Publications

 Asset Management and Investment FundsSeptember 10, 2019

AML Inspections – Funds Industry

Funds, management companies and investment firms should prepare for the possibility of an anti-money laundering and counter financing of terrorism (“AML”) inspection by the Central Bank of Ireland’s dedicated Anti-Money Laundering Division (“AML Division”).

In this bulletin we look at why this is the case, what to expect if you are subject to an AML inspection and how Dillon Eustace can help.

More resources, more inspections

One of the strategic priorities of the Central Bank of Ireland (“CBI”) set out in its Strategic Plan for 2019-2021 is supporting the fight against money laundering. The CBI has confirmed that it has increased resources in its AML Division in recent years to support its AML supervisory engagement model which includes inspections, review meetings and risk evaluation questionnaires (“REQs”). We have noticed an increase in inspections amongst our clients which is borne out by the official statistics. The number of AML inspections has more than doubled in the last two years (34 inspections in 2016 versus 72 in 2018). Last year the CBI held 59 AML review meetings and issued 259 REQs for completion.

What to expect from an inspection

Prior to inspection the firm will be asked to submit certain documents in advance of the inspection including the following:

  1. its AML Policy and Procedure;
  2. its risk assessment and details of the risk based approach employed;
  3. board minutes for the last two to three years (for evidence of discussion of AML matters);
  4. details of AML testing and internal/external audits for the last three years; and
  5. details of any internal/external outsourcing arrangements relating to AML. The firm will usually be given two weeks to provide the CBI with the above documents.

During the inspection, the firm will be asked probing questions about the documents and the firm’s AML governance and compliance. After the inspection the CBI will issue post inspection findings setting out details of various matters which need to be remediated by specific deadlines. The CBI will then look for evidence that the firm has remediated the matters by the required deadlines, before closing the inspection out. The close-out of the inspection does not necessarily mean that this is the end of the matter, as serious breaches will be referred to the Enforcement Division.

Enforcement

The number of enforcement cases for AML breaches has increased recently. In the last three years seven firms have been fined for AML breaches, three of these fines running into seven figure sums. The CBI has the power to fine both regulated entities and individuals who are involved in managing the regulated firm. Frequent themes in enforcement cases include deficient internal governance of AML, inadequate AML policies and procedures, insufficient training, issues with transaction monitoring and inadequate risk assessments.

What should you do now and how Dillon Eustace can help

Dillon Eustace have an experienced team of AML professionals which includes a former CBI Enforcement Division staff member who have been through the CBI inspection process. Our team can assist with:

  1. delivering an independent legal review of your AML documents;
  2. ensuring that your AML policies and procedures are comprehensive and up-to-date;
  3. ensuring that all relevant staff have received appropriate AML training; and
  4. preparing you for, and getting you through, a CBI inspection process.

Should you have any queries on the above or require assistance with any aspect of your AML compliance, please contact the authors or your usual Dillon Eustace contact.