Revolution in AML to affect all legal entities

With the implementation deadline for the fifth AML Directive approaching, preparations of legislative proposals transposing it into Czech laws are underway, including, among others, an amendment to the Czech AML Act (No. 253/2008 Coll. – Act on Certain Measures against Legalisation of Proceeds from Crime and Terrorism Financing). What new duties does the directive impose on obliged entities and other companies?

The first novelty to affect all legal entities is the introduction of sanctions for the failure to report beneficial owners. The sanctions have to be effective, proportionate, and dissuasive. While until now, it was theoretically possible to only apply general provisions of the Act on Administrative Offences, the new rules will be more concrete. Furthermore, the register of beneficial owners will be accessible to the public.

The main changes will concern financial institutions: they will have to implement measures to prevent accepting payments by anonymous prepaid cards issued in third countries not complying with requirements equivalent to those for prepaid cards issued in the EU. A transaction limit will be set for them, and member states may also ban cards from third countries altogether.

Another area of concern are virtual currencies. A change in their definition is being prepared. Providers of exchange services between virtual currencies and fiat currencies, and custodian wallet providers will have to be registered.

Financial institutions will face considerably stricter sanctions. For serious, repeated or continuous offences, fines of up to CZK 130,000,000 or a ban to undertake the activity may be imposed. Sanctions would cover a wide range of offences: from failure to report a suspicious transaction to absent group strategies or not postponing a customer’s order.

A new obstacle to carrying out the trade/activity of accounting advisors, book-keeping and keeping of tax records is to be introduced: a legal entity will not be allowed to undertake these activities if its beneficial owner has been sentenced, by a final and conclusive judgement, for a crime in connection with carrying out the activity. A similar measure shall also apply to beneficial owners of companies active in legal, audit or tax advisory services, while the beneficial owner will be required to have no criminal record at all.

At present, it is hard to predict the concrete changes which the amendment to the AML Act and related laws will bring. Yet, from the wording of the fifth AML Directive and the legislative proposals published so far, it seems that the rules will tighten further. The changes will concern financial institutions, but will affect other entrepreneurs, too.
 

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