AML regulation: risk of penalties of up to CZK 130 million
Obliged persons under the AML Act will be subject to new duties whose violation may result in severe penalties that could be potentially destructive for smaller companies. The legal regulation of sanctions relating to anti-money laundering measures thus follows the trend apparent in other regulatory areas. However, the question remains whether higher maximum penalty rates will bring the desired improvement. The Ministry of Finance is about to submit the legislative proposals to the government.
The first proposed novelty is the introduction of enhanced customer due diligence measures, which will have to be adopted by all obliged persons. This duty will be directly stipulated by law; nowadays, this is only regulated by a Czech National Bank notice and applicable only to persons over which the CNB exercises supervision. To fulfil the new requirements for enhanced customer due diligence, obliged persons will have to ascertain additional information about beneficial owners, verify such information from a larger number of independent resources, and obtain the statutory body member’s consent to enter into business relations with a risky customer.
Another new task for obliged persons will be the reporting of any inconsistencies between documents provided by the customer and entries in the register of beneficial owners. Obliged persons will have to draw their customers’ attention to such inconsistencies. Then, if the customers do not offer appropriate remedies within thirty days, the obliged persons will have to deliver this information along with supporting documentation to the court keeping the register of beneficial owners in which the customer is recorded. If this reporting duty is not fulfilled, obliged persons may be penalised by sanctions of up to CZK 1 million.
The new measures will also have an impact on obliged persons belonging to corporate groups. These will have to prepare and apply relevant corporate group strategies and procedures; if they do not do so and repeatedly violate the new measures, obliged persons from a corporate group may be penalised by sanctions of up to CZK 30 million, with financial institutions having to face sanctions of up to CZK 130 million. The sanctions may even increase where obliged persons benefit from their clients’ behaviour. In addition to penalties, the amendment also specifies other types of sanctions, with the strictest being the prohibition to carry out business activities.
All obliged persons will also have to designate, in writing, a member of the statutory body responsible for meeting the duties arising from the AML Act. If they do not do so, they may again be penalised by sanctions of up to CZK 30 million, or CZK 130 million where financial institutions are concerned.