The Cabinet has approved a Bill to transpose the criminal justice elements of the Fifth EU Money Laundering Directive into Ireland.
This follows the European Court of Justice decision to fine Ireland €2 million in July 2020 as a result of its delay in implementing previous anti-money laundering and counter terrorist finance measures which it was meant to adopt in 2017.
The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Bill 2020 includes provisions to:
- improve the safeguards for financial transactions to and from high risk countries;
- sets new limits on the use on anonymous pre-paid cards;
- brings a number of new designated bodies under the existing legislation, including virtual currency providers and associated online "wallet providers" for virtual currencies as well as dealers and intermediaries in the arts trade;
- prevents credit and financial institutions from creating anonymous safe deposit boxes;
- enhances the customer due diligence (CDD) requirements of the existing legislation;
- provides for a regime of ministerial guidance which would clarify domestic "prominent public functions".
Rules for virtual asset service providers
Notably, the new law will introduce tougher KYC rules and anti-money laundering provisions for virtual asset service providers (VASPS) such as crypto focused companies and exchanges and will essentially treat and regulate VASPS in the same way as traditional financial institutions for the first time. Crypto-currency platforms had been previously accused of being open to use for criminal and terrorist financing activities, so the move to bring them within the regulatory framework and subject to regulatory supervision is a necessary step in the development of crypto-currency platforms.
It is expected that the Department of Finance will bring forward additional legislative amendments to, inter alia, provide for a registration and fitness and probity regime for VASPS.
Changes are also under consideration at an EU level, with the publication of the EU Commission's digital finance package. If implemented, this would create a legislative framework for crypto-assets and would regulate issuers of crypto-assets. If the proposal becomes law, crypto-asset service providers will be required to have a physical presence in the EU and will require authorisation from their relevant national competent authority. Such crypto-asset service providers will also be subject to:
- Prudential requirements
- Organisational requirements
- Rules on safekeeping of clients’ funds
- Rules on complaint handling procedures
- Rules on conflicts of interests
While clearly the implementation of the proposals is some time off yet, the likely evolution of the regulatory framework for cryptocurrency exchanges and issuers is becoming clearer.