The Central Bank of Ireland has fined Drimnagh Credit Union €125,000 and reprimanded it for two breaches of the Credit Union Act 1997 (the “CUA 1997”) and five breaches of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (the “CJA 2010”). All seven breaches have been admitted by Drimnagh Credit Union.
The breaches of the CUA 1997 occurred from 1 August 2013 to 30 November 2014 and relate to the following:
- The prohibited payments to certain directors and a Board Oversight Committee member of Drimnagh Credit Union in breach of section 68 of the CUA 1997; and
- Failings in Drimnagh Credit Union’s systems of control in relation to the claiming, recording and approving of officers’ expenses.
In addition, the Central Bank’s investigation also found that for more than five years, from the enactment of the CJA 2010 on 15 July 2010 to 25 September 2015, Drimnagh Credit Union breached a number of key provisions of the CJA 2010. The five breaches identified by the Central Bank’s investigation represent significant and widespread failings in Drimnagh Credit Union’s anti-money laundering/countering of the financing of terrorism (“AML/CFT”) framework, particularly with regard to its implementation of policies and procedures, conducting customer due diligence, monitoring its dealings with members as well as the monitoring and management of its compliance with the CJA 2010.
Derville Rowland Director of Enforcement at the Central Bank Ireland said “The credit union sector is an important and unique component of the Irish financial services industry. There are over 3.26 million credit union members in Ireland, with collective savings approaching €13.4 billion. Credit unions are established to enable members to save together and lend to each other at fair and reasonable rates of interest, operating on a not for profit basis and in accordance with the voluntary ethos of the sector.
Credit union members should be entitled to expect that the funds they have invested will be safeguarded, and that those charged with the stewardship of a credit union will ensure that any payments made to officers of the credit union, whether acting in a voluntary capacity or otherwise, will be done so in compliance with the applicable legislation. The making of prohibited payments to officers in breach of the CUA 1997, and the lack of robust systems of control in this regard, meant that Drimnagh Credit Union was failing in its primary purpose, to safeguard and protect members’ funds. This is highly concerning behaviour and breaches of this nature will not be tolerated by the Central Bank.
Credit unions are also required to comply with the provisions of the CJA 2010, using a risk based approach to assist them in implementing and adopting adequate policies and procedures appropriate to their business to prevent and detect the commission of money laundering and terrorist financing. It is unacceptable that Drimnagh Credit Union had no AML/CFT policies or procedures at all in place for a period of 11 months. When such policies and procedures were adopted, almost a full year after they should have been introduced, they were wholly inadequate in key areas such as customer due diligence, transaction monitoring, suspicious transaction reporting and training. In addition, Drimnagh Credit Union did not monitor and manage compliance with the policies once adopted and did not ensure they were internally communicated to staff members. Further, the failure by Drimnagh Credit Union to apply adequate identification and verification measures to members and to scrutinise their transactions meant that it was unable to properly fulfil its statutory obligations to monitor, identify and report unusual and potentially suspicious activity and created an unacceptable risk of money laundering and terrorist financing.
This is the third enforcement case which the Central Bank has taken against a credit union since the Administrative Sanctions Procedure became fully applicable to credit unions in August 2013. The fine and reprimand demonstrates that the Central Bank will not hesitate to take enforcement cases against credit unions to ensure the highest standards of regulatory compliance across the sector.
It is incumbent upon all credit unions, irrespective of their size or scale, to be aware of and to comply with all applicable regulatory requirements and to have robust systems and controls in place to ensure full compliance. Failure to do so can undermine the credibility and financial stability of the sector and the Central Bank will take action as appropriate where non-compliance is identified.”