REPUBLIC OF SLOVENIA
MINISTRY OF FINANCE
Office for Money Laundering Prevention
GUIDELINES for the Implementation of the Prevention of Money Laundering and Terrorist Financing Act for Dealers in Precious Metals and Precious Stones and Products Made from These Materials
Ljubljana, June 2009
TABLE OF CONTENTS
1. INTRODUCTION ______2
2. GENERAL REMARKS ON MONEY LAUNDERING AND TERRORIST FINANCING _____3
3. TASKS OF DEALERS IN PRECIOUS METALS UNDER THE PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING ACT (APMLFT) ______4
3.1 Customer due diligence ______4
3.2 Reporting information ______9
3.3 Protection and storage of information and management of records ______9
3.4 Professional education and training ______10
3.5. Persons under obligation with at least four employees must perform additional tasks ______10
3.5.1 Authorised person for money laundering pervention______10
3.5.2 Internal control ______10
4. RISK ANALYSIS ______11
4.1 Purpose of risk analysis ______11
4.2 Preparation of risk analysis______11
4.3 Controls of higher risk situations _____15
5. NATIONAL REGULATIONS ON MONEY LAUNDERING AND TERRORIST FINANCING ______16
6. ANNEXES ______17
7. SOURCES ______29
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1. INTRODUCTION
Organised crime in connection with money laundering remains a topical issue and various forms of terrorist financing have further increased the risk associated with organised crime in recent years. Combating money laundering has moved beyond national boundaries and evolved into a complex global challenge.
In the light of this, the Member States of the European Union undertook to intensify activities in this field by adopting the following two Directives:
– Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing;
– Commission Directive 2006/70/EC of 1 August 2006 laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of “politically exposed person” and the technical criteria for simplified customer due diligence procedure and for exemption on grounds of financial activity conducted on an occasional or very limited basis.
These two Directives follow the recommendations of the Financial Action Task Force (hereinafter: the FATF), which is one of the key international bodies involved in combating money laundering and terrorist financing. In line with these recommendations, their implementation is mandatory and no longer a matter of greater or lesser awareness. In June 2007, the National Assembly of the Republic of Slovenia adopted a new Prevention of Money Laundering and Terrorist Financing Act thus complying with the acquis and transposing the requirements of these Directives into Slovenian legislation. The Prevention of Money Laundering and Terrorist Financing Act (hereinafter:the APMLFT) entered into force on the fifteenth day following its publication in the Official Gazette of the Republic of Slovenia (Uradni list RS) no. 60/2007 on 21July 2007, and became fully applicable on 21 January 2008. One of the important novelties introduced by the APMLFT is the risk-based approach. Persons under obligation referred to in Article 4 of the APMLFT must draw up a risk analysis in order to assess the risk of potential abuse for money laundering or terrorist financing purposes associated with individual groups of customers, business relationships, products and services. The analysis also serves as a basis for the implementation of suitable measures.
Article 90 of the APMLFT gives the Office for Money Laundering Prevention, in its capacity as a supervisory authority, the power to issue recommendations and guidelines implementing the prescribed measures for detection and prevention of money laundering and terrorist financing. These are advisory guidelines designed to facilitate interpretation and implementation of the APMLFT and are addressed to persons under obligation defined in point 16 m) of the first paragraph of Article 4 of the said Act: legal entities and natural persons acting as dealers in precious metals and precious stones and products made from these materials (hereinafter: dealers in precious metals).
The Office for Money Laundering Prevention (hereinafter: the Office) is an administrative body within the Ministry of Finance of the Republic of Slovenia, meaning that it acts as a clearing house between financial institutions and other business entities on the one hand and law enforcement authorities on the other. The Office receives, collects, analyses and disseminates information obtained from persons under obligation referred to in Article 4 of the APMLFT, and submits them to the competent authorities only in cases provided by the law. Since the Office has no powers to act as an inspection body, it can only exercise off-site supervision of the implementation of the APMLFT; if it detects a violation, the Office acts in accordance with the second paragraph of Article 85 of the APMLFT or the law regulating minor offences (the first instance authority for minor offences).
