General climate and recent developments
State of legal development
In general terms, how developed are the laws on money laundering, terrorism financing and fraud in your jurisdiction?
The laws on money laundering, terrorism financing and fraud are well developed in Austria as they are fully aligned with EU standards. More information can be found at: https://www.bmf.gv.at/finanzmarkt/geldwaesche-terrorismusfinanzierung/geldwaesche.html.
In early 2017, an important law – the Financial Markets Anti-money Laundering Act – came into force. The act implements the EU Fourth Money Laundering Directive (2015/849), concentrating into a single statute for the first time the provisions on the prevention against the use of the financial system for money laundering and financing terrorism applied to credit and financial institutions. This statute is designed to ensure uniform application of anti-money laundering and terrorism financing obligations, and to facilitate supervision by the Financial Market Authority. Specific provisions can also be found in, for example, the Austrian Trade Act, the Gambling Act and the Codes of Professional Conduct for Lawyers and Notaries. These provisions place great importance on the principle of ‘know your customer’, which is intended to deny money launderers the benefit of anonymity.
Have there been any notable recent developments in relation to anti-money laundering, terrorism financing or fraud law and enforcement, including any regulatory changes, case law and convictions?
On January 15 2018 the Beneficial Owner Register Act came into effect. The act is based on EU legislation on the effective combat against money laundering and financing terrorism.
This new law obliges the following entities to register their beneficial owner(s) in a newly created register: unlimited liability partnerships, limited liability partnerships, public limited companies, limited liability companies, cooperatives, insurance companies, saving banks, European companies (or societas Europaea), European cooperative societies (or SCEs), private foundations, entities that need to be registered in the company register, associations, foundations, funds, trusts and trust-like agreements that are administered in Austria. The beneficial owner(s) is/are the natural person(s) who ultimately own(s) or control(s) the entity. The Beneficial Owner Register Act provides for a distinction between direct and indirect beneficial owners.
The minimum information to be given to the register are first and last names, registration or file number and type of the identity document if the place of residence is not in Austria, date and place of birth, nationality, residence, type and scope of the economic interest and, for indirect beneficial owners, further information regarding the establishment of the ownership. Certain exemptions to the reporting obligation exist under the law. For more information see https://www.bmf.gv.at/finanzmarkt/register-wirtschaftlicher-eigentuemer/Uebersicht/Rechtliche-grundlagen.html.
The register is accessible for the competent Austrian authorities, as well as certain natural and legal persons that are obliged to perform strict customer due diligence in order to verify the customer’s beneficial owner (eg, banks, lawyers, notaries, tax consultants or auditors). Access for natural and legal persons is allowed only in case of a legitimate legal interest. Unauthorised access can be sanctioned with a fine of up to €10,000.
Existing entities must submit their data by June 1 2018. New entities must submit their data within four weeks of their registration. Violations can lead to fines of up to €200,000 (where intent is established) or €100,000 (in cases of gross negligence). The person in charge, as well as the legal entity itself, can be sanctioned.
Legal and enforcement framework
What primary and secondary legislation applies to money laundering, terrorism financing and fraud in your jurisdiction?
The criminal provisions relating to money laundering, financing terrorism and fraud are included in the Austrian Criminal Code. Provisions covering certain professional groups – such as bankers, legal counsel, notaries, auditors, gaming companies and certain trustees – also exist in other statutes. For example, Sections 8a to 8f of the Austrian Bar Rules stipulate, in detail, how lawyers have to proceed if they conduct financial or property transactions on behalf and for the account of a client, or if they plan or are involved in such transactions. Banks are subject to a number of special provisions contained in the Austrian Banking Act. The general rule for these professional groups can be summarised as follows: disclosure obligations deriving from anti-money laundering prohibitions trump the professional duty of confidentiality, even if this duty is otherwise protected by criminal law provisions, such as under banking secrecy or lawyer secrecy.
To whom does the legislation apply? May both individuals and organisations be held liable under the legislation? Does the legislation have extraterritorial effect?
In addition to individuals, legal entities and organisations may – in certain circumstances – be subject to criminal proceedings for actions of their management and/or employees under the Austrian Act on Corporate Criminal Liability. To establish liability under the act, the prosecution authority needs to show either that the criminal offence was committed in favour of the entity (ie, to the benefit of the subject corporation), or that the company violated certain duties that lie within its responsibility – for example, ad hoc information duties.
