The Central Bank of Ireland (the “Central Bank”) has entered into a Settlement Agreement with effect from 3 October 2013 with AXA MPS Financial Limited (the “Firm”), a regulated financial services provider, in relation to two breaches of the Criminal Justice (Money Laundering & Terrorist Financing) Act 2010, (the “CJA 2010”).
Reprimand and fine
The Central Bank reprimanded the Firm and required it to pay a monetary penalty of €50,000.
The two breaches identified, of the CJA 2010, are:
- That between 15 July 2010 and March 2011, a period of over 7 months, the Firm was in breach of its customer due diligence requirements under sections 33 and 35(1), concerning the identification and verification of customers and beneficial owners. The breach occurred as a result of the Firm’s reliance on a third party to carry out its customer due diligence requirements when it was not eligible to do so due to its failure to comply with the pre-condition set out in section 40(4)(b) CJA 2010; and
- That for 18 months, between 15 July 2010 and 31 January 2012, the Firm was in breach of section 37 which required it to take steps to determine whether a customer, or a beneficial owner connected with the customer or service concerned, residing in a place outside the State, was a politically exposed person or an immediate family member, or a close associate of, a politically exposed person, prior to establishing a business relationship with the customer.
These breaches were identified by the Firm and voluntarily reported by the Firm to the Central Bank in March 2011.
Background to the breaches
Contravention 1 concerns a failure by the Firm to meet one of the reliance conditions of section 40(4) CJA 2010, such that the Firm was in breach of the customer due diligence requirements of section 33 and 35(1) CJA 2010 concerning the identification and verification of customers.
Where a firm wishes to rely on a third party to perform its due diligence requirements under sections 33 and 35(1) CJA 2010, it can only do so if it fulfils the conditions in section 40(4)(a) and (b) CJA 2010 which require:
- An arrangement between the firm and the third party under which it has been agreed that the firm may rely on the third party to apply any such measure; and
- That the firm is satisfied, on the basis of the arrangement, that the third party will forward to the firm, as soon as practicable after a request from the firm, any documents or information relating to the customer that have been obtained by the third party in applying the measure.
The Firm relied on a third party to carry out its customer due diligence obligations. Due to delays experienced in receiving requested documentation or information, it could not have been satisfied, within the meaning of section 40(4)(b) of the CJA 2010, that documents or information relating to customers would, in fact, be forwarded to the Firm as soon as practicable after a request from it.
Contravention 2 concerns a breach of section 37 CJA 2010 which deals with the requirements for politically exposed persons (“PEP”s). A PEP is an individual who is, or has been, at any time in the preceding 12 months, entrusted with a prominent public function. Section 37 CJA 2010 requires entities such as the Firm to take steps to determine whether or not a customer, or a beneficial owner connected with the customer or service concerned (non-resident in Ireland), is a PEP or an immediate family member or a close associate of, a PEP. Such steps must be taken prior to establishing a business relationship with the customer. By the time that this section 37 CJA 2010 requirement came into force, on 15 July 2010, the Firm had plans to put in place an IT solution to deal with the requirements to check for PEPs, which was delayed until 31 January 2012 due to an IT issue and the interim measures put in place by the Firm to manually check for PEPs were inadequate.
Link to Central Bank of Ireland press release: click here