Government told to act on financial transparency legislation
The EU has given the Government a final warning to bring in a new financial transparency law or face a day in court.
The 2019 law would allow the Garda Financial Intelligence Unit direct access to a Central Bank database of Irish-based bank accounts, which was due to go live at the end of this year.
Ireland opted in to the law – although it was not obliged to – but has failed to finalise it.
Croatia and Finland were also cautioned by the European Commission on Thursday over their failure to act.
It was the second formal warning for the three countries after the deadline for transposing the law expired in August 2021.
The Government has two months to reply before it faces a potential court date.
The Department of Justice said it is preparing a statutory instrument with the Department of Finance, which is “expected to be completed in the coming months”.
Full transposition of the directive requires the establishment of the Central Bank database, the Department of Justice said.
Two years ago, the EU took Ireland to court and fined the Government €2m for delays in bringing in a related law, which dated back to 2015.
The 2019 law aims to root out money laundering, terrorist financing and “tax crimes” by shedding more light on suspicious transactions.
It falls under the area of security and justice, for which Ireland has an opt-out under the EU treaties. However, Ireland decided to opt in.
However, last July - a month before the deadline for the 2019 directive to become law - the EU amended it to expand direct access to the Central Bank’s database to include senior Gardaí, the Criminal Assets Bureau and other EU authorities, including Europol.
Police and other authorities across the EU can already exchange financial information with each other on the back of a request, but the rule change would make that immediate.
Junior Justice Minister James Browne told the Dáil last October that not opting in to the updated law “would present risks to Ireland's reputation and the perception of Ireland's commitment to the anti-money laundering framework at EU level".
Separately, the EU is undertaking a major reform of its anti-money laundering rules, for which Ireland has no opt-out.
The reforms are a condition for Ireland to get full payment of a promised €1bn in pandemic aid from the EU’s recovery and resilience fund.
A European Commission report said earlier this year that Ireland faces “entrenched challenges” related to anti-money laundering and aggressive tax planning due to "significant inflows of foreign direct investment and the presence of complex legal structures involving foreign ownership”.
The report said that “further efforts” are needed to ensure the independent supervision of “trust or company service providers” - code for lawyers, accountants or other professionals that set up companies or other structures on behalf of clients.
Dutch MEP Paul Tang, the head of the European Parliament’s tax subcommittee, last week urged Ireland to “be a good European partner” by tackling “phantom investment” from companies using special structures to avoid tax.
The Government has previously entertained hopes of hosting a new EU anti-money laundering agency, which would directly regulate risky firms. EU governments agreed to set up the agency but have yet to decide where it should be located.