In general, the Austrian Criminal Code is applicable to offences committed in Austria or on board Austrian ships and aircraft, regardless of their location. In cases of corruption and financing terrorism, the Criminal Code also applies if the perpetrator:
- was an Austrian citizen at the time of committing the offence or acquired Austrian citizenship after the offence, and continues to hold Austrian citizenship at the time criminal proceedings are initiated; or
- was a foreign national present in Austria and unable to be extradited.
In cases of money laundering, the Criminal Code also applies if the predicate offence was committed in Austria. The Criminal Code further applies in cases of:
- participation in offences that the immediate perpetrator committed in Austria;
- offences committed by or against an Austrian government official, an Austrian office holder or an Austrian adjudicator;
- other offences that, regardless of the criminal laws of the place in which they occurred, Austria is obliged to prosecute, even if the offences were committed in a foreign country;
- offences committed by an Austrian national against another Austrian national if both parties have their place of residence or habitual residence in Austria; and
- offences committed in a foreign country that are punishable under the laws of the place where they occurred if the perpetrator:
- was an Austrian citizen at the time of committing the offence or acquired Austrian citizenship after the offence and continues to hold Austrian citizenship at the time criminal proceedings are instigated; or
- was a foreign national at the time of committing the offence and was apprehended in Austria and cannot be extradited to the foreign country for reasons other than the type or nature of the offence.
Is your jurisdiction a party to any international cooperation agreements to combat money laundering, terrorism financing and fraud?
As a EU member state, Austria is part of all treaties, agreements and legislation signed or issued by the European Union to combat money laundering, financing terrorism and fraud. Furthermore, Austria signed and ratified the UN Terrorist Financing Convention.
Austria is part of the Financial Action Task Force (FATF), which was established as an independent anti-money laundering organisation at the 1989 G7 Summit in Paris. Today, the FATF has 37 members, including the major financial centres of Europe, North America, South America and Asia. Austria was examined by the FATF in 2015/2016. The assessment report was published in September 2016 and is available on the FATF website.
Which government authorities enforce the law on anti-money laundering, terrorism financing and fraud, and what is the extent of their powers?
The law on anti-money laundering, financing terrorism and fraud is enforced mainly by the public prosecution authorities and the criminal courts. For regulatory violations of the Financial Markets Anti-money Laundering Act and the Austrian Banking Act, the Financial Market Authority is competent. The authority may impose sanctions on the management involved in the misconduct.
In case of suspicion of money laundering or terrorism financing suspicion, the Money Laundering Office at the Ministry of Interior Affairs has to be notified.
Statute of limitations
What is the limitation period for bringing actions in relation to money laundering, terrorism financing and fraud offences?
The limitation period for criminal liability depends on the potential punishment. The statute of limitations is 10 years for offences punishable by imprisonment of between five years and 10 years. This applies in the most severe cases of money laundering, serious fraud offences and/or financing terrorism. For simple fraud involving damages of less than €5,000, the statute of limitations is one year. The period for time limitation commences with the completion of the offence or cessation of the illicit conduct. Certain circumstances extend the time bar – for example, committing a further offence that is based on the same malicious propensity, during the running time period. In this case, the statutory limitation period expires for both offences only at the point at which the limitation for the further offence lapses.
How are ‘money laundering’, ‘terrorism financing’ and ‘fraud’ legally defined in your jurisdiction?
‘Money laundering’ is the concealment of the illegal origins of income from certain criminal activities, referred to as prior criminal offences. The scope of ‘terrorist financing’ is more difficult to define than money laundering. It is understood to be providing assets (including legal assets) for the perpetration of a terrorist act. Similarly to the fight against financing terrorism, international standards also exist for combating proliferation financing, since the proliferation of weapons of mass destruction also poses a serious danger to international peace. The precise definitions are provided below:
- ‘Money laundering’ (Section 165 of the Criminal Code): A person commits money laundering when he or she hides or conceals the origin of assets that are the proceeds of specific felonies or certain offences punishable by imprisonment for more than one year, especially by making false statements in the context of transactions about the origin or true nature of these assets, property or other rights attached to them, the permission to control them, their transfers, or about their whereabouts (Section 165(1) of the Criminal Code). Money laundering is also committed by a person who knowingly takes possession of, stores, invests, administers, transforms, utilises or transfers to a third person any assets that are proceeds of one of the offences listed above (Section 165(2)) or of any assets over which a criminal organisation or a terrorist association has the power of disposition (Section 165(3)).
