New anti-money laundering measures came into effect
On March 15, the amendment to the Act on on Prevention of Legalization of Income from the Criminal Activity and Terrorist Financing (the “AML Act”) came into effect. It transposes the 4th AML directive.
The amendment introduces mainly the following changes:
1. Obliged entity – amendment specifies in more details conditions under which a financial agent, financial advisor, insurance company, judicial executor, attorney-at-law or notary public is considered as an obliged entity for purposes of the AML Act.
In addition, new legislation reduces threshold of payments made or received in cash, execution of which classifies the relevant person as the obliged person, from EUR 15,000 to EUR 10,000.
2. Customer due diligence – scope of the (basic) customer due diligence is extended, for instance, by:
- mandatory identification of the ultimate beneficial owner (the “UBO”);
- adoption of measures for verification of such an identification and for understanding the ownership and control structure of the client;
- identification whether the client or its UBO are politically exposed persons or internationally sanctioned person.
Amendment reduces the threshold of the amount of occasional transactions, under execution of which the obliged entity must apply customer due diligence, from EUR 15,000 to EUR 10,000 (or EUR 2,000 for providers of gambling services).
3. UBO records-keeping – legal entities (excluding public sector entities) and purposeful property associations without legal personality are obliged to identify their UBO, to keep and regularly update data about the UBO – unless they are contained in the verification document filed with the register of public sector partners.
4. UBO registration – registration of data related to the UBO in the relevant register will represent one of conditions for establishment of selected legal entities (e.g. companies, non-investment funds, not-for-profit organizations or foundations). Such UBO data will not be publicly available.
In order to apply customer due diligence, the obliged entity is entitled to obtain UBO data from the Slovak Statistical Office.
Obligation to register UBO data when establishing and registering the above legal entities come into force on 1 November 2018. Legal entities already registered in the respective register (e.g. in the commercial register) by 31 October 2018, are obliged to file the application for UBO data registration by 31 December 2019.
However, registration of the UBO in a relevant register will not replace the obligation to identify and register the UBO under the act on the register of public sector partners.
5. Politically exposed person – means a natural person who is or has been entrusted with prominent public functions, irrespective of the place of his/her permanent residency. Under previous regulation, this category consisted only of such persons with permanent residency outside Slovakia.
6. Simplified due diligence – in areas of lower risk of legalization and terrorist financing, the obliged entities must apply at least simplified customer due diligence. Before adoption of the amendment, no care was required in this case.
7. Enhanced due diligence – obliged entity is required to apply enhanced customer due diligence in a case of a higher risk reflected in the risk assessment, and always with respect to:
- cross-border correspondent relationships of a bank and financial institution with a third-country respondent institution,
- dealing with politically exposed person, or
- with a person established in the third countries identified by the Commission as high-risk third countries.
8. Own activity program and risk assessment – obliged entities must align their own activity programs with the amended legislation by 15 May 2018. In addition, the obliged person must conduct a risk assessment taking into account factors related to the type of the service and risk factors indicated in the AML Act.
9. Administrative offences – amendment regulates conditions for imposition of penalties for administrative offences, increases limits of these penalties (up to EUR 1 million for entrepreneurs and up to EUR 5 million for banks and financial institutions for a breach of selected obligations) and prolongs time limits within which the investigation unit is allowed to impose penalties from one year from detection of the breach to three years.