The implementation of the EU’s fourth money laundering directive (2015/849/EU, or MLD4) is a subject of significant interest in Romania, as the process of adopting a new Money Laundering Bill (MLB) in line with the provisions of the MLD4 to replace the current Money Laundering Act is in full progress.
As currently constituted, the MLB will require companies and other legal entities incorporated within Romania’s territory to obtain and hold adequate, accurate, and current information on their beneficial ownership, including details of the beneficial interests – the “reporting entities” – they hold. The MLB is expected to obtain the necessary support to be approved by the Parliament.
As MLD4 does not require the information to be publicly available, in Romania, all the information gathered by the reporting entities according to the MLB must be kept in accordance with Regulation (EU) 2016/679 (General Data Protection Regulation) and the Data Protection Act no. 667/2001, and only disclosed to specified authorities.
Mention should be made that, in terms of the MLB, the “beneficial owner” is any natural person(s) who ultimately owns or controls the entity and/or the natural person(s) on whose behalf a transaction or activity is being conducted, either directly or indirectly. Also, the legal definition of the “beneficial owner” includes a list of categories of individuals that ultimately may control a legal entity.
In this respect, the actual form of the MLB provides that the reporting entities shall have a number of obligations, including to: (i) report suspicious transactions, as well as transactions that do not present the usual suspicion indicators, but are made in cash and with a value of at least the RON equivalent of 15,000 EUR; (ii) provide information regarding the beneficial owners, defined by the law as “any natural person(s) who ultimately owns or controls the entity and/or the natural person(s) on whose behalf a transaction or activity is being conducted, directly or indirectly”; (iii) effect customer due diligence, either simplified, standard, or extended; (iv) preserve relevant reporting documents; and (v) effect a risk assessment regarding the exposure of their activity to money laundering and terrorism financing, considering the main risk factors such as clients, country, geographical area, products, services, transactions, or distribution channels.
In addition, the MLB contains several obligations related to personnel, such as the requirement that a person be designated with responsibilities related to the enforcement of the MLB, and the requirement that a periodic training of employees be conducted with respect to the provisions of the MLB.
Considering its novelty, it is anticipated that the obligation to provide information regarding the beneficial owners shall have the greatest impact on companies. As a consequence, it is important to note that the obligation applies to “corporate and other legal entities,” such as trusts, associations, and foundations, as well as other legal entities that administrate and distribute funds.
Nonetheless, the MLB sets out several specific obligations, which have the nature of transitory provisions of the law, such as filing a declaration regarding the beneficial owner in the Registry of Beneficial Owners. Personal information must be provided regarding the beneficiary as well as the manner in which it exerts control over the entity.
Failure to comply with this obligation, if not corrected after being noted by the competent authority, shall result in the dissolution of the legal entity.
Another important issue to consider is that, once the MLB enters into force, companies will be prohibited from issuing bearer bonds, and all existing bearer bonds shall be converted into nominative bonds. Failure to fulfil this obligation within the provided term will result in the dissolution of the entity.
Finally, it should be noted that infringement of the MLB’s provisions may entail civil, disciplinary, contraventional, administrative, and/or criminal liability.
By Adrian Chirvase, Partner, Popescu & Asociatii
This Article was originally published in Issue 6.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.