ICA Ireland AML & FCP Autumn Forum

I CA I reland AML & FCP Spring Forum with La Touche Training

Kenan Furlong

Steven Clodagh Meighan White

Pekka Dare

Brian Hayes

Adrian Kiernan Managing Director, La Touche Training

Kenan Furlong Partner, Litigation & Dispute Resolution, A&L Goodbody

Kenan Furlong – Partner, A&L Goodbody 27 February 2020

M-49035764-1 What is a “corporate crisis”?

“Children’s hospital report says final cost will exceed €1.73bn”

6 Assemble your response team

. Crises require decisive leadership

. As few individuals as possible

> Responsibilities: . manage investigation . update key internal stakeholders . interact with external lawyers

. Exclude those who may be involved in the matter, even peripherally

7 Privilege ‘heat map’

INPUTS ASSESSMENT/DECISION OUTPUTS

Board of directors/ Minutes Third party? Foreign/Other Regulator? Factual discussion Legal advice Assessment/ Factual reports Direction Regulator

‘Business 1’ ‘Business 2’ ‘CLIENT GROUP’ Court

‘Litigation Opponent’ Inhouse Legal Business leads Expert Opinion Third party (common Compliance interest?)

Forensic Review Press/public

Instructions External (or internal) Legal advice Lawyers 8 Formulate a communications plan

Market Customers

Who needs to be Staff contacted? Regulators

Media

9 Legal issues to consider when drafting communications

1 2 3 4 5

Defamation

Employment law

Mandatory reporting

Market abuse

Confidentiality

10 Notify your insurers

1 Watch admissions of liability

2 Assess D&O cover

3 “Immediate” notification often required

11 Manage your documents

Communicate 03 IT department With key individuals. 01 Ensure they are Significant adverse briefed on consequences if requirements, documents are including suspension missing or destroyed of routine document once company is on destruction exercises notice

Hold Notices GDPR Aim is to secure all 02 04 Get your protocols relevant soft and and permissions hard copy documents straight before you start reviewing emails/texts

12 Dealing with whistleblowers

01 02 03

Requirement Practical steps Potential Exposure Companies are required Try to ensure that Companies and/or their to take all reasonable all steps possible are employees can face legal steps to protect the taken not to disclose exposure to the whistleblower if identity of a his/her identity and that seen to 'penalise' him/her for whistleblower, subject to relations with him/her whistleblowing and/or if staff limited exceptions. are managed were seen to 'victimise' the appropriately throughout whistleblower.

13 Dealing with document requests

. Are the requests compulsory or voluntary? If voluntary, consider:

- self-incrimination - GDPR - defamation - employment law issues

. Company can face potentially significant legal exposure

from the voluntary production of documents, particularly

if the provision of those documents is deemed to have

adverse consequences for individuals involved.

. If company is compelled to provide the documents this will tend to 'cure' above issues. 14 Next Steps

1 2 3 4 5

Identify your material risks

Educate your risk committee/board/review management

D&O cover review

Prepare your dawn raid/”break glass” contact list

Gather your team…legal, PR etc

15 Thank you Money Laundering & Terrorist Financing – FIU Perspective

Inspector Steven Meighan Detective Sergeant Clodagh White Garda National Economic Crime Bureau, Garda National Economic Crime Bureau, Barrister-at-la w FIU

Inspector Steven Meighan Detective Sergeant Clodagh White Financial Intelligence Unit (FIU)

An Garda Síochána - Financial Intelligence Unit 18 Presentation Topics

 Role of FIU

 Reporting Requirements - STRs

 STR Analysis

 Terrorist Financing

 Current Financial Crime Trends

An Garda Síochána - Financial Intelligence Unit 19 Role of FIU  FINANCIAL INTELLIGENCE UNIT (FIU) – Part of the Garda National Economic Crime Bureau (GNECB) - Police-based FIU - Garda Officers & administrative support staff

 PRIMARY ROLE/FUNCTION OF FIU: Functions & powers of FIU Ireland on a legislative footing – Criminal Justice (Money laundering and Terrorist Financing) (Amendment) Act 2018 Receive, assess, & disseminate Suspicious Transaction Reports (STRs) from “designated persons” for investigation – Two inhouse ML Teams, CAB or Garda Divisions – specially trained members . . .