Assets are considered to be proceeds of a crime if the perpetrator has obtained the assets through an offence or has received them to commit an offence, or if the assets represent the value of the assets originally obtained or received (Section 165(4)).
The potential punishment is imprisonment for up to three years if the offence is committed in relation to a value exceeding €50,000; if the offence is committed as a member of a criminal organisation that has been formed for the purpose of laundering money on a continuing basis, imprisonment is for one to 10 years.
- ‘Terrorism financing’ (Section 278d of the Criminal Code): A person commits terrorism financing, if he she provides or collects funds intending that they be used, in whole or in part, to commit:
- the offence of hijacking an aircraft or intentional endangerment of the safety of aviation;
- the offence of kidnapping for ransom or to threaten to commit that offence;
- an attack against limb, life or liberty of an internationally protected person or an attack involving the use of force against a residence, office or means of transportation of an internationally protected person that is capable of endangering limb, or the freedom of that person, or any threat of such attack;
- the offence of intentionally creating a nuclear power or ionising radiation hazard, to threaten to commit that offence, unauthorised dealing with nuclear or radioactive material or radiation equipment, any other offence relating to the acquisition of nuclear or radioactive material or a threat to steal or rob in order to acquire nuclear or radioactive material in order to coerce another to do, tolerate or omit an act;
- a serious attack against limb or life of another at an international civil aviation airport, a destruction of or serious damage to such an airport or to an aircraft at such an airport, or a disruption of the services of the airport if the offence involves the use of a weapon or other devices that are capable of jeopardizing the security at the airport;
- an offence committed in one of the ways set out in Sections 185 or 186 of the Criminal Code against a ship or fixed platform, against a person on board a ship or on a fixed platform, against a cargo of a ship or a shipping installation;
- the carrying of an explosive or another lethal device in a public place, a government or public facility, public transport, supply systems, or the use of such devices for the purpose of causing the death or serious assaults of another or of causing extensive destruction of the place, facility, or systems if the destruction is capable of bringing about considerable economic damage; or
- an offence that seeks to bring about the death or serious assault of a civilian or another person in an armed conflict who is not actively participating in the hostilities if the offence, due to its nature or circumstances, is intended either to intimidate a segment of the population or to coerce a government or an international organisation to perform or not to perform an act.
The potential punishment is imprisonment for one to 10 years.
- ‘Fraud’ (Section 146 of the Criminal Code): A person commits fraud when he or she has the intention to gain an unlawful material benefit for him or herself, or a third person, and, by deceiving another person about material facts, causes the other person to carry out, tolerate or omit an act that causes a financial or other material loss to the other person or a third person. Fraud is therefore a felony where the victim causes, by his or her own action, toleration or omission, the damage to him/herself or to a third person.
The potential punishment for fraud is imprisonment for up to six months or a monetary fine not exceeding 360 penalty units. In case of an aggravated fraud (eg, by using a false or forged legal document or damages exceeding €5,000), the punishment is imprisonment for up to three years; in case of damages exceeding €300,000, imprisonment is for up to 10 years.
In Austria, there are separate legal provisions for aggravated fraud, commercial fraud and insurance fraud.
Principal and secondary offences
What are the principal and secondary offences in relation to money laundering, terrorism financing and fraud?
The Austrian legal system does not distinguish between primary and secondary offences. However, as described in more detail above, there is a principal offence, such as fraud, and if this offence is committed with means that are driven by a higher criminal mind (eg, by counterfeiting legal documents), the range of the applicable fine or sentence is increased. This kind of fraud is called ‘qualified fraud’. The same principle of a higher qualification of the crime applies if the damage caused by it or the object of the crime has a higher financial value. The increase of the punishment is significant: while simple fraud can be sanctioned by a monetary fine, severe fraud is sanctioned by imprisonment of up to 10 years.
How are predicate offences defined?
Although there is no explicit legal definition of ‘predicate offence’, there is a common understanding of its meaning. In connection with anti-money laundering, the predicate offences are explicitly listed in Section 165 of the Criminal Code. Predicate offences are felonies (intentional offences that are punishable by imprisonment for life or by imprisonment for more than three years), offences against someone’s property punishable by imprisonment for more than one year, counterfeiting legal documents, counterfeiting specially protected legal documents, counterfeiting public authentication marks, suppressing legal documents, relocating boundary markers, resisting the authority of the state, founding or participating in a criminal association, providing false testimony, providing false testimony to an administrative authority, counterfeiting evidence, suppressing evidence, active and passive bribery, misdemeanours against IP law provisions if committed to generate a steady flow of income, or misdemeanours under financial laws relating to smuggling or the evasion of income or expenditure taxes.
