Ivana Bacik

 

Criminal Justice (Money Laundering and Terrorist Financing) Bill 2009: Second Stage

2^nd March 2010

 

Senator Ivana Bacik: Like the other speakers, I welcome the Minister of State and the Bill. I believe it was welcomed on all sides in the Dáil too on Second Stage in November, followed by the Committee and Report Stages in January and February, respectively.

 

Like Senator Regan, however, I am somewhat critical of the Government in terms of the delay in bringing forward this legislation which we all agree is needed. The main aim is clearly to transpose the third EU money laundering directive of 2005, which was supposed to have been implemented by 15 December 2007. By late last year Ireland was one of only three countries in the European Union that had fallen behind in implementing the directive, with Belgium and Spain being the others. As Senator Regan and others have said, we were heavily criticised at EU level and were subject of court judgments because of this delay. While I acknowledge we need time to debate such legislation, it should have been introduced earlier to enable us to have time for the full debate that is required and to enable us to meet our obligations.

 

It is not just that we need to be seen to be good Europeans as Senator Regan said. Ireland’s credit rating is low because we are seen to have failed in the regulation of our banking and finance systems generally. Important legislation such as this adds substantially to our reputation as an ethical and sound place in which to do business. The Minister, Deputy Dermot Ahern, has acknowledged — it was acknowledged in the Dáil earlier — that the Bill is important for our reputation, apart from being important in a substantive way in terms of redrafting offences, etc.

 

It is worth talking about that more general context on a day when almost all contributors on the Opposition side and also some on the Government side called for a debate on banking. We are seeing the cost of the bailout of Anglo Irish Bank, in particular, rise at an alarming rate. We see the great concerns about the costs we will incur through NAMA. We have seen Postbank going to the wall. It is worth reflecting on our failures to regulate efficiently and effectively in the past to ensure our banking sector did not get carried away in the testosteronefuelled orgy of lending to those who should not have got loans, which we all now acknowledge.

 

I wish to mention the more general issue of enforcement regarding white-collar crime. When Edwin Sutherland, the American criminologist, first developed his thesis on white-collar crime he could not get a publisher for his study of corrupt, illegal and fraudulent practices in a range of different professions, which makes a very good read even today. Owing to fears during the McCarthy era, publishers were unwilling to take anything that named big business as being complicit in fraud. Of course, the book was eventually published and went on to be one of the leading criminological texts and put white-collar crime on the map.

 

Unfortunately, in this country for far too long we had a similar view to the McCarthy era potential publishers of Edwin Sutherland’s work in that we have been afraid to name the shady practices that were going on in our banks. For example, we were fearful about raising concern about interbank lending, which we now know was going on among financial institutions, seeking to hide an outflow of deposits from Anglo Irish Bank, in particular. We are now told the regulators were telling the banks that they had to wear the green jersey. We are told that people who talked about this were talking down the economy and being in some way unpatriotic. As a result, we saw fraudulent practices among banks being treated at arms’ length and not undergoing the full rigours of the criminal process to which they should have been treated. We saw fraudulent practices that were not investigated or prosecuted in the way they should have been. For far too long we turned a blind eye to this sort of high-level crime or fraud.

 

We have not used the Criminal Justice (Theft and Fraud Offences) Act, which remains the leading Act dealing with offences against property, including offences of fraud. We have not extended that Act in practice to cover offences of money laundering and offences involving millions and billions of euro rather than the petty crime that is routinely prosecuted every day involving shoplifters, burglars and so on under that Act. I have previously quoted the famous words of Jeffrey Reiman who said: “The rich get richer and the poor get prison”. Sir Kenneth MacDonald, the former British DPP, was quoted in the Dáil debate on this Bill referring to somebody who steals a small amount and gets caught going to prison, but somebody who steals a large amount from pension funds or people’s savings ending up getting a yacht rather than prison. There has clearly been a disconnection for far too long between the crimes of the powerful and the crimes of the powerless.

 

Senator Ross’s book on the bankers points out in very graphic terms how many shareholders — ordinary pensioners who had invested their life savings in what they saw as gold-standard stocks and shares in the banks — lost their lifesavings as a direct result of the reckless risk taking of those at the top in the banks, yet those men at the top in the banks — they were mostly men — walked away with golden handshakes, large bonuses and enormous salaries. It has been said before that if Lehman Brothers had been Lehman sisters this would not have happened and certainly might not have happened to the same extent. It is probably no coincidence that in Iceland the people turned to women to restore some sort of sense to its economy when the crash came. We have not, unfortunately perhaps, taken that route yet.

