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Investment Funds AML Sectoral Guidelines Agreed with Central Bank

On 18 December 2013, the Irish Funds Industry Association (the “IFIA”) released Investment Funds Sectoral Guidelines on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (the “Sectoral Guidelines”).

The release of the Sectoral Guidelines follows extensive engagement between the IFIA and the Central Bank of Ireland (the “Central Bank”) in order to develop a standard that the Central Bank can use in determining that an investment fund has adequate measures and controls in place.

On 5 December 2013, the Central Bank issued a letter to the IFIA confirming that they have reviewed the draft Sectoral Guidelines and will “have regard” to these when assessing compliance with the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010-2013 (the “Acts”).

The Sectoral Guidelines are subordinate to the Core Guidelines on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing the (“Core Guidelines”) and to the Acts.  The Sectoral Guidelines are to be read in conjunction with the Core Guidelines.

Importantly, Designated Persons (as defined in the Acts) must refer directly to the Acts when determining statutory obligations. Designated Persons have numerous responsibilities under the Acts. In particular, Designated Persons must:

  • apply Customer Due Diligence (“CDD”) procedures to identify and verify customers;
  • identify and, where applicable, verify, the beneficial owners of customers;
  • monitor the business relationship on an on-going basis and report any suspicions of money laundering and terrorist financing;
  • apply Enhanced Due Diligence to high-risk investors;
  • determine the source of wealth and of funds for Politically Exposed Persons;
  • monitor dealings with the customer (to the extent reasonably warranted by risk) by scrutinizing transactions and source of wealth or source of funds for those transactions to determine whether or not the transaction are consistent with the profile of the customer;
  • promptly report suspicions of money laundering or terrorist financing to the Gardaí and Revenue Commissioners; and
  • maintain appropriate records, to train staff and to maintain appropriate procedures and controls pertaining to the obligations imposed by the Acts.

The aim of the Sectoral Guidelines is to provide guidance to Designated Persons on money laundering and terrorist financing in the investment funds sector, in consideration of the Acts.

The Sectoral Guidelines also contains 3 Appendices which provide more general guidance and examples in relation to:

  • due diligence documentation based on investor type;
  • jurisdictions where a presumption of comparability may be made; and
  • Nominees and Intermediary Investments- possible approaches to CDD.

The Sectoral Guidelines will be posted shortly by the Irish Department of Finance. For a link to the website please click here.