De minimis rules
What de minimis rules apply to money laundering, terrorism financing and fraud offences?
There is no general de minimis rule for money laundering, financing terrorism and fraud offences. However, either the prosecution authority or the criminal court has the right to terminate a proceeding due to its minor nature. The suspect’s guilt, consequences of the offence and the suspect’s behaviour after committing the offence with regard to a potential compensation must be evaluated to assess whether the negative impact is of minor nature. In addition, a penalty must not be imposed solely to deter the suspect or the general public.
Penalties and plea agreements
Are plea agreements available? If so, how often are they used and what rules, standards and procedures apply?
Plea agreements are not available in Austria.
However, pleading guilty will lead to a reduced punishment.
In general, non-prosecution agreements do not exist in Austria. There are, however, two related concepts: ‘diversion’ and ‘termination of proceedings’. Owing, in part, to cultural opposition to agreements offered by the prosecution authorities, neither option is used frequently.
‘Diversion’ allows the prosecutor to end the criminal prosecution of a corporation if it does not seem necessary to punish the corporation. A number of factors are considered, including the conduct of the corporation after the alleged offence (here, self-reporting is of particular importance), the weight of the alleged offence, the amount of the fine to be imposed and the detriment suffered by the corporation due to the misconduct.
The public prosecution authority is however obliged to pursue diversion if certain criteria are met. These include:
- the facts of the case are sufficiently established (here, self-reporting may be essential);
- the personal culpability of the accused is not grave;
- adequate damages have been paid; and
- punishment of the corporation is not necessary for special or general prevention.
While a termination of proceedings leads to a full acquittal, diversion is positioned between a conviction and an acquittal. In contrast to a conviction, a diversion is not entered in the criminal register for corporations and the related fines are lower.
Are plea agreements available? If so, how often are they used and what rules, standards and procedures apply?
Plea agreements are not available in Austria. As discussed above, there are ways to reduce the punishment or even to avoid a conviction. In cases of severe fraud or money laundering, however, such alternatives are either unavailable under the law or not commonly used because of cultural opposition to agreements offered by the prosecution authorities.
What defences are available in your jurisdiction to parties accused of money laundering, terrorism financing or fraud?
According to Section 165a of the Criminal Code, a person is not liable for money laundering if the person, freely and before the authorities become aware of the person’s culpability, enables the seizure of assets involved, by informing the authorities or by contributing to this result in another way. The person is also not liable if the assets are seized, without the person’s contribution, if that person, not knowing about the seizure, freely and genuinely attempts to enable the seizure.
Section 166 stipulates a defence for commission of fraud within a family. Thus, liability for defrauding a spouse, registered partner, lineal descendant, sibling or other relative with whom the defendant shares a household would lead to imprisonment for up to three months or a monetary fine not exceeding 180 penalty units, or imprisonment for up to six months or a monetary fine not exceeding 360 penalty units, if the offence would otherwise be punishable by imprisonment of three years or more. These favourable factors do, however, not apply to a guardian, trustee or custodian who acts to the detriment of the person for whom he or she has been appointed. Furthermore, the perpetrator may be prosecuted only at the request of the victim.
There is no special defence available to parties accused of financing terrorism.
Depending on the severity of the offence under prosecution, the defendant may be eligible for ‘diversion’ (see above).
For companies, the Companies Criminal Liability Act offers in Section 18 very specific preconditions under which the prosecution authority may refrain from prosecution.
Record keeping, disclosure and compliance
Record-keeping and disclosure requirements
What record-keeping and disclosure requirements apply to companies and relevant individuals under the anti-money laundering, terrorism financing and fraud legislation?
As a rule of thumb, keeping records for seven years from the transaction and as long as investigations are pending is required. There are a number of legal provisions concerning record- keeping, including Section 21 of the Financial Markets Anti-money Laundering Act requiring that records be kept for five years from the transaction. For more information concerning record- keeping in Austria see https://www.wko.at/service/wirtschaftsrecht-gewerberecht/eu-dsgvo-speicher-und-aufbewahrungsfristen.html.