 

Certainly everybody now acknowledges there was an orgy of reckless lending. It is not something for which we are all to blame. The Labour Party believes blame should fall squarely on the Government. For 13 years it failed to regulate the banking sector and failed to ensure some stop was put on the mad over-reliance on construction. It was not that people did not know about this. I clearly recall in 2007 both major Opposition parties, the Labour Party and Fine Gael, stating there was an over-reliance on construction, which was not healthy for the economy, and that the lending and spending spree had to be reined in, yet Fianna Fáil and its junior partners in government at the time kept insisting that the fundamentals were sound and that we were talking down the economy, and as a result they were re-elected in 2007.

 

Since then we have all seen the extent of the crash. However, there has still been a tendency on the Government benches to blame international causes. Undoubtedly the international climate contributed, but when one considers the Irish economic collapse compared with other countries, we see that here it is also very much our own Government’s policies that brought about the extent of the collapse and the extent of the rise in jobless figures and so on. Share-holders who have lost their life savings and pensioners of Waterford Glass and other places who have lost their pensions also know this was a crisis caused as much by national policies and national failures as much as by international ones. Future generations will also know this as they are saddled with the NAMA debts and saddled with bailing out zombie banks like Anglo Irish Bank. However, we are still being told these are of systemic importance. The myths are still being peddled.

 

I have digressed from the point of the Bill, but it is worth considering the context. The Bill deserves a welcome because it takes white collar crime seriously. All sides of the House agree for far too long in this country we have not taken white collar crime seriously. Although the Bill is long overdue, we welcome it. It recognises one of the truisms of the international financial system on which Deputy Higgins commented in the Dáil. A great failure of the international financial system is that it has chosen to be silent on the issue of the transmission of dirty money in the world. With his characteristic eloquence he describes what others call “hot money” as “dirty money” — money that is being laundered. He pointed out the enormous cost of dirty money and unregulated financial corruption to the developing world. Senator Quinn rightly focused on Switzerland as a country where for far too long there was far too much fraud and corruption in banking and far too little regulation. The complicity of Swiss banks in corruption is usually blamed on African countries. Deputy Higgins rightly pointed out that Nigerian corruption is seen as an African problem and yet for every Nigerian dictator who has impoverished his country, there has been a Swiss bank in which he could lodge his billions. There has been an enormous cost for developing countries. Figures have been quoted. For example in Russia €20 billion was looted out of that country in the two-year period 1988 to 1989.

 

An analogy which I believe is useful and which was mentioned at the justice committee recently is the enormous cost to the Exchequer and internationally of cigarette smuggling and the complicity of the big tobacco companies in facilitating this to happen and not regulating it enough. Similarly, the transmission of dirty money, as Deputy Michael D. Higgins has described it, is being done with complicity by western banks and the western banking system. This EU initiative we are now transposing into Irish law is an important step in the process of trying to change that and restore some sort of ethical compliance within our banking system as much as within the European banking system. It is about restoring our international reputation as a place in which financial services are conducted in an ethical and reputable manner but it also plays a much bigger part in restoring confidence generally within the European Union.

 

In the time remaining I will examine the specifics of the Bill but I also want to make a general point about the principle of consolidation. The Minister, Deputy Dermot Ahern, referred to the consolidating nature of this Bill. It certainly refers to a great deal of earlier legislation and repeals a large number of regulations under the Criminal Justice Act 1994 which until now was the main legislation on money laundering. It is somewhat regrettable, however, that the opportunity was not taken in the Bill to do a proper consolidating or codifying job as was done in the Criminal Justice (Theft and Fraud Offences) Act 2001 where an attempt was made to try to bring every statute dealing with theft or fraud offences against property into one piece of legislation.

 

Unfortunately, in this area of money laundering offences and terrorist financing we still have a range of legislation dealing with it. The Bill amends various provisions of the Criminal Justice Act but it does not repeal the Act in total and, in a way, that is regrettable. A previous Minister for Justice, Equality and Law Reform, Michael McDowell, had a pet project of codification of the criminal law. I am aware work on that is ongoing but this could have been an opportunity to codify at least one area.

 

Deputy John Curran: The timeframe might have been an issue.

