knowledge | 29 November 2019 |
Whistleblowing under the New Anti-Money Laundering Regulations
Financial institutions and other persons subject to anti-money laundering/counter-terrorist financing compliance obligations now need to put in place whistleblowing arrangements as part of these obligations, if they have not already done so.
The new requirement is set out in the European Union (Money Laundering and Terrorist Financing) Regulations 2019 (the “2019 Regulations”)(here), which amend the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (the “2010 Act”) to give further effect in Irish law to the EU’s Fourth Money Laundering Directive 2015/849 (“MLD4”).
Overview of the 2019 Regulations
The 2019 Regulations amend the 2010 Act to include a new section 54(6A) which requires each person who is a “designated person” for the purposes of that Act, to have in place appropriate procedures for their employees, or persons in a comparable position, to report a contravention of the 2010 Act internally through a specific, independent and anonymous channel, proportionate to the nature and size of the designated person concerned. The new section transposes Article 61(3) of MLD4.
The 2019 Regulations also contain a number of other amendments relating to:
- the fitness and probity of persons performing a management function in or being a beneficial owner of an auditor, external accountant, tax advisor, independent legal professional or property service provider; and
- cooperation between Member State competent authorities and supervision by competent authorities.
The New Whistleblowing Channel
The new requirement to put in place a whistleblowing channel mirrors similar obligations contained in other EU financial services legislation. For example, investment firms and credit institutions are required to have internal reporting procedures in place in respect of infringements of, respectively, the markets in financial instruments legislation and the capital requirements legislation.
However, while financial institutions that are already subject to similar whistleblowing obligations may be able to roll out their existing framework, others will have to put in place new arrangements as soon as possible. Specifically, the new section 54(6A) started to apply as of 18 November 2019 and failure to comply with the new section is punishable by a fine and/or up to five years in prison, following a conviction on indictment.
The new whistleblowing requirement may also have implications for existing reporting obligations which may be triggered by information obtained by a designated person through the whistleblowing channel. For example, regulation 4 of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Investment Firms) Regulations 2017 imposes an extensive reporting obligation on investment firms including where an investment firm becomes aware of:
- a breach by the investment firm of supervisory and regulatory requirements; or
- any situation or event which impacts, or potentially impacts, on the investment firm to a significant extent.
Furthermore, section 38(2) of the Central Bank (Supervision and Enforcement) Act 2013 requires persons appointed to perform a pre-approval controlled function to disclose to the Central Bank of Ireland, as soon as practicable, information relating to, among other things, the commission of an offence under any provision of financial services legislation, including the 2010 Act.
More broadly, section 19 of the Criminal Justice Act 2011 makes it an offence for a person, to fail to disclose information to a member of the Garda Síochána, without a reasonable excuse, which he or she knows might be of material assistance in preventing or prosecuting a relevant offence, including offences under the 2010 Act (see our briefing here).
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.