The Notice from the Banco de Portugal (Bank of Portugal) 5/2013 (“Notice”), about the prevention of money laundering and terrorism financing, was published in the Portuguese Official Gazzette, on December 18, 2013. It will enter into force on February 16, 2014, revoking the prior Notice number 11/2005, of 21 July, and the Instruction 26/2005, of 16 August, which lied on the same matter.
The drafting of this Notice came out from the articulation of the Banco de Portugal with the Comissão de Mercado de Valores Mobiliários (Portuguese Securities Market Commission) and the Instituto de Seguros de Portugal (Institute of Portuguese Insurance), under the aegis of the National Council of Financial Supervisors, and considered the contributes of several entities obtained through a public consultation process.
The Notice arises with the purpose of regulating and defining the conditions, the mechanisms and the procedures of Law No. 25/2008, from 5 June (“Law”), as provided in paragraph a), number 1 of article 39 of the Law, which grants the Banco de Portugal competences to regulate on the effective compliance of the duties that the entities subject to the regime of preventive rules of money laundering and terrorism financing are bound by.
In addition to the provision set forth in paragraph a), number 1 of article 39, article number 12 of the Law must also be highlighted, as it grants exclusively to the Banco de Portugal the power to subject other modifications, besides the ones foreseen, to the compliance of additional measures of diligence.
Scope of application
It is important to begin by identifying the entities within the subjective scope of the Notice. According to the wide enumeration of article 3, all credit institutions, financial companies, payment institutions, institutions of electronic currency with headquarter in the national territory and their branch offices (sucursais) located in the national territory and finally, the entities providing postal services which also provide the public with financial services subject to the supervision of the Banco de Portugal are covered by the Notice.
Duty of Supervision
The Notice emphasizes the supervising powers of the Banco de Portugal, in particular, according to article 5, the ones to:
- Monitor the activity of the financial institutions;
- Demand financial institutions to comply with obligations of report;
- Perform inspections within the facilities of the financial institutions;
- Issue recommendations or specific determinations; and
- Decide on the execution of special audits carried out by an independent entity.
Duty of Identification
In accordance with the provisions of the Law, and of article 9 of the Notice, the financial institutions shall comply with a duty of identification when establishing any business relation or when executing occasional transactions of an amou nt equal or superior to € 15.000, regardless of whether it is a single operation or various operations that seem to be linked.
The execution of this duty comprehends the two following procedures:
- Registration of the elements of identification concerning the clients of financial institutions, their representatives and the effective beneficiaries of the business relations and occasional transactions; and
- Verifying the truthfulness of the elements of identification obtained.
Moreover, under article 13 of the Notice, credit institutions shall adopt additional procedures, within a special duty of care, whenever they open deposit banking accounts.
Duty of diligence
The Notice further foresees that financial institutions shall comply with a procedure of vigilance of the clients, by means of both a procedure of simplified diligence (article 34) and a procedure of re-enforced diligence (article 35), which foresees the adoption of additional measures of diligence in the predicted cases, in a proportionate and adequate way according to the level of risk associated to the client or the operation.
The duty of diligence must always be complied with in case there is a business relation or an occasional transaction, regardless of the amounts concerned, if there is a suspicion concerning the crimes of money laundering or terrorism financing.
Other relevant issues
Besides the duties described above, the following aspects in the Notice shall be noted:
- It stipulates rules allowing the institutions to have an approach based on the risk and thus adapting the nature and the extension of the procedures of identification and diligence;
- It establishes rules on the activity of the payment institutions and institutions of electronic currency, with headquarters in Portugal or abroad, through agents, and clarifies the functions and responsibilities of those agents;
- It re-enforces the obligations of the institutions regarding the systems and the procedures of internal control;
- It re-enforces the requirements and obligations of the compliance function;
- It defines requirements regarding the formation policy of the institutions;
- It includes lists exemplifying high-risk factors and operations with suspicions of money laundering and terrorism financing.
Overall, the Notice materializes and details the duties of the entities described in article 3, which are essentially duties of supervision, identification, special duties of care, diligence, control, and formation, among others.
In general, it clarifies the extension and the degree of responsibility of the management body of the institutions; it creates the conditions to promote a more active supervision and compels the financial entities to provide more and better formation to the company’s employees in such matters.
It should be noted that this set of new rules and new procedures will demand a significant effort from the entities within its subjective scope in order to adapt themselves to the structures and procedures foreseen until February 16, when the Notice enters into force.