Financial Crime World

Terrorism Financing Risks Emerge from Public Collections and Non-Profit Organizations in Slovakia

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A recent assessment by anti-money laundering (AML) experts has identified significant vulnerabilities in Slovakia’s financial system, particularly among public collections and non-profit organizations. The country’s authorities have been warned that these entities are at high risk of being exploited to finance terrorism.

Lack of Comprehensive Understanding of Terrorist Financing Risks

Many non-bank financial institutions, including exchange offices and payment institutions, lack a comprehensive understanding of terrorist financing (TF) risks. These institutions rely on manual, suspicious-based checks against published lists, rather than implementing robust risk assessment and mitigation measures.

Manual Checks Not Sufficient

Suspicious-Based Checks Against Published Lists

Some non-profit organizations, which are supposed to be transparent about their financial transactions, have failed to identify natural persons behind legal entities. This lack of transparency creates an environment conducive to money laundering and terrorist financing.

Conducive Environment for Money Laundering and Terrorist Financing

Supervision Challenges

The Financial Intelligence Unit (FIU) and the National Bank of Slovakia (NBS) have been assigned responsibility for supervising AML/CFT compliance among financial institutions. However, their inspections are not always risk-based, and resources available for supervision are limited.

Limited Resources for Supervision

Lack of Documented Process for Setting Subject-Specific ML/FT Risk Ratings

The experts also expressed concerns about the lack of a documented process for setting subject-specific ML/FT risk ratings, which drives frequency, scope, and nature of future supervisory onsite/offsite inspections.

No Clear Guidelines for Setting Risk Ratings

Failure to Submit Suspicious Transaction Reports (STRs)

The FIU has reported that some financial institutions have failed to submit Suspicious Transaction Reports (STRs), and many others have not identified suspicious transactions internally.

Insufficient Reporting of Suspicious Transactions

Recommendations

The experts concluded that Slovakia’s authorities must take immediate action to address these vulnerabilities and ensure that public collections and non-profit organizations are adequately monitored for TF risks. The country’s financial system must be made more transparent, with robust risk assessment and mitigation measures in place to prevent the misuse of its funds by terrorists.

Recommendations:

  • Implement robust risk assessment and mitigation measures
  • Ensure transparency in financial transactions
  • Develop a documented process for setting subject-specific ML/FT risk ratings
  • Conduct regular, risk-based inspections
  • Improve reporting of suspicious transactions
  • Increase resources available for supervision