An amendment transposing the 5th AML Directive enters into force in November
The 5th AML Directive introduces namely measures to increase the transparency of beneficial ownership, extends the scope of obliged entities to virtual currency service providers, strengthens the rules for the assessment and increased care of obliged entities for clients from high risk third countries and addresses the risks associated with anonymous prepaid instruments.
Since 1 November 2020, the amendment to the Act No. 297/2008 Coll. on protection against money laundering and on protection against financing of terrorism comes into effect, transposing the 5th AML Directive into Slovak legislation. The key changes include:
1. Scope of obliged persons
Based on the development and experience from practice, the 5th AML Directive revises the scope of obligated persons listed in Section 5 of Act no. 297/2008.
Under Slovak law, the transposition of the 5th AML Directive implicates :
i) narrowing of the scope of obliged persons in the rental of real estate and art shops by introducing a criterion of the value of brokered business and setting the threshold to EUR 10 000,
ii) extension of the scope of obliged persons in the category of auditors, external accountants and tax advisors to include other persons who provide assistance in tax advice. Amendment to the Act no. 297/2020 also includes in this category other persons who provide advisory services in tax matters pursuant to special regulations, for example pursuant to the Act on Trade Licensing or the Act on Advocacy. Persons who undertake to provide, directly or through other persons with whom that other person is connected, material assistance, assistance or advice in tax matters as their principal business or professional activity should be included in the extended scope of the regulation.
2. Framework for virtual currencies
The approved amendment represents a major milestone in the provision of services related to virtual currencies.
Based on the amendment, the obligated persons will also include entities providing certain services related to virtual currencies as providers, that professionally deal with currency exchange services between virtual currency and uncovered currencies (fiat currencies), or virtual currency wallet service providers.
This means in practice that after the amendment, these providers will also be obliged to, for example, identify the client (KYC) and end user of benefits, find out information about the purpose and nature of the planned transaction, perform client control or report unusual transactions.
The amendment also introduces some new legal definitions of the related terms "virtual currency", "virtual currency wallet service provider" and "virtual currency service provider". The condition for the provision of both of these services will be the acquisition of a trade license for a licensed trade. For the sake of completeness, we add that a trade license issued for a trade whose content meets the characteristics of the provision of virtual currency exchange services or the provision of virtual currency wallet services issued before 31 October 2020 expires on 28 February 2021.
3. UBO data
The 5th AML Directive strengthens public access to beneficial ownership information in relation to the public availability of data on ultimate beneficial owner (UBO). The changes to the 5th AML Directive also include the strengthening of the exchange of information on UBO’s and the introduction of a central register of UBO.
The most significant change in the current regime of data publicity is that the new data on a UBO will be publicly available to the following extent: name, surname, date of birth, nationality and address of residence, as well as data establishing the status of UBO.
The amendment responds to this request of the 5th AML Directive in such a way that the function of the central register of UBO will be provided by the Register of Legal Entities, while the above-mentioned data on UBO should be available to the general public from 10 January 2021. This data is to be provided by the Statistical Office of the Slovak Republic through its website, and the data made available in this way would be free of charge.
4. Additional changes
The 5th AML Directive expressly provides that, when implementing due diligence measures, equivalent requirements will apply to legal entities such as foundations and legal structures similar to the management of entrusted assets.
The amendment therefore requires that when obliged persons enter into a business relationship not only with a business undertaking but also with an entity with a similar legal structure (e.g. a foundation, a non-profit organization providing services of general interest, a non-investment fund or other special purpose vehicle) they must require a certificate of registration or an extract from the relevant register and the identification of the individual who is authorized to act on its behalf.
The amendment also establishes a cross-reference to the Notarial Code by explicitly stipulating that the fulfillment of notaries' duties under Act no. 297/2008 is not limited by the statutory obligation to maintain confidentiality under the Notarial Code. The change responds to practice, according to which in the past notaries refused to provide the financial intelligence unit with the necessary co-operation during the inspection due to the statutory obligation to maintain confidentiality in the Notarial Code.
The amendment also furthers the scope of politically exposed persons by persons of national or regional significance, on the basis of which, for example, representatives of municipalities or officials of the prosecution.