Denmark’s AML Act: A Comprehensive Guide for Undertakings on Preventing Money Laundering and Terrorist Financing

The Danish Financial Supervisory Authority (FSA) has released an updated guide on the Act on Measures to Prevent Money Laundering and Financing of Terrorism (AML Act) for undertakings and individuals covered by this legislation. This Guide replaces the previous version from October 2018 and focuses on the requirements of the AML Act, although other regulatory areas are also acknowledged.

Overview

The Danish AML Act applies to various undertakings and individuals as per the European Union’s 4th and 5th Anti-Money Laundering Directives. Compliance with the AML Act is risk-based and this Guide provides examples and inspirations to help meet these requirements. However, it does not constitute an exhaustive list for compliance.

Entities Subjected to the AML Act

1. Banks
2. Mortgage credit institutions
3. Stockbroker undertakings
4. Life insurance companies and multi-employer pension funds
5. Savings banks
6. Providers of payment services and issuers of electronic money
7. Branches, distributors, or agents of foreign undertakings carrying out covered activities
8. Investment management companies (with direct customer contact)
9. Operators of a regulated market or auction platform for greenhouse gas emission allowances
10. Persons authorized to bid in greenhouse gas emission allowances auctions
11. Lawyers (advising on or conducting transactions in connection with property, client funds, securities, bank accounts, or setting up, running or managing entities)
12. Auditors or auditing firms approved under the Danish Act on Approved Auditors and Audit Firms
13. Real estate agents and agencies, including intermediaries for real estate rental

Additionally, individuals who commercially provide services similar to lawyers, auditors, or real estate agents are also subjected to the AML Act.

Contents of the Guide

This Guide covers the following aspects of the AML Act:

• Scope of the AML Act
• Definitions
• Risk assessment and management
• KYC procedures
• Assistance from third parties and outsourcing
• Duty to investigate
• Register, report, and keep records
• Cross-border activities
• Financial sanctions

Guide Contents

Scope of the AML Act

The AML Act applies to banks, mortgage credit institutions, stockbroker undertakings, life insurance companies, savings banks, providers of payment services and issuers of electronic money, investment management companies, operators of a regulated market or auction platform for greenhouse gas emission allowances, persons authorized to bid in auctions for these allowances, lawyers, auditors, real estate agents and agencies, and other undertakings or persons performing activities mentioned in Annex 1.

Definitions

The AML Act defines various terms, including customer due diligence, beneficial owner, etc.

Risk Assessment and Management

Undertakings should implement a risk-based approach to anti-money laundering and terrorist financing compliance, beyond this Guide. National and supranational risk assessments, such as those by the European Banking Authority (EBA) or the Financial Action Task Force (FATF), should be consulted for guidance.

KYC Procedures

Customer due diligence procedures as per the AML Act.

Third-party Assistance and Outsourcing

Avoiding the use of high-risk third parties and the importance of due diligence.

Duty to Investigate

Upon suspicion of money laundering or terrorist financing, the duty to conduct investigations.

Record Keeping

The importance of maintaining accurate records and their retention period.

Cross-border Activities

Compliance with applicable cross-border regulations.

Financial Sanctions

Sanctions, restrictions, and reporting obligations related to money laundering and terrorist financing.