It is unsurprising that the anti-money laundering (“AML”) regimes in both the UK and Ireland are similar, given that the legislation in both jurisdictions is largely based on EU directives. It remains to be seen whether, post Brexit, the two regimes may begin to diverge. Those laws obviously make it a criminal offence to engage in, or assist, money laundering. However, they also define various other criminal offences such as “tipping off” of suspects that are under investigation or even, for certain firms, to fail to have adequate AML procedures in place.
If you are a director of a company, you may, in certain circumstances, be at risk of criminal prosecution if the company has committed a criminal offence.
In the UK, Regulation 92 of the Money Laundering Regulations 2017 as amended (“MLRs”) makes Directors liable for certain offences:
Reg 92 MLRs:
(1) If an offence under this Part committed by a body corporate is shown—
(a)to have been committed with the consent or the connivance of an officer of the body corporate; or
(b)to be attributable to any neglect on the part of an officer,
the officer (as well as the body corporate) is guilty of the offence and is liable to be proceeded against and punished accordingly.
The MLRs provides additional relevant information:
Reg 86 MLRs:
(3) A person is not guilty of an offence under this regulation if that person took all reasonable steps and exercised all due diligence to avoid committing the offence.
While Reg 86 helps reduce your liability, the inclusion of the phrase “all reasonable steps” is often viewed as a compromise between taking “best steps” and “reasonable steps” and sits somewhere between the two standards. Suffice to say that unless you keep those steps under regular review, they may not be deemed to be all reasonable steps.
Note that if the firm is FCA regulated, it is arguable that any director made responsible for the establishment and maintenance of the firm’s anti-money laundering systems and controls under the FCA SYSC rules may carry more criminal liability than his fellow directors, depending on how responsibilities have been allocated.
In Ireland the relevant director liability is contained in s111 of the Criminal Justice Act 2010 as amended (“CJA 2010”):
s111 CJA 2010:
Where an offence under this Act is committed by a body corporate or by a person purporting to act on behalf of a body corporate […], and is proved to have been committed with the consent or connivance, or to be attributable to any wilful neglect, of a person who,
when the offence is committed, is—
(a) a director, manager, secretary or other officer of the body, or a person purporting to act in that capacity, or
(b) a member of the committee of management or other controlling authority of the body, or a person purporting to act in that capacity, that person is taken to have also committed the offence and may be proceeded against and punished accordingly.
Assuming a director does not connive or consent to a money laundering breach by his firm, the main risk is therefore one of wilful neglect. While each case must be considered on its merits, the Supreme Court in Ireland has found in certain cases that for an act to be wilful, it should be done deliberately. Taking steps to meet the legal requirements (see below) would help in any defence against such a charge.
While the legislation in the two regimes is similar, there are of course subtle differences. However, as a director in either regime you can reduce your personal liability by considering the following:
In both jurisdictions, there have been to date very few prosecutions of directors in the absence of the director wilfully taking part in money laundering. However, there is a general trend to make directors more accountable and this may change in the future. Additionally, it is more likely that if your firm is regulated, civil action could be taken by a regulator. The same actions outlined above will assist in defending regulatory actions as well as criminal actions.
Sam Stewart is a member of the FS Expert Group. For over 30 years, he has been working in the financial services sector as a practitioner, advisor, accountant and regulator. He currently leads AML Solutions Group, an anti-money laundering consultancy located in Ireland. Sam was previously registered as an MLRO and Compliance Officer with the relevant regulators in the UK for roles at Northern Trust and State Street Global Advisors. At the Financial Services Authority Sam led Enforcement teams responsible for investigating asset management firms and individuals. For full details see www.FSXpert.com
The FS Expert Group provides, through dedicated Experts with exceptional track records, relevant expertise and expert evidence in a wide variety of financial services cases, mindful of clarity and impartiality, whether in Court as expert witness, in tribunal as adjudicator or in the Board Room to instruct and advise.