 

Senator Ivana Bacik: I accept the Minister of State’s point that the timeframe was an issue. I wish to speak briefly about the specifics of the Bill. I welcome the broader definition of “criminal conduct” and “proceeds of crime” in section 6 and the cross border dimension. I note, and the Minister highlighted, the interesting mens rea requirement for the crime of money laundering, namely, that it can be proven where a person believes the property is probably the proceeds of crime. That would be useful in prosecution.

 

I note also the extensive powers given to the gardaí under section 17 but that there is a recognition of their extensive nature in that a superintendent can effectively close a business for seven days without recourse to a judge. I am glad there is an opportunity under section 19 for a person to come back to the district judge to revoke it. That is important.

 

Time does not permit me to go into too much more detail but I have some concern about the vagueness of certain definitions. The Minister has indicated some areas on which he will come back. Section 35 which deals with the definition of a politically exposed person is too vague. I ask the Minister to look at it again. Section 24 which deals with the definition of a property service provider is also too vague. Many ordinary individuals under the Celtic tiger years could easily now be described as property service providers. Will all of the onerous obligations under section 55 which deals with record keeping and section 54 which deals with internal policies, procedures and training apply to them? I see there is an opt-out for the training provisions but they will still be required to keep policies and procedures and to be liable for criminal prosecution if they do not. I ask that this might be looked at again.

 

Acting Chairman (Senator Michael McCarthy): The Senator’s time is up.

 

Senator Ivana Bacik: I beg the Chair’s indulgence. There are two interesting models elsewhere. In Britain a five year strategy has been adopted in conjunction with its legislation on anti-money laundering and counter terrorist financing. In Belgium the legislation is to include a question and answer form for evaluation of clients’ risk profile. That would be a useful model for us to adapt in this legislation.

 

I have more to say, particularly on the monitoring issues——

 

Acting Chairman: Unfortunately, the Senator does not have time.

 

Senator Ivana Bacik: ——and whether it is appropriate for the Minister to act as monitor for designated persons but I look forward to discussing all of those issues and more on Committee Stage.

 

Senator Jim Walsh: I do not want to chase red herrings introduced by Senator Bacik too

far——

 

Senator Ivana Bacik: Can one chase a red herring?

 

 

Criminal Justice (Money Laundering and Terrorist Financing) Bill 2009: Report and Final Stages.

21^st April 2010

Senator Ivana Bacik:      I am not speaking against the amendments but we had some debate on this matter on Committee Stage. It is very much related to amendments I have tabled, namely, amendments Nos. 7 and 9. We are all in agreement about the aim of the Bill and want to ensure the correct people are covered by it. On Committee Stage I raised with the Minister the issue of whether the Bill captures the sufficient numbers. Amendments Nos. 6 and 8 are designed to capture a larger group. Do they capture the issue of external accountants? How do they relate to the definition of “designated person” in section 25?

Chartered Accountants Ireland has raised with the Minister and the Department the fact that accountancy bodies do not have regulatory functions or practising certificate regimes and therefore may not be in a position to monitor their members for anti-money laundering purposes. It is also concerned that there are people who hold themselves out as “accountants” but who are not members of any accountancy bodies. Given that the term “accountant” is not protected by Irish law, Chartered Accountants Ireland is concerned that such people may not, therefore, be caught under this provision although it seems they will be captured within the definition of “designated persons” under sections 24 and 25 of the Bill.

In such circumstances, the competent authority in respect of external accountants or people holding themselves out as accountants but who are not members of an accountancy body would have to be the Minister. I tried to capture some of my concerns and those of Chartered Accountants Ireland in this regard with amendments Nos. 7 and 9, which would include the term “insolvency practitioner”. I have used the term to mean a person acting as liquidator, provisional liquidator, receiver or examiner to a person or as trustee in bankruptcy proceedings whether the person holds accountancy qualifications, is a member of a designated accountancy body or is a relevant independent legal professional.

My amendments would capture more accurately the group of persons who will not be governed by the regulatory regime of a designated accountancy body. I do not oppose amendments Nos. 6 and 8 but I am not sure that they are comprehensive enough. I ask the Minister to clarify that point. When we debate amendments Nos. 7 and 9 I will ask the Minster whether he will be willing to accept them. He indicated on Committee Stage that he would examine the issue of insolvency practitioners in particular.

Senator Ivana Bacik:      I move amendment No. 7:

In page 22, line 40, after “adviser,” to insert “insolvency practitioner,”.

