The Third Money Laundering Directive Implementation Likely To Be Delayed Until Spring

Author:Mr Joe Beashel
Profession:Matheson Ormsby Prentice

Delay in implementation of Third Money Laundering Directive

will be a challenge for designated bodies. Policy makers in

this, as in any other area, must ensure that industry is fully

informed of its obligations in sufficient time to allow

industry to plan to meet its obligations.

The Third Money Laundering Directive (Directive 2005/60/EC)

and implementing measures (Directive 2006/70/EC) (the

"Directive") are due to be implemented in Ireland on

15 December 2007.

The Directive is designed to consolidate the existing regime

and introduce new anti-money laundering and counter-terrorist

financing requirements ("AML/CTF") across the

European Union.

The Department of Finance, along with the Department of

Justice, have confirmed that the new legislation will not be

published until mid to late January. We understand that there

will be a period of consultation before the legislation is

finalised which might not be until March next.

Although the requirement to implement procedures to prevent

and detect both money laundering and the financing of terrorism

are not new, the Directive will introduce some important

changes to that regime which will require careful planning from

affected firms, (referred to in Irish legislation as

"designated bodies").

It is important to note the Directive's requirement that

the board of directors of each designated body must be able to

demonstrate that they have "adequate and proportionate

policies and procedures of customer due diligence, reporting,

record keeping, internal control, risk assessment, risk

management, compliance management and communication". It

takes time to put these processes and procedures in place and

the delayed implementation will no doubt be welcomed by

designated bodies although it may lead to some confusion where

for example, a designated body has clients in Member States

that have implemented the Directive and as such are expecting

the new regime to apply.

Application of a risk based approach

The Directive uses the terminology "Customer Due

Diligence" ("CDD") which is the term used to

describe the process whereby designated bodies form a

reasonable belief as to the true identity of each customer, the

type of business it is involved in and the transactions the

customer is likely to make. Designated bodies will need to have

processes and procedures in place which will collect a range of

information sufficient to allow that firm to identify and

verify each customer, take reasonable measures to...

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