Financial Crime World

Czech Republic’s KYC Regulations: Identifying Customers and Complying with AML Act

KYC Procedures in the Czech Republic: Understanding Your Customers

The finance industry in the Czech Republic is subject to stringent anti-money laundering (AML) regulations, which aim to verify the identity, suitability, and potential risks associated with maintaining business relationships. In this article, we will discuss the KYC procedures and regulatory framework in the Czech Republic.

The regulatory framework for AML in the Czech Republic is outlined in the Anti-Money Laundering Act (AML Act), Zákon o opatřeních pro legalizaci výnosu z trestné cinnosti a financování terorismu. This legislation follows European regulations and complies with guidelines from organizations such as the Financial Action Task Force (FATF). The AML Act became effective on July 1, 2016.

Regulatory Authorities

The Financial Analytical Office (FAÚ) is the primary regulatory authority for supervising AML controls in the Czech Republic. For specific types of financial entities, other authorities, such as the Czech National Bank (CNB) or the Czech Bar Association, may also exercise certain regulatory powers.

Customer Due Diligence (CDD)

Identifying Customers

For individuals and entities entering into business relationships, identification procedures must be conducted before any dealings commence. Customer Due Diligence (CDD) is the process of identifying and verifying the identity of new customers and, in certain circumstances, existing customers.

Identification Data Requirements

The AML Act stipulates specific identification data that must be acquired depending on the entity type:

  • Natural Persons: full names, birth identification number or date of birth, gender, place of birth, address, and citizenship.
  • Entrepreneurs: all the above information for the natural person and the business name, registered office, and business identification number.
  • Legal Persons: company name, registered office, and company number (or similar identification number). Additionally, identification data for governing body members plus identification data for those authorized to represent the legal person.
  • Trusts: trust name and identification data for the trustee.

Identification Procedures

Typically, identification procedures involve in-person meetings. However, electronic identification means, bank identity, or micro-payment transfers can also be employed in specific cases. The FAÚ allows video identification for lower AML risk cases.

Reliance on Third Parties

Yes, KYC identification can be outsourced to third parties. These third parties must also comply with AML regulations. However, the primary obligated entity retains overall responsibility for meeting these due diligence obligations.

Outsourcing to Non-regulated Third Parties

Yes, it is permissible under specific conditions and with proper oversight. The obliged entity remains responsible for adhering to the AML Act’s conditions.

Regulated Entities Acting as Third Parties

Certain entities, such as credit institutions, financial institutions, auditors, external accountants, tax advisors, notaries, and other independent legal professionals, can be relied upon to comply with AML regulations without requiring the outsourcing company to have a license, per se.

Entities that Cannot be Relied Upon as Third Parties for AML Compliance

Entities that cannot be relied upon as third parties for AML compliance include other trust or company service providers, estate agents, and high-value goods providers, as well as gambling services providers.