 Terrorist Financing Intelligence Unit [TFIU] - STRs potentially linked with terrorist financing (domestic/international) – high priority - further analysis – works closely with Special Detective Unit (SDU) and Security & Intelligence – sharing intelligence & TF investigations

 Training within An Garda Síochána – highlighting importance of financial intelligence in fight against ML, TF & associated predicate offences – very valuable information in STRs

An Garda Síochána - Financial Intelligence Unit 20 Role of FIU Cont’d . . .  Training – Reporting Entities – Trends, Typologies, STR Reporting, etc.

 Cross-jurisdictional nature of money laundering & terrorist financing - Receive/send enqs. to Europol, Interpol, Egmont & FIU.Net (international Approach) – requirement to disseminate STRs to other EU Member States [Art. 52 & 53 4AMLD]

 Sit on the Anti-Money Laundering Steering Committee (AMLSC) chaired by the Department of Finance with other stakeholders – we discuss money laundering and terrorist financing trends and risks, policies, FATF-related matters, etc.

 Bimonthly meetings with the Office of the Revenue Commissioners – discuss STR- related issues – comparisons on number of STRs received, quality of STRs, etc.

 Joint Intelligence Group (JIG) – similar to UK JMLIT – launched in June 2017 – chaired by Head of FIU, Detective Chief Superintendent Pat Lordan & supported by the Banking and Payments Federation (BPFI) - AIB, BOI, Ulster Bank Ireland DAC, permanent tsb, KBC Bank & WUPSIL– small grouping discussing trends, typologies, risks, etc – addressed issue of cardless cash lodgements (CCLs), improving quality of Production Orders. . . Very successful public-private partnership

An Garda Síochána - Financial Intelligence Unit 21 Reporting Requirements – STRs Cont’d. . .  Quality reporting is essential in the fight against ML/TF Attention to detail is paramount . . . > GoAML – structured data What transaction(s)/event(s) has triggered suspicion? Source of funds? Explanation given for source of cash? EFTs: Provide details of remitter, bank name & account details. N.B. Source & Destination countries = essential in GoAML Transaction fields Has inward transaction been queried with remitting bank if deemed suspicious? Narratives on transactions are important (EFTs & PI transfers) Outgoing EFTs: Provide details of bank name, payee account details, any narrative, etc. Current Whereabouts of “Suspicious funds” – Do funds need to be “frozen”? IP addresses? Mobile phone numbers? CDD Documentation? Occupation? Source of Wealth?  Timely reporting is important – important to upload all transactions deemed suspicious – supporting documentation can be attached in STRs

An Garda Síochána - Financial Intelligence Unit 22 STR Analysis Cont’d . . .

 STRs treated as a very valuable source of intelligence – intelligence disseminations (updated addresses, mobile phone numbers, linking persons through transactions, movements of persons, booking flights, hiring cars, ip addresses, etc.)

 Necessity to protect SOURCE - STR-related information never used – used as “triggers” . . . . all relevant documentation uplifted on foot of Court Orders (evidential purposes)

 Other STRs potentially of interest to the Revenue Commissioners

 Good cooperation between reporting entities and FIU Ireland

An Garda Síochána - Financial Intelligence Unit 23 Terrorist Financing

 FOCUS ON DESTINATION OF FUNDS

 Funds used for an illegal purpose (terrorist act or benefit of a terrorist grouping)

 Similar money laundering techniques: 3rd party cash lodgements & withdrawals, electronic transfers, cash couriers, etc.

