A designated business must obtain information reasonably warranted by the risk of money laundering or terrorist financing on the purpose and intended nature of a business relationship with a customer prior to establishing the relationship. A designated business which is unable to obtain such information, as a result of failure on the part of the customer, shall not provide the service for so long as the failure continues.
A designated business shall monitor dealings with customers with whom it has a business relationship by scrutinising transactions and sources of wealth or of funds for those transactions, to determine whether or not they are consistent with the business’ knowledge of the customer’s business and pattern of transactions, and any knowledge that they may have that the customer may be involved in money laundering or terrorist financing.
Failure to comply with the obligation is subject on summary conviction, to a fine up to €1,000 and/or, 12 months imprisonment or on indictment up to five years imprisonment and an unlimited fine.
Non-exhaustive list of factors suggesting a potentially lower risk
Customer risk factors:
- public companies listed on a stock exchange and subject to disclosure requirements (either by stock exchange rules or through law or enforceable means), which impose requirements to ensure adequate transparency of beneficial ownership;
- public administrations or enterprises;
- customers that are resident in geographical areas of lower risk .
Product, service, transaction or delivery channel risk factors:
- life assurance policies for which the premium is low;
- insurance policies for pension schemes if there is no early surrender option and the policy cannot be used as collateral;
- a pension, superannuation or similar scheme that provides retirement benefits to employees, where contributions are made by way of deduction from wages, and the scheme rules do not permit the assignment of a member’s interest under the scheme;
- financial products or services that provide appropriately defined and limited services to certain types of customers, so as to increase access for financial inclusion purposes;
- products where the risks of money laundering and terrorist financing are managed by other factors such as purse limits or transparency of ownership (e.g. certain types of electronic money).
Geographical risk factors – registration, establishment, residence in:
- Member States;
- third countries having effective anti-money laundering (AML) or combating financing of terrorism (CFT) systems;
- third countries identified by credible sources as having a low level of corruption or other criminal activity;
- third countries which, on the basis of credible sources such as mutual evaluations, detailed assessment reports or published follow-up reports, have requirements to combat money laundering and terrorist financing consistent with the revised Financial Action Task Force (FATF) recommendations and effectively implement these requirements.]
Non-exhaustive list of factors suggesting a potentially higher risk
Customer risk factors:
- the business relationship is conducted in unusual circumstances;
- customers that are residents in geographical areas of higher risk
- non-resident customers;
- legal persons or arrangements that are personal asset-holding vehicles;
- companies that have nominee shareholders or shares in bearer form;
- businesses that are cash intensive;
- the ownership structure of the company appears unusual or excessively complex given the nature of the company’s business;
- the customer is a third country national who applies for residence rights or citizenship in the State in exchange for capital transfers, purchase of property or government bonds or investment in corporate entities in the State.
Product, service, transaction or delivery channel risk factors:
- private banking;
- products or transactions that might favour anonymity;
- non face-to-face business relationships or transactions, without certain safeguards, such as electronic identification means, relevant trust services as defined in the Electronic Identification Regulation or any other secure, remote or electronic, identification process regulated, recognised, approved or accepted by the relevant national authorities;
- payment received from unknown or unassociated third parties;
- new products and new business practices, including new delivery mechanism, and the use of new or developing technologies for both new and pre-existing products;
- transactions related to oil, arms, precious metals, tobacco products, cultural artefacts and other items of archaeological, historical, cultural and religious importance, or of rare or scientific value, as well as ivory and protected species.
Geographical risk factors:
- countries identified by credible sources, such as mutual evaluations, detailed assessment reports or published follow-up reports, as not having effective AML/CFT systems;
- countries identified by credible sources as having significant levels of corruption or other criminal activity;
- countries subject to sanctions, embargos or similar measures issued by organisations such as, for example, the European Union or the United Nations;
- countries (or geographical areas) providing funding or support for terrorist activities, or that have designated terrorist organisations operating within their country.
Certain categories of persons may rely on certain third parties to apply in relation to a customer, any of the measures that are to be applied under the above provisions regarding due diligence and enhanced due diligence for politically exposed persons.
The designated business may rely on the third-party, if there is an arrangement between the designated business and the third party under which it has been agreed that the designated business may rely on the third-party and the designated business is satisfied on the basis of the arrangement that the relevant third-party will forward, as soon as practicable after a request, any documents, information relating to the customer that has been obtained in applying the member.
A designated business is not required to apply the measures above if having taken such measures as are reasonably necessary to establish that the customer is a specified (exempted) customer or product, as above, the person is so satisfied.
The exemption does not apply in certain cases above.
An exempted customer for the following purpose is a credit institution carrying on business in the State or in another money laundering controlling state, a listed company, or a public body either under domestic or EU law.
The above measures are not required, if having taken such measures as are necessary to establish that the customer is in fact an exempted customer or exempted type of product, it is satisfied that the customer or product is an exempted customer or product.
A exempted product is
- A life assurance policy of not more than €1000 or a single premium of not more than €2,500,
- a policy in respect of a pension scheme, being a policy that does not have a surrender value and may not be used as collateral,
- a pension, superannuation or similar scheme,
An exempted product includes electronic money, in a case where
- the electronic device concerned that cannot be recharged,
- the monetary value that may be stored electronically does not exceed €250 or if it cannot be used outside of the State, €500, or
- where the electronic device can be recharged, the total monetary value of all amounts by which the device may be charged or recharged, in any calendar year, is less than €2,500, and none or less than €1,000 of the electronic money may be redeemed by the issuer in that year.
There is an exemption from carrying out certain customer due diligence measures in respect of electronic money. Certain conditions must be fulfilled if the exemption is to be availed of, including that the monetary value that can be stored on the instrument must not exceed a certain amount.
The issuer of the instrument must carry out sufficient monitoring of the business relationship or transactions concerned to enable the detection of unusual or suspicious transactions. The exemption cannot be applied if the customer is established or resident in a high-risk third country or if the customer or beneficial owner is a politically exposed person.
A designated business to examine the background and purpose of all complex and unusual transactions and to increase the degree and nature of monitoring of a business relationship in order to determine whether the transactions appear suspicious. Failure to comply with legislation is an offence.
A credit institution is not obliged to apply the measures in relation to solicitor’s client account or certain other parties who are supervised or monitored for compliance in accordance with the Money Laundering legislation. There are exceptions to the exemption.
A credit institution may apply the exemption in relation to beneficial ownership of money in a trust, only if it is satisfied that the information on the identity of the beneficial owners held is available on request. The exemptions are not available in certain specified circumstances.