List of obliged entities

The first set of principal changes relates to expanding the list of obliged entities, which constitutes the implementation of the 5^th AML Directive. An obliged entity refers to an entity for which specific duties are defined in anti-money laundering and counter-terrorist financing legal regulations. It is no longer surprising at present that, for example, banks apply a number of such measures as part of their business operation, such as detailed client identification and check, introducing and using a system of internal policies, special employee training and/or reporting suspicious transactions to state authorities.

However, obliged entities should be expanded to newly include:

1. Real estate agents acting as intermediaries in the lease of real estate (with regard to transactions for which the monthly rental amounts to EUR 10,000 or more);
2. Persons authorised to trade cultural monuments and objects with cultural value or to mediate such transactions, or to store cultural monuments and objects with cultural value in so-called “free zones”; and
3. Expanded list of persons providing services relating to virtual currency.

The proposed amendments demonstrate an ongoing trend of expanding the list of obliged entities and their duties to reflect increasing efforts to prevent money laundering and terrorist financing at both the European and local levels. From the perspective of existing obliged entities and especially entities that will be newly incorporated into the list of obliged entities, it is thus critical to monitor current legislation and make timely preparations for compliance with duties in the area of anti-money laundering and counter-terrorist financing because a failure to meet statutory duties may be subject not only to a fine of up to CZK 10,000,000 but also, in the last resort, revocation of a business licence.

Modernisation of the client identification process

At present, client identification is primarily performed “face to face”, i.e. at the physical presence of the person being identified, which considering the current technical possibilities seems to be an increasingly less-attractive choice for both obliged entities and clients when compared with an opportunity to perform remote client identification.

The currently proposed amendments to the AML Act take into account that it will be possible to perform electronic client identification (such as using an identity card containing a chip or the so-called bank identity which is being introduced) or remote client identification that in respect of individuals consists (primarily) of three relatively simple steps:

1. Sending a copy of the respective parts of the identity card and at least one more supporting document;

2. Credible demonstration of the existence of a payment account maintained on the client’s name; and

3. The client making the first payment under a new contract using a previously specified account.

Newly, the AML Act should also expressly allow for the option of using some of the new payment services as part of client identification. The payment services including “account information service” and “payment initiation service” will enable the fulfilment of some rules for remote client identification, which may accelerate, simplify and increase the security of the remote client identification process.

If the amendments to the AML Act defining the above-specified client identification possibility are passed, this will result in not only increased comfort for clients, for which such identification process will be further simplified, but also attractive opportunities for business entities that will be able to integrate new client identification possibilities into their processes and thus obtain a competitive advantage as they will be able to identify their clients in a simpler and faster way.

The article is part of dReport – September 2019, Tax news; Grants and investment Incentives.