Czech Republic Revamps AML Legislation Months Ahead Of EU Directive

Josh O'Neill

12 January 2017

The Czech Republic has made amendments to its Anti-Money Laundering Act requiring all banks to generate an internal risk assessment by July 2017 while also obliging them to maintain records and documents gathered during due diligence processes for a ten-year period.

The European Union's Fourth Anti-Money Laundering Directive is the most sweeping piece of AML legislation in Europe in recent years. All EU member states must be compliant with the Directive's mandates - which place further emphasis on ultimate beneficial ownership, enhanced customer due diligence and an increased risk-based approach - by 26 June 2017. Many member states have already made, or began making, legislative changes that seek to implement it into national law by the official transposition date.

Under the Czech Republic's legal changes, all banks must have their written risk assessments approved by managing bodies before 1 July this year and then submit relevant documentation to the Financial Intelligence Unit, which was established by the amendments as an independent administrative body, within 30 days of its approval.

The results of the risk assessment should be used to categorise clients and transactions into one of two groups: a group of those to which more stringent requirements for client identification apply, for example where additional data, such as email addresses, phone numbers or employment details, should be gathered, and a group where these requirements are less strict. Data about clients may also be gathered from the newly-established Register of the Ultimate Beneficial Owners of Companies, which will be accessible to banks as of January 2018.

As a result of the amendments, due diligence requirements are set out as a non-exhaustive list so that banks may modify the extent and content of the checks at their discretion. The changes to the Czech Republic's AML Act require banks to maintain a record of information and documents collected during due diligence for a 10-year period after the termination of a trade or commercial relationship. This enhanced level of due diligence is essential in order to inform banks' decisions of whether to report a suspicious transaction to the Financial Intelligence Unit.