 Difference: relatively small sums involved - difficult to detect terrorist financing

 Banks & payment institutions most likely to be used - credit cards used to book flights, pay car hire, purchase raw materials, pay accommodation, etc. . . Paris/Belgium Attacks An Garda Síochána - Financial Intelligence Unit 24 25 26 27 Romance Fraud

“My dreams are your dreams, my goals are your goals, and my financial interests are your financial interests”

28 Money Mules What is a “Money Mule”? Fraud/Anti Corruption Prevention Advice to Staff

 Challenge suspicious transactions/Actions – don’t apologise

 Guidelines/Training in ABC/AML legislation.

 If you think something is wrong – it probably is!

 Don’t be afraid to consult with your supervisors

 Check, check and check again!

 Make that phone-call!

 What are your company views on losing a customer? Fraud/Anti Corruption Prevention

Advice to Management  Tone from the top down  Ethical approach to all stakeholders  Integrity  Attitude to ABC and AML legislation  Not a box ticking exercise  Training for management and staff  What my company looks like to the person on the street and on the internet Contact Information:

FIU Ireland, Garda National Economic Crime Bureau (GNECB), Harcourt Street, Dublin 2 D02 DH42

Tel: 003531 6663714 Email: [email protected]

An Garda Síochána - Financial Intelligence Unit 32 Managing Money laundering Risk- Best Pract ice in Cust om er Due Diligence and Risk Assessm ent

February 2020

Pekka Dare Dire ctor Tra in in g , Ed u ca tion & De ve lop m e n t

• Risk Assessment Methodology in practice. • Understanding Nature of business • Source of Wealth and Source of Funds what does good look like for corporate and retail clients. • Evaluating Sanctions risk in CDD • Understanding ownership and Control • Reviewing Negative News and Negative facts • Best practice in documenting and evidencing CDD.

© 2018 International Compliance Association. All rights reserved. UPDATE: The Laundromat Rolls on: Swedbank & Dankse “Nor enough resources or competence to fight money laundering ” admit Sweden’s oldest bank Links to Dankse and Deutsche Bank Clifford Chance Report nest year on actions Global Contagion ….

Inputs CDD Outcomes

Cu stom e r Profile

Cu s to m e r Id e n tifica tion Cu s to m e r Re la tion sh ip Id e n tifica tion Sof/Sow Ris k Fa cto rs Prospect Rating & Acce p ta b iity o f Th e Accepted Customer Assessment Re la tion sh ip Customer Beneficial Owners Cu s to m e r & Con trolle rs Verifica tion

Structured KYC File Screening Sanctions, Peps, Me d ia

• What Does Good Look like?

• RACI Ap p r o a ch • Risk Assessment • Risk Acceptance • Upskills and training for Relationship Managers • Role of 1st line CDD Analysts & QA • Interaction with the 2nd lin e Com p lia n ce

- Rising Standards and regulatory Focus on CDD in Particular - True Understanding of Ownership and Control/ Complex Structures/Nature of business - Geographic Footprint - Source of Wealth/ Source of Funds - Dynamic: reviewing activity v profile - Counterparty DD - New threats and risk - Negative News going deep and new skills & training needed for re la tion sh ip m a n a g e rs / 1 st lin e . “if it isn’t written down it didn’t happen!”

• What is a RAM and how does it relate to the risk based approach? • The link to Enterprise Wide Risk Assessment (EWRA) • RAM is not a fully automated machine. The role of a final human review and weighing of all considerations. • Escalation and event driven and regular reviews

• Review Scenarios:

1- Retail Customers 2. Corporate Customers

Customer High Net Worth / High Volumes of Cash Category: High net worth individual / high volumes of cash

Geography Cayman Islands Category: Cross-border payments to high risk country

Product Multi-Currency Cash Pool Account Category: High Risk Product

Service Low Risk Service Category: Low Risk Service

Other Details N/A Additional Factors Individual #2 Ref #9

Customer High Net Worth Individual Category: High Net Worth

Geography Gibraltar Category: Medium Risk Previous Address

Product Current Account with Electronic Payments and Third Party Payments Category: Medium Risk Product