I have explained the rationale for tabling these amendments. I also raised the issue on Committee Stage. I am concerned that the existing provisions of the Bill do not cover those persons who hold themselves out as “insolvency practitioners”, that is, persons who act as liquidators, provisional liquidators, receivers, examiners, trustees in bankruptcy proceedings or administrators under the insurance and credit union Acts. Such persons will be captured if they are members of a designated accountancy body or the Irish Taxation Institute in accordance with the Minister’s amendments. However, he has acknowledged that these persons may not hold accountancy qualifications and may not be members of a designated accountancy body, the Irish Taxation Institute or a legal professional body. In the interests of ensuring adequate consumer protection, it is important, therefore, to include a term that would capture a group which may not otherwise be captured. The Minister described them as “amateur practitioners”, but a consumer dealing with someone who holds himself or herself out as an insolvency practitioner may not be aware of the professional or amateur status of the person concerned. Chartered Accountants Ireland has also suggested it would be useful to include the term “insolvency practitioner” in the Bill.

I assume the Minister will respond again that this matter can be revisited at a later stage and that further classes of practitioners may be designated but that is not satisfactory. We are dealing with the final Stages of a Bill that has been passed by the Dáil. Therefore, this issue should have been tidied up, clarified or resolved before now. My amendment would do this.

Senator Ivana Bacik:      I am grateful that the Minister has given a considered response to my proposal and that he is willing to come back to review the issue and examine the possibility of designating other groups in the future, but I am disappointed the matter cannot be resolved and that an amendment cannot be made to capture this group. It is important in the interests of the consumer to ensure as large a group as possible is covered, but I will not press the amendment. Amendment, by leave withdrawn.

Senator Ivana Bacik:      I move amendment No. 22:

In page 42, lines 34 and 35, to delete “and the Revenue Commissioners”.

On Committee Stage the Minister had sympathy for the point that the section involved a bureaucratic overload in that two separate reports were required. The amendment would remove the obligation to report also to the Revenue Commissioners. I will not press the amendment, but it should be enough to report to the Garda Síochána, given that there should be very strong liaison between these bodies. We all want the legislation to be as effective as possible, but there should be sufficient liaison between the Garda and Revenue such that one reporting obligation would suffice.

Senator Ivana Bacik:      I move amendment No. 23:

In page 58, line 45, after “oath” to insert “or affirmation”.

The amendment seeks to insert the words “or affirmation” after “oath” since the law allows affirmations to be made as well as oaths. Strictly speaking, it may not be necessary to do this, as the matter is covered by the reference to oaths in the interpretation legislation, but it would be an improvement in terms of clarity of the Bill. It is a matter of principle and would be a good idea to include the words “or affirmation” wherever the word “oath” appears in modern legislation.

Senator Ivana Bacik:      I will not press the amendment to a vote, but it is an important principle, to which the Labour Party and I personally adhere. We should seek to ensure in a modern, pluralist republic that, where possible, we separate church and State in every aspect. To include the word “oath” without also including “or affirmation” is bad practice in a modern state. I will not press the amendment, but the Minister will see the amendment crop up time and again in legislation from the Labour Party.

Amendment, by leave, withdrawn.

Senator Ivana Bacik:      I move amendment No. 24:

In page 78, line 44, after “purpose,” to insert “as giving rise to civil or criminal liability or”.

The amendment seeks to strengthen the whistleblower’s section, section 112, as we wish to ensure there is no omission in the protection of whistleblowers. The section only covers protection against an action for breach of confidence and does not provide for immunity from liability for such disclosures. The amendment would clarify the protection provided for whistleblowers and improve the provision.

Senator Ivana Bacik:      I thank the Minister for his kind words. I welcome the passing of the Bill which the Labour Party supports and on which we engaged with the Minister. Apart from the Government, the Labour Party was the only group to table amendments. We did so in a spirit of constructive engagement. As the Minister indicated, the debate on Committee Stage of the Bill in the Seanad was very good. We have teased out very well some of the issues relating to it. Although I am disappointed the insolvency practitioner point was not ultimately accepted, I thank the Minister. I thank him also for his comments on the usefulness of the Seanad and the importance of an Upper House in terms of providing extra scrutiny. It is important. In my short time here I have certainly seen some very good debates on Bills, especially on Committee Stage. Really interesting and complex points have been teased out. I thank the Minister and his officials very much for their work on the legislation.