The 5th Anti-Money Laundering Directive1 ("AMLD") to amend the current EU Anti-Money Laundering ("AML") regime must be transposed into national law by 10 January 2020. The approach of the EU is clear: AML prevention will be strengthened and AML requirements in the financial sector will rise.
Credit institutions dealing with business relationships and transactions involving high-risk third countries2 (like Bosnia Herzegovina) or having establishments in these countries may be particularly affected. It is also to be expected that the Commission's list of high-risk third countries will soon change, as the Council recently rejected a proposal that would have included, among others, Saudi Arabia, Panama and the US Virgin Islands.3
1. IMPLEMENTATION IN AUSTRIA
The AMLD leads to considerable amendments in the Austrian Financial Markets Anti-Money Laundering Act ("FM-AMLA") and the Beneficial Owners Register Act ("BORA") which will affect the financial sector and include the following:
- Regulation of service providers in relation to virtual currencies
- Limitation of business relationships or transactions involving high-risk third countries
- Public access to the Register of Beneficial Owners
1.1. Regulation of service providers in relation to virtual currencies
Since 1 August 2019, the FM-AMLA covers service providers in relation to virtual currencies ("Service Providers"), which include persons providing
- services to safeguard private cryptographic keys on behalf of customers, to hold, store and transfer virtual currencies ("custodian wallet provider");
- services to exchange or transfer virtual currencies; or
- financial services for the issuance and sale of virtual currencies.
The latter especially could have a considerable impact, as "financial services" are not defined in the FM-AMLA and could be interpreted broadly.
Service Providers must comply i.a. with the customer due diligence measures stipulated by the FM-AMLA and must be registered with the Financial Market Authority (the registration duty applies as of 10 January 2020). The inclusion of Service Providers in the Austrian AML regime could thus particularly affect credit institutions, but also start-ups dealing with or providing services in connection with virtual currencies, like Bitcoin.
1.2. Limitation of business relationships or transactions involving high-risk third countries
As of 10 January 2020, enhanced due diligence measures must be applied if a high-risk third country is involved in business relationships or transactions. According to the preparatory documents of the FM-AMLA it shall thus be irrelevant if the customer, its beneficial owner or representative is established in a high-risk third country; enhanced due diligence measures must already be applied if such a country is involved in any form. If, for example, an Austrian company receives payments from Bosnia Herzegovina via its Austrian bank account, this could already trigger enhanced due diligence measures for the bank.
Furthermore, the enhanced due diligence measures in the FM-AMLA will be specified and include i.a.
- obtaining additional information on the source of funds and source of wealth of the customer and the beneficial owner(s);
- enhanced monitoring of the business relationship by increasing the number and timing of controls applied and selecting patterns of transactions that require further examination; and
- approval of the senior management for the establishment or continuation of the business relationship, which must be adequately specific (no "general approval").
Moreover, the FM-AMLA will allow the Austrian Finance Minister to issue very restrictive measures like (i) prohibiting Austrian credit institutions from establishing branches or representative offices in high-risk third countries or (ii) requiring credit institutions to review and amend (or if necessary terminate) correspondent relationships with respondent institutions in high-risk third countries.
1.3. Public access to the Register of Beneficial Owners
As of 10 January 2020, the BORA will provide the possibility of public access to the Register of Beneficial Owners. Therefore, basically anyone can access certain information in the register, like the name and nationality of the beneficial owner or the nature and extent of the beneficial interest.
2. IMPACTS AND TO-DO'S
The AML regulations are still expanding and increasing compliance needs. Therefore, companies in the financial sector are well advised to observe these developments – in particular regarding high-risk third countries – and to continually adapt their internal AML measures to stay compliant.
By Dr. Michael Lindtner, Associate, Schoenherr