Service Medium Risk Service Category: Medium Risk Service

Other Details New to Bank Additional Factors Individual #9 Ref #2

Customer Book Shop Owner Category: Self-employed in low risk industry

Geography Guernsey Category: Medium Risk Correspondence address

Product Deposit Account Category: Medium Risk Product

Service Low Risk Service Category: Low Risk Service

Other Details New to Bank Additional Factors Individual #7 Ref #35

Customer Self Employed in the Plumbing Industry Category: Self employed in low risk industry

Geography U.S.A. Category: Cross-border payments to low risk country

Product Individual Personal Loan Category: Medium Risk Product

Service Low Risk Service Category: Low Risk Service

Other Details New to Bank Additional Factors Corporate #4 Ref #4

Customer Cash Intensive Business Category Cash Intensive Business, High Risk SIC Code

Geography Trinidad and Tobago Category High Risk Correspondence Address

Product Current account with third party payments but no electronic payments Category Low Risk Product

Service Low Risk Service Category Low Risk Service

Other Details N/A Additional Factors Corporate #13 Ref #31

Customer Trust Category High Risk Legal Form

Geography British Virgin Islands Category High Risk Country of Registered Address

Product Current Account with Third Party Payments Category Low Risk Product

Service High Risk Service Category High Risk Service

Other Details New to Bank Additional Factors Corporate #9 Ref #16

Customer Charitable Incorporated Organisation Category Low Risk Legal Form

Geography Norway Category Cross-Border Payments to Low Risk Country

Product Markets Online Category High Risk Product

Service High Risk Service Category High Risk Service

Other Details New to Bank Additional Factors Corporate #7 Ref #11

Customer Trust, Complex Group Structure Category High Risk Legal Form, Complex Group Structure

Geography Sweden Category Low Risk Registered Address

Product Asset Finance Category Low Risk Product

Service Low Risk Service Category Low Risk Service

Other Details N/A Additional Factors Establishing So F & So W

Ch e ck Understand Apply a Identify Assess and Understand Verify the consistency with the actual Risk document the Origin Risk Based in form a tion customer or Activities outcome Approach Factors UBO p rofile

The Bank holds an account for an existing property firm Yule Investments Ltd which, due to a combination of factors, has been rated as high risk.

Yule investments was created in 1977 when Newton Properties Ltd was split into two portfolios for sisters Elle Bryant and Simone Hall when their father Simon Yule passed away. The portfolio of property for Elle was called Yule Investments, and at the time was valued at 3.5m AED. Elle is the UBO and director. With current house prices the portfolio is valued at 88.5m AED and no further purchases or sales have happened. Simone does not hold a relationship with Bank.

1. What is the source of wealth?

2. What evidence could be obtained to verify the source of wealth?

An existing customer who was medium risk but due to a change in the p rofile n ow h a s a sig n ifica n t tra d in g re la tion sh ip with a h ig h risk cou n try. The nature of business is IT. Risk assessment now gives a decision of high risk so source of wealth now needs to be verified. The company was initially set up in the late 80's with the total shares costing $4. However the size of the company has grown in the last 30 years with the last 10 year being evidenced by the use of the account.

1. What is the source of wealth?

2. What evidence could be obtained to verify the source of wealth?

The company was initially set up in 1989 with total shares costing $4. It grew organically over the next few years slowly expanding until 1993 when it invested in a larger commercial property at auction at the lowest level of the property downturn. The property was purchased from equity in the business and a loan from a retail Bank of 100,000 AED. In 2006 the property was sold for 5.5m AED a profit of over 5m AED. This came at an opportune time for the business who had scaled back their UAE operations within the property with more and more working from home, saving significant costs. They purchased another property in an area prior to its redevelopment on the outskirts of town which was significantly smaller but had better transport connections. This is where they are currently based.

