In 2018, Slovak Act No. 297/2008 Coll. on the Prevention of Legalization of Proceeds of Criminal Activity and Terrorist Financing and on Amendments to Certain Acts (“AML Act”) has been the subject of legislative amendments twice, and as a result of the extensive amendment adopted with effect from 15 March 2018, the AML Act lays down the changed statutory conditions, including, inter alia, for a program of the obliged entity’s own activities aimed at prevention of money laundering and terrorist financing (“AML program”).
The reason for this extensive amendment to the AML Act was firstly the transposition of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (“4 th AML Directive”). On the other hand, the change in statutory conditions has also been justified by the findings from practice and the constantly recurring interpretative and application complications in supervision.
From 2018, the obliged entity must meet clearly defined requirements for the mandatory essentials of an AML program. A strong AML Program should also include a description of the organizational structure of the obliged entity in terms of its size, nature of activity, number of employees and management method. Under the new legislation, the AML program must be updated, not only in the context of a change in the scope of business but also, for example, before starting to provide new products, but only if these situations could increase the risk of money laundering or terrorist financing in the obliged entity’s operational activities.
However, the basic criterion of whether a given circumstance being assessed may increase the risk of money laundering or terrorist financing will be left to the responsibility of and self-assessment by the obliged entity. The AML program must be approved by the obliged entity’s executive body.
Furthermore, a stable AML program should include not only general but also specific forms of unusual business transactions that may occur in the obliged entity’s business activities.
The AML program must also include a method of assessing and managing the risks that occur when the obliged entity carries out its business activities in accordance with the AML Act.
The most important change to the content of the AML program is a change in the statutory requirements for the person responsible for compliance with anti-money laundering and terrorist financing regulations (“designated person”). The new statutory requirements laid down for the designated person arise, first, from the requirements of the 4th AML Directive and also correspond to the recommendations of the Council of Europe’s Moneyval and the FATF. The designated person’s position must be determined at management level, while the designated person may only be either an executive body or a member of an executive body of the obliged entity, or an officer who must be able to communicate directly with the executive body and the supervisory authority and have access to information and documents which the obliged entity has obtained in relation to conducting customer due diligence and could have used in assessing transactions and, where appropriate, in reporting unusual business transactions. An officer may be the person who is authorised to manage and check the work of the employees, ensure the adoption of timely and effective measures, etc.
The fundamental change is therefore the new definition of the designated person that ensures the performance of tasks in the prevention of money laundering and terrorist financing, reporting of unusual business transactions, and ongoing contact with the Financial Intelligence Unit, whose name, surname and job description is also a mandatory essential element of the AML program. The obliged entity may no longer allow the designated person’s tasks to be performed by a subcontractor as a third party, as was the case in the past. The designated person should be an integral part of the obliged entity’s organizational structure and, at the same time, should guarantee compliance of the obliged entity’s activities with AML/CFT regulations.
Under the new AML Act, obliged entities must adapt their AML programs to the new statutory requirements, including making possible changes to their organizational structures due to the appointment of the designated person by 15 May 2018. If there is a breach of this obligation, or in the case of discovering any deficiencies in the AML program, a fine of up to EUR 200,000 may be imposed on the obliged entity. However, it should be noted that considering the role of the AML program in the functioning of a company, any possible deficiencies in such document may lead to a failure to fulfil this statutory obligation for which the AML Act allows a fine of up to EUR 1,000,000 to be imposed.
A report recently published by the Financial Intelligence Unit confirms in its statistical data that the AML program has always been subject to every inspection by the supervisory authority. Despite the importance and role of the AML program, it can be stated that in almost every inspection, the supervisory authority identified a breach of an obligation or weaknesses in the obliged entity’s AML program. The fact that a considerable number of obliged entities still have not complied with the new statutory requirements for their AML programs is evidenced by the ongoing activity of some entrepreneurs as subcontractors of obliged entities replacing the role of the designated person.
With a stable AML program, being in line with the currently applicable legislation, companies will increase the security level of their internal functioning and reduce the risks they encounter in individual transactions and business relations.