Portugal Adopts Stringent Measures to Combat Money Laundering and Terrorist Financing: Best Practices for Compliance
The fight against money laundering (ML) and terrorist financing (TF) has become a top priority in Portugal, as the country seeks to maintain its reputation as a reliable financial hub. To achieve this goal, the Portuguese government has implemented the Anti-Money Laundering Law, which imposes strict obligations on financial institutions and other obligated entities.
Effective Risk Management
At the heart of this legislation is the requirement for each obligated entity to establish an internal control system that effectively manages ML/TF risks. This includes:
- Designating a senior manager to oversee compliance with relevant legal frameworks
- Developing a risk management model that identifies, assesses, and mitigates ML/TF risks
- Defining appropriate tools or information systems necessary for effective risk management
Client Identification and Due Diligence
In addition, obligated entities must establish policies, procedures, and controls regarding the identification and diligence of clients when establishing business relationships or carrying out occasional transactions. This involves:
- Identifying and verifying client identity
- Obtaining information on transaction purposes and intended nature
- Maintaining continuous monitoring to ensure that operations align with the entity’s knowledge of customer activities and risk profiles
Simplified Due Diligence Measures
To further enhance ML/TF prevention, simplified (or enhanced) due diligence measures can be applied in cases where the risk is deemed high. These measures include:
- Obtaining additional documentation
- Conducting enhanced customer screening
- Increasing transaction monitoring
Best Practices for AML/CFT Compliance
Other best practices for AML/CFT compliance in Portugal include:
- Implementing a whistleblower mechanism that allows employees to report suspicious activities anonymously
- Conducting regular training programs to educate employees on AML/CFT obligations and risks
- Establishing investigation procedures to ensure high standards in hiring processes
- Developing mechanisms to control employee performance and conduct regular testing of the control system’s quality, adequacy, and effectiveness
Conclusion
By adopting these best practices, financial institutions and obligated entities in Portugal can demonstrate their commitment to combating ML/TF and maintain a safe and secure financial environment for both domestic and international transactions.