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News & Media

The law on money laundering concerns more than half a million companies

Date: 13/03/2018

From March 15, 2018, the Amendment to the Act on Protection against the Legalization of Proceeds from Crime and Terrorist Financing, adopted by Slovakia on the basis of a European Parliament Directive, will enter into force. A law that regulates the rights and obligations of the obliged person, concerns more than 500,000 companies. Possible sanctions for its violation may amount up to Euro 5,000,000.

“These legislative changes are mainly a response to the ongoing developments in money laundering and terrorist financing. The amendment increases the requirements for client control. The Slovak Republic has been reproached of shortcomings by the MONEYVAL Committee of the Council of Europe. I think that the reason is also an increase in unusual box-office business transactions (e.g. PANAMA Papers), increasing the involvement of grey knights in carousel VAT scams, a 100% increase in phishing, a significant increase in deposits on corporate accounts with tax havens maintained by the Slovak banks, conducted by Chinese citizens living in Hungary, abuse of stolen identity (also corporate), increased fraud, network security breaches, cyber crime and many other activities,“ says JUDr. Lucie Schweizer, Partner of the Ružička Csekes Law Firm.

Obligations and Deadlines for the Businesses

Every legal entity, not only the obliged persons, must enter into the Commercial Register the details of their end-user benefits. The obligation is required to be met during the transition period until 31 December 2019.

In addition, each obliged person must, before 15 May 2018, draw up and update in writing a program of its own anti-legalization activity. The obliged person must update the program whenever there is change in the subject matter of the obliged person and before commencing the provision of a new product - if this may have an impact on increasing the risk of legalization of proceeds from crime or terrorist financing.

Who is an obliged person?

According to Mgr. Sylvia Szabó, Partner of the Ružička Csekes Law Firm: “The Act defines very specifically a list of entities being obliged persons. However, an obliged person is also a business carrying out cash transactions in the amount of at least Euro 10,000, regardless of whether the transaction is executed individually or as a number of follow-up transactions that are or may be interconnected.“

High penalties for violating the law

The amendment also brings increase in sanctions. For general violation of the law it is possible to impose a fine up to Euro 200,000 and for material breaches the fine is up to Euro 1,000,000 (for banks and financial institutions up to Euro 5,000,000). In addition to these penalties, companies may also be punished by publishing the decision to impose a sanction on the website of the Financial Intelligence Unit for five years.

The amendment affects a large number of companies

According to the information provided by the entities that maintain the relevant registers and lists, approximately 548,000 of obliged persons have been identified in summary. This number if not final. It is several times higher, as some entities may be included among obliged persons on the basis of multiple business activities,“ adds Sylvia Szabó.

JUDr. Lucie Schweizer                                          Mgr. Sylvia Szabó
Partner                                                                  Partner