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Anti-Money Laundering and Counter Financing of Terrorism Policy in Slovenia

Anti-Money Laundering and Counter Financing of Terrorism Policy in Slovenia

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Recent developments in the ongoing investigation into money transactions coming from Iran through one of the largest Slovenian banks have raised awareness about anti-money laundering and financing of terrorism rules in Slovenia. 

On November 19, 2016 the Slovenian Parliament passed the Prevention of Money Laundering and Terrorist Financing Act (ZPPDFT-1) which implements EU Directive (EU) no. 2015/849 of May 20, 2015 on the prevention of the use of the financial system for purposes of money laundering or terrorist financing (the “Directive”). Since measures adopted solely at the national or even at the EU level made without taking into account international coordination and cooperation would have very limited effect, the objective of ZPPDFT-1 is also to conform Slovenian legislation with international standards, especially with the Financial Action Task Force recommendations. 

The most important changes in ZPPDFT-1 include the strengthening of the risk-based-approach to increasing the effectiveness of measures, broadening the definition of politically exposed persons, lowering the threshold for reporting of cash transactions from 30,000 EUR to 15,000 EUR, and introducing the possibility of electronic identification means for Know Your Customer (KYC) procedures. 

An important innovation is also the establishment of a Register of Beneficial Owners to ensure transparency of ownership structures of business subjects and thus prevent the use of business entities for money laundering and terrorist financing. Obliged entities will have to determine their beneficial owner(s) and provide that information to the register, which is going to be established and maintained by the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES). According to ZPPDFT-1, information to be provided should include, inter alia, the name, address, and ownership interest or other way of control of the beneficial owner. The register, which is expected to become publicly available in January 2018, will provide this information free of charge. Further guidance will be provided by the Rules on Implementation of Prevention of Money Laundering and Terrorist Financing Act, which have not yet been adopted.

According to the Directive, EU member states can use a proportionate approach, under which the obliged entities are able to adapt the stringency of their procedures to the risk of money laundering and financing of terrorism. The risk-based-approach affects the politics, controls, and procedures for risk management and therefore enables entities to mitigate the length of the KYC procedure in low risk areas. Since according to a national risk assessment the current risk of money laundering and financing of terrorism in Slovenia is still low to medium, simplified KYC procedures can be used by the obliged entities. 

In June, 2017 a committee of experts (the “Moneyval Committee”) conducting an evaluation of anti-money laundering measures and the financing of terrorism published the Fifth Round Mutual Evaluation Report on anti-money laundering and counter-terrorist financing measures in Slovenia. According to the Moneyval report, Slovenia is not a major international financial center and has a low domestic crime rate. Crime offences that pose the highest money laundering threat in the country are abuse of position, tax evasion, business fraud and offences related to illicit drugs. Within the financial services industry in Slovenia, the banking sector accounts for the largest part of the industry and is deemed most vulnerable to money laundering. 

The Moneyval Committee showed that Slovenia has undertaken certain measures to increase transparency and its authorities have partially succeeded in identifying, assessing, and understanding money laundering risks. Further steps to improve the knowledge of supervisors and other relevant authorities regarding money laundering and terrorism-financing risks and to improve proactivity in investigating and prosecuting money laundering and terrorism-financing related crimes will however still have to be taken. 

In the dynamic area of money laundering and financing of terrorism regular changes in legislation are inevitable. Slovenia will have to assess its progress based on the Moneyval 2017 recommendations and present a report at the 57th plenary meeting of the Moneyval Committee in September 2018.

By Lea Pecek, Head of Corporate Practice Group, and Primoz Mikolic, Associate, ODI Law Firm

This Article was originally published in Issue 4.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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