Central Europe Update: Russian Federation as a high-risk third country under the AML Act

On November 15, 2022, the Chamber of Deputies of the Parliament of the Czech Republic declared the current Russian regime as a terrorist one by its Resolution No. 421, which was adopted in light of the escalating Russian aggression against Ukraine.

The current Russian regime has already been declared as terrorist by Resolution 2463 of the Parliamentary Assembly of the Council of Europe on the further escalation of the Russian Federation’s aggression against Ukraine on October 13, 2022. On November 23, 2022, the European Parliament adopted a resolution recognizing the Russian Federation as a state sponsor of terrorism.

In view of the above, the Financial Analytical Office (FAÚ) has urged the obliged entities under Act No. 253/2008 Coll., on Selected Measures against Legitimisation of Proceeds of Crime and Financing of Terrorism (“AML Act”) to consider Russia as a high-risk third country within the meaning of Article 9(1)(a)(3) of the AML Act (“obliged entities” within the meaning of the AML Act include, for example, credit and financial institutions, gambling operators, or real estate brokers).

According to the AML Act, in relation to persons from high-risk third countries, it is always necessary to carry out not only identification but also due diligence. In view of the official designation of the Russian regime as a terrorist regime (a state sponsor of terrorism), it will be appropriate to approach clients or other persons established in the Russian Federation with a high-risk approach, i.e., to carry out enhanced identification and customer due diligence according to Section 9a of the AML Act.

In the course of enhanced identification and due diligence according to Section 9a of the AML Act, the obliged entity is required to perform additional statutory duties, such as gathering of additional documents or information about the client.

Compliance with the statutory requirements is the bare minimum necessary when carrying out enhanced due diligence and identification. Where an obliged entity and its internal procedures provide for more strict measures and procedures in relation to a client or a person established in a high-risk third country, the obliged entity has to comply with such stricter regime.

Conclusion

Where an obliged entity concludes that its client or other person involved in the business relationship in question has been established in a high-risk third country (or where the business/business relationship otherwise extends into a high-risk third country), in this case the Russian Federation, a high-risk approach should be adopted in relation to such person. Should the obliged entity suspect the true intent of the trade when identifying or when carrying out the due diligence, of the person concerned, it is recommended to contact the Financial Analytical Office with a suspicious transaction report (STR) or a request for an assessment of the specific situation.

By Konečná & Zacha law firm, Czech Republic, a Transatlantic Law International Affiliated Firm.  

For further information or for any assistance please contact centraleurope@transatlanticlaw.com

Disclaimer: Transatlantic Law International Limited is a UK registered limited liability company providing international business and legal solutions through its own resources and the expertise of over 105 affiliated independent law firms in over 95 countries worldwide. This article is for background information only and provided in the context of the applicable law when published and does not constitute legal advice and cannot be relied on as such for any matter. Legal advice may be provided subject to the retention of Transatlantic Law International Limited’s services and its governing terms and conditions of service. Transatlantic Law International Limited, based at 42 Brook Street, London W1K 5DB, United Kingdom, is registered with Companies House, Reg Nr. 361484, with its registered address at 83 Cambridge Street, London SW1V 4PS, United Kingdom.