Even stricter money laundering guidelines! Anonymity limit is lowered to 10,000 euros!

Anonymity limit is lowered to 10,000 euros! © Anne Nygard / Unspalsh

Gold&Co - always informed for you. As the first precious metal trader and even before most of the media, we already reported in 2015 about the newly planned Money Laundering Directive No.4 of the European Commission. Now it is also in Austria so far that the directive is implemented in national legislation - and not a few industries are puffing suffering under the high requirements.

Through the new law, actual tasks of the state are transferred without any reimbursement of costs to "members of declarable professions", namely lawyers, tax advisors,commercial traders, precious metal and precious stone dealers, real estate & insurance brokers, business consultants, and others. In precious metals trading, this means that it is now only possible to buy gold anonymously up to a transaction value of 10,000 euros.

In the annual report on money laundering of the Federal Ministry of the Interior, one reads about the so-called "reporting persons":

In the course of their work, members of professional groups subject to reporting requirements are subject to the following obligations in particular:

  • Verification of the customer's identity before establishing a permanent business relationship, before carrying out transactions exceeding 10,000 euros,
  • Establishing the identity of the beneficial owner,
  • in the case of trust transactions, establishing the identity of the trustor,
  • Determine the purpose and nature of the business sought,
  • Obtaining information on the source of funds,
  • continuous monitoring of the business relationship,
  • Verification that the customer is a "Politically Exposed Person" (PEP), i.e. a person of public interest.

The assessment of whether due diligence requirements have been properly met is the responsibility of the respective supervisory authority. This supervisory function is exercised in the financial sector by the FMA, the respective chambers and, in the case of persons subject to the Trade Regulation Act, by the district authorities.

The companies concerned must also inform and train their employees on the new money laundering regulations. Those who do not allow themselves to be checked by the authorities, who keep no or too few records (according to official understanding, it may always be a little too little) or who do not report illegal money flows risk heavy penalties. The expense is not inconsiderable and non-compliance as well as deficiencies are punished draconically with a trade ban and up to 30,000 euros.

In summary - what changes does this new, even tougher directive bring?

  1. Reduction of the anonymity limit from EUR 15,000 to EUR 10,000, although Austria still exceeds the EU requirement of EUR 7,650. In other EU countries, such as Italy, Spain, Greece and France, the limits are even lower.
  2. Introduction of a central register for beneficial owners This means that at the European level, all beneficial owners of companies, funds or other entities will be meticulously recorded and made transparent. This data will be collected from all those required to report - i.e. if your bank advisor asks you where you got the money you deposited, it is precisely this collection of information.r
  3. New regulations for business with politically exposed persons (PEP) Politicians or officials should be prevented from spending illegally diverted funds, both directly and indirectly through relatives or other confidants.r
  4. Even stricter due diligence requirements for reporting entities - employee training, finding out who the beneficial owners are or the source of funds when buying or selling expensive goods.r
  5. tougher sanctions for reporting entities in the event of non-compliance.r
  6. Stricter reporting requirements Whereas previously reporting agents (tax advisors, lawyers, banks, etc.) "only" had to report their clientele to the Money Laundering Reporting Office if there was a concrete suspicion of money laundering, today they already have to take action if there is a suspicion that "funds originate from criminal activities, regardless of the amount".r
  7. Expansion of the scope of predicate offenses (origin of money is from predicate offense) The scope of criminal offenses from which the money to be laundered originated has been expanded. This means that financial crimes are now also included, which of course makes the whole thing more lucrative for the state.

According to the Austrian Penal Code, "... anyone who knowingly introduces his own or another person's illegally acquired assets into the legal economic cycle is liable to prosecution for money laundering....". The directive now explicitly stipulates that all tax crimes punishable by more than one year of imprisonment must constitute predicate offenses. All intentional criminal acts punishable by more than three years' imprisonment can be considered predicate offenses. These include, for example, embezzlement or forgery of documents. In addition, more serious financial offenses such as tax evasion, smuggling and false customs declarations are now also included.

Goodbye professional secrecy - by law!

The control of predicate offenses, such as tax evasion or corruption, had already been practiced by banks, but for tax advisors or lawyers the new regulation represents a major cut - instead of advising their clients - they now have to betray them!

Together with the newly introduced account register, to which every tax official has direct access, this new directive seems to be aimed more at tax evaders than at terrorists. Apparently, the worldwide trend towards a transparent citizen, which has been in place since 9/11 (World Trade Center attack), is now also benefiting the Austrian financial sector. Access to all account movements on all related bank accounts (in Austria) is possible retroactively for up to three years. This means that all self-employed persons will have to answer meticulous questions about their payment flows the next time they are audited - including those of their wives.

Many SARs from banks, few from others

With the implementation of the Money Laundering Directive No. 4 of the European Commission, Austria has also - apart from any perception and reporting by the media - immediately created a new Money Laundering Act, which has already been in force since 1.1.2017. Currently, however, it only affects reporting entities from the financial sector. These are the main collectors of data and also provide the most suspicious activity reports. As of 26 June 2017, however, the directive will also apply to all other reporting entities.

The Ministry of Interior's annual report provides the following insight into the number of SARs received by the CID's Money Laundering Reporting Office over the past three years:

Achievements due to the implementation of the directive against money laundering and terrorist financing

If you take a closer look at the statistics, there are also some successes to report, albeit a manageable number. For example, in 2016, the considerable increase of almost 15% in the number of SARs contrasts with a significant decrease in the number of convictions. At the same time, it can be observed that the actual verifiable money laundering suspicions, which are mainly reported by banks, are only 1-3%. Conversely, this means that in 97-99% of cases, the authorities involved, from the Criminal Investigation Department (BKA) to the Tax Office (BMF), the Financial Market Authority (FMA) to the Public Prosecutor's Office and the courts, investigate and investigate completely unjustified SARs.

This results in the statistic, which is particularly thought-provoking for critics, that almost 99% of all reported persons are wrongly investigated. For the individual, who is generally suspected by the authorities across the board and without sufficient cause, this means a loss of privacy.

Malicious tongues might therefore wonder whether, given this low proportion of actual convictions, we should not rather be talking about a system for generating suspicions rather than effective anti-money laundering.

Terrorist Financing

I would like to say a few final words about the title of the Money Laundering Directive, which has the word "terrorist financing" in its title to great media effect. Money laundering (approx. 40-50%) and fraud (approx. 40%-55%) account for the largest percentage of SARs. Surprisingly, the often-used topic of "terrorism" ranks extremely low, accounting for 2.5-4% of all SARs. Perhaps a retitling to "Directive on Combating Money Laundering and Fraud" would be much more in line with the facts.

In any case, critics hope that with an average of 97% of those wrongly suspected, the authorities will behave in a correspondingly moderate manner in order to keep the collateral damage, which is unavoidable anyway, as low as possible

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