Financial Crime World

Czech Republic’s Progress in Enhanced Follow-up Report on Anti-Money Laundering Measures

The Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) has released the 2nd Enhanced Follow-Up Report on the Czech Republic, assessing their progress in addressing technical compliance deficiencies identified during the Mutual Evaluation Report (MER) in December 2018.

2nd Enhanced Follow-Up Report and Technical Compliance Re-Rating

In October 2021, MONEYVAL adopted the 2nd Enhanced Follow-Up Report on the Czech Republic. This assessment report covers the Czech Republic’s progress in addressing technical compliance deficiencies and their efforts to implement new measures to meet updated FATF Recommendations. The initial Enhanced Follow-Up Report was adopted in June 2020.

Overview of Progress in Enhancing Technical Compliance

The Czech Republic has made significant progress in enhancing technical compliance since their MER. They have addressed several technical compliance deficiencies and have been re-rated on Recommendations 8, 20, 21, 22, and 35.

  • Recommendation 8: Initially rated Partially Compliant, now Large Compliant.
  • Recommendation 20: Initially rated Partially Compliant, now Large Compliant.
  • Recommendation 21: Initially rated Partially Compliant, now Compliant.
  • Recommendation 22: Progress has been made but still not fully compliant.
  • Recommendation 35: Initially rated Partially Compliant, now Large Compliant.

Addressing Deficiencies in Recommendation 8

The Czech Republic has made considerable progress in addressing the technical compliance deficiencies in Recommendation 8. They have implemented measures to strengthen the role of the non-profit sector in preventing terrorist financing and associated risks. However, challenges remain regarding risk-based supervision and reporting mechanisms for NPOs, leaving Recommendation 8 Large Compliant.

The Road to Compliance with Recommendation 20

The Czech Republic has also made notable progress in addressing the deficiencies identified in Recommendation 20. They have amended the AML/CFT Act to remove the timeframe for reporting suspicious transactions and to clarify the definition of a Suspicious Transaction Report (STR).

Recommendation 21 – From Partially Compliant to Compliant

Under MONEYVAL’s revised assessment methodology, the Czech Republic has been re-rated as Compliant with Recommendation 21. The Czech authorities have ensured that directors, officers, and employees of reporting entities are protected from liability for reporting data in good faith to the Financial Analytical Unit (FAU).

Addressing the Deficiencies in Recommendations 22 and 23

The Czech Republic has made some progress in Recommendations 22 and 23, but significant deficiencies still exist. In Recommendation 22:

  • Some independent legal professionals are not covered by AML/CFT obligations.
  • Definitions and obligations for Tax Consulting Service Providers (TCSPs) need improvement.

In Recommendation 23:

  • There is a lack of written systems of internal rules, procedures, and control measures for lawyers, notaries, and accountants.
  • Deficiencies under 18.1(b), 18.2(b), and 18.3 remain.

Conclusion

The Czech Republic has shown considerable progress in addressing the technical compliance deficiencies identified in their MER. However, they are encouraged to continue their efforts to address the remaining deficiencies and strengthen their implementation of AML/CFT measures. The Czech Republic is set to report back to MONEYVAL within one year.