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Irish SPVs deemed Schedule 2 Firms

Ireland 11th Oct 2024
Central Bank of Ireland (CBI) Anti-money laundering (AML) / Counter financing of terrorism (CFT) / Financial Sanctions (FS) Expectations
Regulation & Supervision

The CBI has Regulatory and Supervisory responsibilities covering a range of sectors providing financial services in Ireland and endeavours to operate a high-quality regulatory framework, delivering risk-based supervision with the expectation regulated financial institutions have appropriate polices, controls, and procedures (“PCPs”) in place to meet their regulatory obligations. Through their supervision, the CBI conducts AML/CTF/FS themed reviews and inspections which may form the basis for future regulatory or enforcement actions where breaches are identified.

Irish SPVs deemed Schedule 2 Firms

An Irish SPV that is involved in or carry out activities specified in Schedule 2 of the Criminal Justice Act 2010 (the “Act”) is classified as a “financial institution”, is required to register with the CBI pursuant to Section 108A, and subject to the provisions of the Act. The CBI has published guidance to assist with the completion of the registration form.

Having registered with the CBI, an Irish Schedule 2 SPV (the “SPV”) should have regard to all the key components of Ireland’s AML Regime and should be prepared for a CBI themed review and inspection. These themed reviews and inspections may include the CBI issuing Risk Evaluation Questionnaires (REQs), holding AML/CFT/FS review meetings, conducting inspections and holding ad hoc meetings with the relevant SPV, where required.

With this in mind, the directors of a relevant SPV, who are ultimately responsible for the SPV’s AML/CFT/FS compliance, should be able to demonstrate that the SPV’s inherit risks have been appropriately considered and mitigated through its AML/CFT/FS framework as follows:

Corporate Governance

Key CBI Expectations 

The CBI expects the SPV to ensure that its AML/CFT/FS framework is appropriately governed and operating effectively ensuring a timely resolution to AML/CFT/FS issues and matters requiring remediation identified by the CBI.

To satisfy this expectation, the SPV should be able to demonstrate that AML/CFT/FS matters are a recurring agenda item at board meetings, are subject to robust discussion and challenge from directors, and that those discussions are accurately recorded in minutes of board meetings.

Business Risk Assessments(“BRA”)

Key CBI Expectations

The CBI expects the SPV to conduct a BRA that should document:

  • the methodology employed for the BRA;
  • includes an assessment of the inherent ML/TF/FS risk;
  • an assessment of the effectiveness of the AML/CFT/FS control framework; and
  • details of the overall residual risk.

To satisfy this expectation, the SPV should have a BRA which includes factors such as customer base, products and services, geographic risk, transactions and delivery channels. The BRA should also be a tangible document,  approved by the Directors, kept up to date, and records must be available to the CBI on request.

Polices, Controls, and Procedures

Key CBI Expectations

The CBI expects the SPV to implement and maintain PCPs commensurate to the nature, scale and complexity of a SPV’s activities and consistent with Irish legislative requirements.

To satisfy this expectation, the board of a SPV should implement PCPs which are subject to an annual review, or more frequently, when required. Directors’ consideration and approval of the AML/CFT/FS PCPs should be documented and satisfactorily evidenced.

Customer Due Diligence

Key CBI Expectations

The CBI expects the relevant SPV to comply with Section 33(6) of the Act which requires that all CDD is in place prior to processing a transaction. On 16 December 2020 a “Dear CEO” letter was issued by the CBI on Schedule 2 firms, and it would appear that the CBI considers “loan noteholders” as customers of the SPV; therefore, an SPV must consider AML risk arising from loan noteholders and borrowers and must conduct appropriate due diligence in accordance with the level of risk attached to those parties.

To satisfy this expectation, the SPV should have PCPs which explicitly document the SPV’s approach to identification and verification of customers and should be reviewed, updated and approved to reflect legislative and regulatory guidance. The SPV should also implement controls, to ensure that a transaction cannot occur until all CDD documentation and information is in place to meet the requirements of Section 33(6) of the CJA 2010.

Money Laundering Reporting Officer (MLRO)

Key CBI Expectations

The CBI expects the relevant SPV to appoint a MLRO who should be suitably qualified and have sufficient skills and experience in the area of compliance, particularly in the areas of AML/CFT/FS. That person should be of suitable seniority and authority for the directors of the relevant SPV to react to and act upon recommendations from the MLRO.

To satisfy this expectation, the SPV should appoint a fit and proper MLRO, who abides by the Common Conduct Standards, ensuring the SPV’s AML/CFT/FS framework is appropriately governed and operating effectively.

 

JTC Corporate Services (Ireland) Limited (JTC)

At JTC, we understand how the required regulatory requirements can often become a regulatory burden for clients. Led by Clay Dupuy, the JTC solution  involves the provision of a MLRO service offering to assist with these requirements.

JTC Corporate Services (Ireland) Limited’s MLRO team is based in Ireland and provides an outsourced MLRO oversight control function that will assist the SPV in maintaining an effective AML/CFT/FS framework ensuring compliance with applicable AML/CFT/FS Legislation, Regulations, Guidance and the day-to-day operation of the SPV’s AML/CFT/FS policies and procedures and engagement with the CBI In contract to their providers we have documentation pertaining to the SPV up to date at all times ready to submit to the CBI on a timely basis.

 

Your JTC Irish MLRO Service Contact:

Clay Dupuy
Director of AML Officer Services
JTC Corporate Services (Ireland) Limited
(t) +353 53 910 8160
(e) [email protected]

 

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