the designated person shall—

(a) identify and assess the risk of money laundering or terrorist financing in relation to the business relationship or transaction concerned, having regard to section 30B, and

(b) apply customer due diligence measures specified in this Chapter to the extent reasonably warranted by the risk of money laundering or terrorist financing.

(4) A designated person who fails to comply with this section commits an offence and is liable—

(a) on summary conviction, to a class A fine or imprisonment for a term not exceeding 12 months (or both), or

(b) on conviction on indictment, to a fine or imprisonment for a term not exceeding 5 years (or both).”

Amendment, by leave, withdrawn.
Section 12 agreed to.
NEW SECTIONS

I move amendment No. 9:

In page 12, between lines 7 and 8, to insert the following:

“Amendment of section 40 of Act of 2010

3. The Act of 2010 is amended by the substitution of the following section for section 40:

“Reliance on other persons to carry out customer due diligence

40. (1) In this section, ‘relevant third party’ means—

(a) a person, carrying on business as a designated person in the State—

(i) that is a credit institution,

(ii) that is a financial institution (other than an undertaking that is a financial institution solely because the undertaking provides either foreign exchange services or payment services, or both),

(iii) who is an external accountant or auditor and who is also a member of a designated accountancy body,

(iv) who is a tax adviser, and who is also a solicitor or a member of a designated accountancy body or of the Irish Taxation Institute,

(v) who is a relevant independent legal professional, or

(vi) who is a trust or company service provider, and who is also a member of a designated accountancy body, a solicitor or

authorised to carry on business by the Central Bank of Ireland,

(b) a person carrying on business in another Member State who is supervised or monitored for compliance with the requirements specified in the Fourth Money Laundering Directive, in accordance with section 2 of Chapter VI of that Directive and is—

(i) a credit institution authorised to operate as a credit institution under the laws of the Member State,

(ii) a financial institution (other than an undertaking that is a financial institution solely because the undertaking provides either foreign exchange services or payment services, or both) and authorised to operate as a financial institution under the laws of the Member State, or

(iii) an external accountant, auditor, tax adviser, legal professional or trust or company service provider subject to mandatory professional registration or mandatory professional supervision under the laws of the other Member State,

(c) a person who carries on business in a place (other than a Member State) which is not a high-risk third country, is supervised or monitored in the place for compliance with requirements equivalentto those specified in the Fourth Money Laundering Directive, and is—

(i) a credit institution authorised to operate as a credit institution under the laws of the place,

(ii) a financial institution (other than an undertaking that is a financial institution solely because the undertaking provides either foreign exchange services or payment services, or both) authorised to operate as a financial institution under the laws of the place,or

(iii) an external accountant, auditor, tax adviser, legal professional or trust or company service provider subject to mandatory professional registration or mandatory professional supervision under the laws of the place,

or

(d) a person who carries on business in a high-risk third country, is a branch or majority-owned subsidiary of an obliged entity established in the Union, and fully complies with group-wide policies and procedures in accordance with Article 45 of the Fourth Money Laundering Directive and is—

(i) a credit institution authorised to operate as a credit institution under the laws of the place,

(ii) a financial institution (other than an undertaking that is a financial institution solely because the undertaking provides either foreign exchange services or payment services, or both) authorised to operate as a financial institution under the laws of the place, or

iii) an external accountant, auditor, tax adviser, legal professional or trust or company service provider subject to mandatory professional registration or mandatory professional supervision under the laws of the place.

(1A) Without prejudice to the generality of paragraphs (b) and (c) of subsection (1), for the purposes of those paragraphs, a person is supervised or monitored for compliance with the requirements specified in the Fourth Money Laundering Directive, in accordance with section 2 of Chapter VI, or requirements equivalent to those requirements, where—

(a) the person and the designated person seeking to rely upon this section are part of the same group,

(b) the group applies customer due diligence and record keeping measures and policies and procedures to prevent and detect the commission of money laundering and terrorist financing in accordance with the Fourth Money Laundering Directive or requirements equivalent to those specified in the Fourth Money Laundering Directive,

(c) the effective implementation of the requirements referred to in paragraph (b) is supervised at group level by a competent authority of the state where the parent company is incorporated.

(2) A reference in subsection (1)(b)(iii) and (c)(iii) to a legal professional is a reference to a person who, by way of business, provides legal or notarial services.

(3) Subject to subsections (4) and (5), a designated person may rely on a relevant third party to apply, in relation to a customer of the designated person, any of the measures that the designated person is required to apply, in relation to the customer, under section 33 or 35(1).

(4) A designated person may rely on a relevant third party to apply a measure under section 33 or 35(1) only if—

(a) there is an arrangement between the designated person (or, in the case of a designated person who is an employee, the designated person’s employer) and the relevant third party under which it has been agreed that the designated person may rely on the relevant third party to apply any such measure, and

(b) the designated person is satisfied that the circumstances specified in paragraphs (a) to (c) of subsection (1A) exist, or on the basis of the arrangement, that the relevant third party will forward to the designated person, as soon as practicable after a request from the designated person, any documents (whether or not in electronic form) or information relating to the customer including any

information from relevant trust services as set out in the Electronic Identification Regulation that has been obtained by the relevant third party in applying the measure.

(5) A designated person who relies on a relevant third party to apply a measure under section 33 or 35(1) remains liable, under section 33 or 35(1), for any failure to apply the measure.

(6) A reference in this section to a relevant third party on whom a designated person may rely to apply a measure under section 33 or 35(1) does not include a reference to a person who applies the measure as an outsourcing service provider or an agent of the designated person.

(7) Nothing in this section prevents a designated person applying a measure under section 33 or 35(1) by means of an outsourcing service provider or agent provided that the designated person remains liable for any failure to apply the measure.”.”.

Amendment, by leave, withdrawn.

Amendment No. 10 has already been discussed.

I thank the Minister of State for his consideration that the provisions of section 40 seem to prevent any relaxation in respect of transferring the obligation to another institution in regard to politically exposed persons. I do not think that is necessarily mandated by the directive. In the circumstances, with the leave of the House, I am not moving this amendment.

Amendment No. 10 not moved.

I move amendment No. 11:

In page 12, lines 10 and 11, to delete “including any information from relevant trust services as set out in the Electronic Identification Regulation” and substitute the following:

“, including any information from relevant trust services as set out in the Electronic Identification Regulation,”.

I am unsure if the Minister of State is prepared to accept this amendment. If he is not I will withdraw it as it is a technical and small amendment.

Unfortunately, from a technical point of view I am unable to accept this amendment.

Tarraingím siar an leasú sin, I withdraw that amendment.

Amendment, by leave, withdrawn.
Section 13 agreed to.
SECTION 14

Amendments Nos. 12 and 13 are related and may be discussed together.

Government amendment No. 12:
In page 12, line 18, to delete “any” and substitute “and”.

These are merely technical amendments.

Amendment agreed to.
Section 14, as amended, agreed to.
Sections 15 to 24, inclusive, agreed to.
SECTION 25
Government amendment No. 13:
In page 27, line 24, after “from” to insert “the”.
Amendment agreed to.
Section 25, as amended, agreed to.
Sections 26 to 30, inclusive, agreed to.
Title agreed to.
Bill reported with amendments.

When is it proposed to take Report Stage?

Is that agreed? Agreed.

Report Stage ordered for Monday, 15 February 2021.
Sitting suspended at 3.05 p.m. until 3.30 p.m.