Financial Crime World

Risks in Slovenian Financial Sector Remain Low, but Authorities’ Guidance Needed

Overview

Ljubljana, Slovenia - A recent assessment by the Slovenian authorities has revealed that risks in the country’s financial sector are generally low. However, despite this positive finding, concerns remain over the lack of guidance from regulators on applying sufficient risk-mitigating measures.

Risk Assessment

According to the report, all financial institutions (FIs) apply a basic risk-based approach and implement certain elements of enhanced customer due diligence (CDD) for higher-risk customers. Banks have demonstrated more extensive and elaborate checks, but many other obliged entities have not applied a risk-based approach to business relationships.

Concerns and Recommendations

  • The report highlighted concerns over the depth and consistency of beneficial ownership verification by FIs, particularly non-bank institutions.
    • Only one bank reported identifying domestic politically exposed persons (PEPs).
    • Casinos were the only DNFBP sector that demonstrated awareness of PEP requirements.
  • The inadequate level of reporting among other obliged entities appears to be due to limited awareness of reporting requirements.
  • The number of suspicious transaction reports (STRs) has been steadily increasing, but the majority are submitted by banks.

Internal Controls and Compliance

  • Banks have sound anti-money laundering and combating the financing of terrorism (AML/CFT) internal controls in place.
  • Some non-bank FIs demonstrated well-organized AML/CFT compliance functions.
  • However, the application of internal controls in DNFBP sectors appears very limited.

Supervision and Governance

  • The report criticized the supervisory authorities for not demonstrating effectiveness in detecting and preventing individuals with criminal backgrounds from gaining ownership or management positions in FIs.
  • While banks are required to conduct fit-and-proper tests for board members, this is not the case for other obliged entities.
  • Slovenia has a high level of availability of basic information on legal entities through the Business Register.
  • The new APMLFT has introduced a new obligation for legal persons to discover and maintain information on their beneficial owners.
  • However, concerns remain over the effectiveness of existing mechanisms to ensure accurate and up-to-date information.

Recommendations

  • Improve mechanisms to prevent the misuse of legal entities, including stricter controls on the number of companies that can be set up by one person.
  • Collect reliable statistics on mutual legal assistance (MLA) and extraditions.

Overall, while risks in the Slovenian financial sector are generally low, there is a need for authorities’ guidance on applying sufficient risk-mitigating measures. The report highlights several areas where improvement is needed to ensure a robust AML/CFT framework.