What internal compliance measures are required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?
Corporations are liable for the unlawful and culpable actions of their decision makers (ie, higher-ranked individuals with authority to represent the company) and, under more restrictive conditions, also for the actions of their ‘normal’ employees, provided that the offence was either committed for the benefit of the corporation or the offence violated duties incumbent upon the corporation itself. If the offence was committed by a normal employee, it must have been either rendered possible or facilitated by the decision makers' failure to take essential precautionary measures. Consequently, companies have to implement a proper compliance system in order to reduce their risk of criminal liability. Thus, implementing a proper compliance system that safeguards compliance with the law, including anti-money laundering, has become best practice in Austrian corporations. However, there are no general mandatory internal compliance measures for companies in relation to anti-money laundering, financing terrorism and fraud in Austria. Only for specific professions, such as bankers and lawyers, do specific rules apply. Companies that implement a compliance management system may get a certification according to the International Standards ISO 19600 “Compliance management systems – Guidelines” and ISO 37001 “Anti-bribery management systems – Requirements with guidance for use”. The certification enhances the reputation of the company and demonstrates transparency to its shareholders. It may also help the company in participating in tenders and reduce the risk of prosecution.
What customer and business partner due diligence is required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?
Austria is fully compliant with the EU regulations, in particular through the enactment of the Financial Markets Anti-money Laundering Act, which implements the EU Fourth Money Laundering Directive (2015/849) and concentrates all relevant provisions into a single statute. Specific provisions applying to certain professions can be found, for example, in the Austrian Trade Act, the Gambling Act and the Codes of Professional Conduct for Lawyers and Notaries. All of these provisions place great importance on the principle of ‘know your customer’, which is intended to deny money launderers the benefit of anonymity. Among other rules, new business partners need to be carefully vetted, and the identify the beneficial owner of a new business partner needs to be disclosed and documented. Entering into a new client relationship requires a careful assessment of the anti-money laundering and terrorism financing risks. Also during an ongoing business relationship, these checks must be carried out repeatedly. Furthermore, the origin of funds for a specific money transaction needs to be identified. Special attention is to be paid to transactions of €15,000 or more.
Transactions that cast doubt on the origin of the funds trigger immediate notification duties. The professional duty of confidentiality is overridden by the duty to report any suspicion of money laundering for financial institutions, legal counsel, notaries public etc. The duty of notification is lifted for legal counsel hired to defend the alleged perpetrators of such crimes in order to allow a proper defence under the ‘fair trial’ principle.
Can private actions be brought in your jurisdiction for damages arising from money laundering, terrorism financing or fraud? If so, who may file such actions and what filing procedures apply?
Besides filing a claim for damages in a civil court, a private party that is the victim of a criminal offence and suffered damages from it can join a criminal proceeding as a private party. This is a time and cost-effective way to seek compensation. The accession as private joinder can be submitted to the prosecution authority or the police and, after the indictment, to the criminal court. The criminal court may award damages if the necessary taking of evidence regarding the private joinder does not substantially delay the proceeding. In practice, the criminal court awards damages only if the amount of the claim can be easily assessed – in particular, when the victim expressly acknowledges such amount. While such an acknowledgement is rare, it may happen when the victim seeks a lower punishment by offering compensation for the damage. While the private joinder is pending in criminal proceedings, civil claims will not get time-barred if the civil law suit is swiftly (ie, without delay) submitted to the civil court once the criminal proceedings have ended.
How are damages calculated?
First, causality needs to be established. The legal question to be answered is: “If the offence had not have taken place, would the damage have occurred?” Second, if the causal link has been established, then the court will compare the financial situation of the victim before and after the event. If this comparison shows a financial loss, this loss is regarded as the damage that will have to be compensated. This applies to damages actually suffered and also to potential future earnings. If the victim lost a readily available chance to gain profits, this will also be considered as loss. The burden of proof rests with the victim.
There are no punitive damages under Austrian law. However, in case of a criminal conviction the Austrian criminal authorities have the power to confiscate proceeds of the crime and any advantage gained through the crime.
What other remedies may be awarded to successful claimants?
If causal damages are likely to occur in the future, a declaratory judgment holding the opponent liable in principle can be obtained. If the Unfair Competition Act has been violated, cease and desist orders and – in specific cases – orders to publish the judgment can be obtained.