Since 1993 they have had the following significant contracts which has allowed them to grow at an increased rate. 1994 French aviation invested in their services with a 2.5m AED pa contract. In 1998 this was increased to 15.5m AED pa. In 2001 US aviation outsourced to the company with a contract worth 5m AED pa. German aviation followed in 2007 with a contract worth 6m AED. 2013 US aviation increased the services and products with the contract now worth 12m AED and recently China have a contract of 11m AED. The relationship with the bank has been in place since 2007.

1. What evidence could be obtained to verify the source of wealth?

A small energy company is looking to open an account with the Bank prior to a share issue after winning a specific energy contract. The directors have a strong history of success working within the industry and have designed the company to meet the niche market for the contract. The company itself was set up with $500 with the directors funding this from their personal savings. This is broken down with Paul Brown funding $100, John Smith $100 and Christina Given $300. All have supplied the relevant ID&V which has taken some time as Christina has been working away. Due to a change in the Risk Assessment the company is now classed as High Risk but it was agreed to proceed as the process to onboard had been started, so source of wealth is required to be verified.

The energy company must have an account open before the share issue which will be the significant source of wealth and cannot complete the energy contract without a bank account. The contract itself will be for 12m AED pa for 5 years with the share issue expected to generate 8m AED.

1. What is the source of wealth?

2. What evidence could be obtained to verify the source of wealth?

• Geographical footprint : customer domicile vs. country and sanctions risk exposure through affiliates and source of revenues • Customer base : Country, industry, sanctions & reputation risks arising from the customer’s customers

• A narrative • Rationale as to why risks have been deemed acceptable. • Copies of relevant supporting information • Appropriate language mindful of legal risk

• What does purpose of relationship include? • Why is it im p orta n t?

© 2018 International Compliance Association. All rights reserved. Beneficial ownership create an ownership structure chart for the customer, detailing the ownership links and percentage holdings between entities and private persons, including the cumulated percentages of ownership in the customer. MaidCreek Crayland Ltd is your customer

Ownership layer 1 Jonathan Ca n d e , a Priva te Pe rson , d ire ctly own s 8% of Maidreek Crayland Ltd Webber SA directly owns 40% of Maidreek Crayland Ltd Ha yn zick Inc owns the remainder of Maidreek Crayland Ltd and is listed on the New York Stock Exchange

Ownership layer 2 Jeddrance Ltd directly owns 60% of Webber SA and owns indirectly 24% of Maidreek Crayland Ltd Th e Zaneer Trust owns the remainder of Webber SA Lawford Trustees Inc is the trustee of the Zaneer Tr u s t

Ownership layer 3 Isabelle Rowden is a beneficiary of the Zaneer Tru st (50%) All oth e r b e n e ficia rie s of the Zaneer Trust have small interests Isabelle Rowden owns 25% of Jeddrance Jonathan Ca n d e owns the remainder of Jeddrance Lt d Controllers Isabelle Rowden is the CEO of MaidCreek Crayland Ltd

Type of ownership % in Maidreek Crayland Lt d Jonathan Cande: Direct 8.0% Indirect via Jeddrence Ltd 18.0% Total 26.0% Isabelle Rowden: Indirect via Jeddrence Ltd 6.0% Indirect via Zaneer Trust 8.0% Total 14.0% Others: Indirect via Zaneer Trust 8.0% Haynzick Inc 52.0% Total 100.0%

Please note that the workshops will broadly follow the structure of the relevant units in the Study Text. It is not, of cours e, possible to cover all of the course text within the classroom so therefore focuses on key elements of these through a variety of different approaches. The information that is provided during this classroom, and in any supporting documents, is provided in confidence and may not be disclosed to any third party or used for any other purpose without the express written permission of the International Compliance Association. Whilst every effort has been made to ensure accuracy regarding the content of these slides/notes International Compliance Association cannot be held responsible in any way for consequences arising from the information given. No decisions should be taken on the basis of information included in the slides/notes without reference to specialist advice.

Brian Hayes CEO, Banking & Payments Federation Ireland

Send your questions to www.slido.com # ICAIRL