Czech Republic Cracks Down on Financial Crimes: New Regulations and International Cooperation

The Czech Republic is making significant strides to prevent money laundering and financing of terrorism within its borders. The Financial Analytical Unit (FAU), which operates under the Ministry of Finance, is the primary body responsible for enforcing Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) regulations in the country.

Current Regulatory Landscape

The FAU’s efforts are primarily governed by the Act No. 253/2008 Coll., on Selected Measures against Legitimisation of Proceeds of Crime and Financing of Terrorism – known as the AML Act. This legislation implements the 3rd EU Anti-Money Laundering Directive and other related EU regulations. The AML Act is currently being updated to incorporate the 4th EU Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (AMLD).

The 4th EU Directive and Its Implications

Scope Extension: The new directive partially extends its scope to gambling services.
Threshold Limit: The cash transaction threshold limit is decreased from €15,000 to €10,000.
Adjustment Process: With a two-year transposition period, the FAU is already adapting the Czech legislative framework.

Obligations for Obliged Entities

Obliged entities, such as banks, insurance companies, and trustees, are responsible for maintaining transaction records for at least 10 years. Failure to comply can result in fines up to CZK 10 million (€400,000).

International Cooperation and Information Exchange

The FAU focuses on strengthening international cooperation and information exchange. They aim to enforce foreign requests in the same manner as domestic cases.

Identifying the Beneficial Owner

The FAU issued a methodical guide to help identify the beneficial owner of a client. This includes procedures for detecting and identifying silent partners. All customer identification is based on official identity cards issued by appropriate state authorities.

Role of Customs Administration

The Customs Administration plays a crucial role in detecting and detaining undeclared cash. Failure to meet cash declaration obligations may result in administrative proceedings and penalties.

Aside from penalties stipulated in the AML Act, several related criminal offenses are stated in the Penal Code, including money laundering, money laundering out of negligence, and corruption.

FAU’s Proposed Changes

To strengthen its capabilities, the FAU is proposing the creation of an independent office within the Ministry of Finance, with an increase in manpower. A significant increase in activities, particularly regarding international sanctions and asset sharing, has led to the requirement for at least a 20% increase in staffing, with an ideal goal of 50%. The estimated costs for this endeavor amount to 10-24 million CZK.

The Future of Financial Crimes Prevention

The Czech Republic’s efforts to combat financial crimes necessitate international cooperation and technological advancements. As the regulatory landscape evolves, these components will play a key role in the success of these initiatives.