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Portugal Cracks Down on Financial Crime Detection: AML Compliance Efforts Intensify

As one of the European countries at risk due to its geographical location, Portugal has been working tirelessly to prevent money laundering and combat financial crimes. The Portuguese government, aware of the risks posed by money laundering, has implemented effective Anti-Money Laundering (AML) compliance policies and regulations to stop the flow of funds to criminal organizations.

AML Framework Strengthened

Since joining the Financial Action Task Force (FATF) in 1991, Portugal has made significant strides in strengthening its AML framework. The establishment of the Financial Intelligence Unit (FIU) in 2002 marked a major milestone in the country’s fight against money laundering and tax crimes. Operating independently under the umbrella of the Portuguese Judicial Police, FIU deals with executive matters related to financial crimes.

Legislation and Regulation

The first concrete step taken by Portugal against money laundering was the enactment of Law No. 11/2004, which outlined specific requirements for AML compliance in line with FATF’s and the European Union’s (EU) regulations. Following FATF’s 2017 evaluation, Portugal was commended for being compliant with 12 and largely compliant with 22 of the 40 FATF Recommendations.

Role of Financial Regulator

The Financial Regulator of Portugal, Banco de Portugal, plays a crucial role in implementing AML measures in the country. As both the central bank and financial regulator, it regulates and publishes guidelines for financial institutions to prevent money laundering and the financing of terrorism. These regulations are designed to be compatible with international standards set by FATF and the EU.

Recent Developments

In recent years, Portugal has taken significant steps to enhance its AML legislation. In 2017, the country introduced new laws aimed at reducing cash transaction limits, establishing a national record of recipients for financial transactions, and obligating attorneys to report suspected money laundering activities to authorities.

Classification as Jurisdiction of Primary Interest

Portugal was classified as a Jurisdiction of Primary Interest in the 2018 International Narcotics Control Strategy Report (INCSR) by the US Department of State. The report highlighted that Portugal had established AML laws and enforcement mechanisms that adhered to global standards.

Coverage of AML Regulations

The country’s AML regulations cover a wide range of sectors, including financial institutions and non-financial businesses. Entities are required to identify clients and conduct due diligence for business relationships or transactions exceeding specific thresholds. For high-risk situations, an elevated level of due diligence is necessary.

Reporting Suspicious Transactions

Instances of suspicious transactions must be reported to both the Central Department of Criminal Investigation and Prosecution and the FIU. Maintaining correspondence relationships with shell banks or institutions facilitating shell bank accounts is prohibited for financial institutions. Entities are also required to formulate compliance programs, which include risk assessment, policies, training, and internal controls.

Consequences of Non-Compliance

Failure to comply with AML regulations can result in severe penalties, including imprisonment up to 12 years. For legal entities, the prison sentence may be converted into a fine, taking into account the financial situation of the convicted entity and its employee-related expenses.

Innovative Solutions

To effectively combat financial crime detection, Portugal has implemented innovative solutions such as Sanction Scanner’s AML compliance software. This cutting-edge technology simplifies the compliance journey through real-time screening capabilities, enabling entities to identify high-risk entities and prevent threats.