Romania Introduces Know Your Customer (KYC) Regulation to Combat Money Laundering and Terrorism Financing
The Romanian government has introduced a new regulation requiring financial institutions to know their customers better, in an effort to prevent money laundering and terrorism financing.
Anti-Money Laundering (AML) Framework
The Know Your Customer (KYC) guidelines are part of Romania’s AML framework, which aims to verify the identity, suitability, and risks involved with maintaining a business relationship. The regulation is designed to prevent financial institutions from unknowingly facilitating money laundering or terrorism financing activities.
Requirements for Financial Institutions
According to Law no. 129/2019 on the prevention and combating of money laundering and terrorism financing, as subsequently modified, financial institutions must:
- Conduct due diligence measures to identify clients
- Verify their identities using various methods, including electronic identification means, trust services, and other secure processes recognized by the Authority for the Digitalisation of Romania
- Assess and obtain information on the purpose and nature of the business relationship
- Monitor transactions to ensure consistency with the institution’s knowledge of the customer
Outsourcing Customer Due Diligence
Entities can choose to outsource customer due diligence by contract to third parties who are not obliged by law to meet AML regulations. However, Romanian law does not provide for specific terms regarding outsourcing, leaving entities to rely on their own judgment.
Role of the National Office for Preventing and Combating Money Laundering (OPCSB)
The OPCS is responsible for coordinating Romania’s national system of combating money laundering and terrorist financing. The regulator provides guidance on AML/CTF compliance and monitors the implementation of the regulation.
Entities Covered by the Regulation
The regulation applies to a wide range of entities, including:
- Credit institutions
- Financial institutions
- Auditors (except for those exempt from conducting customer due diligence)
- External accountants (except for those exempt from conducting customer due diligence)
- Tax advisors
- Notaries
- Trust or company service providers
- Estate agents
- Providers of gambling services
Goals and Benefits of the Regulation
The introduction of the KYC regulation aims to prevent money laundering and terrorism financing by ensuring that financial institutions have a better understanding of their customers and their business relationships. The regulation also aims to reduce the risk of fraud and other financial crimes.
Key Takeaways
- Financial institutions must conduct due diligence measures to identify clients, verify their identities, and assess the purpose and nature of their business relationships.
- Entities can choose to outsource customer due diligence by contract to third parties, but must still comply with AML regulations.
- The OPCS is responsible for coordinating Romania’s national system of combating money laundering and terrorist financing.