Whistle-Blowing Laws Planned for Ireland

Now that Ireland has signed into law the Criminal Justice (Money Laundering & Financing Terrorism) Act 2010 (signed 5 May 2010) - even though we have yet to announce its implementation date - I thought that there would be little in terms of semi-interesting content to write about this month. So I cleared my agenda and headed over to Amsterdam today (Monday 7 June) to attend an AML/CTF conference.  The second presentation of today made me re-think my erroneous assumption.  The presentation focussed upon PEPs and in particular one of the panellists (a former US prosecutor and consultant to the World Bank) took the audience back to the cornerstone of the PEP test, i.e. corruption.

The presentation got me thinking and at the back of conference hall I thumbed my way through the text of the 3rd Directive.  Article 3(5) (e) of the Directive specifically includes corruption as a ‘serious crime’.  ‘Criminal activity’ is defined in the Directive as ‘any kind of criminal involvement in the commission of a serious crime’.  Readers will fully appreciate how, should the proceeds of such a serious crime be disguised, concealed etc., that the offence of money laundering will arise.

On 21 May 2010 the Minister for Justice, Dermot Ahern T.D., announced to the Law Society of Ireland that he desired a new law which, amongst other things, would provide whistle-blower protection for those reporting suspicions of corruption.  I was particularly happy to read the Minister’s comments as only 12 days previously (9 May 2010) I had written an article for an Irish newspaper arguing the need for a law to protect whistle-blowers who report corporate governance and other failures at their institutions (not just financial crime).  The article (Those who cry foul on corporate governance whistling in the dark   http://www.tribune.ie/article/2010/may/09/those-who-cry-foul-on-corporate-governance-whistli/?q=oakes ) cited the approach of the UK's financial watchdog, the Financial Services Authority, which has established a hotline for whistle-blowers.  The hotline is one of the FSA’s responses to the Public Interest Disclosure Act which affords significant protection to employees. A person who discloses, in good faith, a suspected criminal offence, a breach of a legal obligation or the concealment of the offence or breach has an actionable right not to suffer detriment instigated by their employer because of the disclosure. 

Over the past number of years there have been several instances in Ireland where bank employees have claimed their careers suffered after they blew the whistle.  One former bank internal auditor, Eugene McErlean, eventually obtained (after many years) an apology from a former CEO of the bank over his treatment.  The former CEO, when appearing before an Oireachtas Committee, confirmed that McErlean had in fact "undertook the role of auditor in a highly professional, competent and effective manner".  This is a far cry from the bank’s original characterisation of its former internal auditor to say the least.

The Minister for Justice’s announcement on whistle-blowers also followed comments by the Director of Public Prosecutions (DPP), James Hamilton, on 16 May 2010, who called for a whistle-blowing charter.  Mr Hamilton correctly pointed out that people were afraid to come forward for fear of being victimised at work or the risk of losing their jobs.   Mr Hamilton made a simple but effective point: "Quite simply, if you don't have strong whistleblower legislation you probably have no case because you have no witness and no evidence".  It is hard to imagine a more credible person in Ireland than the DPP to make such a point.  We would be foolish to ignore his concerns.

It is early days yet, but the Minister seems intent on following up his policy announcement.  The Minister intends to table a series of reforms on white collar crime designed to detect it, deter it and bring to justice those who perpetrate it.  The measures will include, in addition to a blanket whistle-blower protection for those reporting suspicions of corruption, a new Corruption Bill, a broad and comprehensive white paper on white collar crime and formally requesting the Garda Commissioner (the head of the Irish police force and the Irish FIU) to bring forward proposals for change in the criminal law in this area.

Politics is never too far away when the issue of whistle-blowing or white collar crime arises.  One of Ireland’s opposition parties, the Labour Party, pointed out its deputy leader (Pat Rabbitte) had introduced a private members' Whistleblowers' Protection Bill back in 1999.  Another opposition party, Fine Gael, has recently put forward proposals dealing with this hot topic.   Regardless of a reader’s political persuasions we should hopefully see support from all parties on this important issue.  Watch this space!

[Postscript: While finishing up this article I heard a comment which might send MLROs and the sales staff into a tailspin.  One of the PEP panelists not only recommended mandated PEP checks for both non-resident and domestic PEPs but also compelling customers to complete a form declaring their beneficial ownership of funds and separately whether he/she/it is a PEP (immediate family member or close associate).  He proposed that regulations should support these forms so that if someone lied when completing same, he/she/it could be prosecuted for an offence.] 

Peter Oakes is the founder and managing director of Compliance Ireland Regulatory Services Ltd and City Compliance Regulatory Services Ltd.  In addition to advice and training on financial crime, Peter advises local and overseas firms on regulatory compliance issues (peter@complianceireland.com / www.complianceireland.com). Peter is admitted as a solicitor in Ireland, the UK and Australia.  He has worked in the enforcement and legal departments of, respectively, the UK Financial Services Authority and the Australian Securities and Investments Commission.  Peter is also a former registrar of a disciplinary board which sanctioned auditors and liquidators for regulatory failures.

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