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2. GENERAL REMARKS ON MONEY LAUNDERING AND TERRORIST FINANCING
The APMLFT defines money laundering as an activity carried out for the purpose of concealing the origin of money or other proceeds of crime, and includes the conversion or transfer of money or other proceeds of crime, and the concealment or disguise of the true nature, source, location, movement, disposition, ownership or rights with respect to money or other proceeds of crime. Money laundering is an independent criminal offence through which one conceals or otherwise disguises the illegal nature or source of proceeds obtained by committing a criminal offence (usually tax evasion, trafficking in drugs or arms, corruption, fraud, etc.) for the purpose of making criminal proceeds appear as legally acquired property. The ultimate objective of money laundering is to gradually integrate laundered money or proceeds into a criminal activity (existing or new) or into standard business flows which form an integral part of a lawful business activity.
In accordance with the APMLFT, terrorist financing means the direct or indirect provision or collection of money or other property of legal or illegal origin, or the attempted provision or collection of such money or other property, with the intention that they be used, in full or in part, for the performance of a terrorist act, or that they be used by a terrorist or terrorist organisation. Contrary to money laundering, where the subject of concealment or disguise may be only illegally acquired property – which means proceeds of a previously committed criminal offence – terrorist financing resources that are intended for the performance of terrorist acts or used by terrorists or terrorist organisations may be either of legal (personal income, profit, humanitarian assets, sponsor assets, etc.) or of illegal origin (criminal proceeds, e.g. tax evasion, offences related to corruption, drug or arms trafficking, etc.).
In the field of combating terrorism, the Republic of Slovenia adopted the Act Relating to Restrictive Measures Introduced or Implemented by the Republic of Slovenia in Compliance with Legal Instruments and Decisions Adopted within International Organisations (hereinafter: the ZOUPAMO – Uradni list RS, no. 127/06). The restrictive measures currently implemented in Slovenia are based on the legal acts of the UN Security Council and the EU, but may also be introduced on the basis of binding or non-binding acts of other international organisations or associations (e.g. the OSCE). These measures may include the partial or full cessation of economic relations, and railway, maritime, air, postal, telegraphic, radio and other means of communication, and the severance of diplomatic ties, while the most common measure in combating terrorism is financial sanctions, including the freezing of funds on accounts and/or the prohibition of the disposal of property (economic resources) in general, a military embargo, which means prohibition from arms trading with a certain country or other entities as well as a travel embargo, which includes banning certain persons from entering a country or transiting through its territory. Restrictive measures may be imposed against countries, international organisations, other entities, natural persons (e.g. heads of state, high state officials, terrorists) and other entities, especially terrorist organisations, whereas persons subject to sanctions may also include legal entities. The lists of persons subject to sanctions form part of legal acts which introduce sanctions.
The implementation of the ZOUPAMO falls within the competence of the Ministry of Foreign Affairs – International Law Division. For more information please visit the webpages of: the Ministry of Foreign Affairs,
(http://www.mzz.gov.si/fileadmin/pageuploads/Zunanja_politika/omejevalni_ukrepi_drzave1.doc
or the Office (http://www.uppd.gov.si/slov/mnenjaAPMLFT/mnenja 13 1.htm).
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3. TASKS OF DEALERS IN PRECIOUS METALS UNDER THE PREVENTION OF MONEY LAUNDERING AND TERRORIST FINANCING ACT (APMLFT)
According to Article 5 of the APMLFT, the measures to detect and prevent money laundering and terrorist financing must be implemented by persons under obligation, which includes dealers in precious metals. In view of the above, the activities of persons under obligation must also include the preventive measures prescribed in order to reduce the risk of money laundering or terrorist financing.
To detect and prevent money laundering and terrorist financing, dealers in precious metals must perform the following mandatory tasks:
1. implement the measures to acquire knowledge of the customer (hereinafter: customer due diligence) in a manner and under conditions stipulated by the APMLFT, and prepare a preliminary risk analysis;
2. report the information prescribed and requested to the Office, and submit the documentation;
3. provide regular professional training and education for employees;
4. protect and store the information and manage the records stipulated by the APMLFT;
5. prepare a list of indicators for the identification of customers and transactions in respect of which there are grounds for suspicion of money laundering or terrorist financing;
In addition to these measures, dealers in precious metals with at least four employees must also:
6. appoint an authorised person and his/her deputy, and provide suitable conditions for their work;
7. provide regular internal control over the performance of tasks under the APMLFT.
In addition to the implementation of the prescribed measures, dealers in precious metals must also comply with the limitations of cash operations with customers. In line with Article 37 of the APMLFT, persons trading in products, which include dealers in precious metals, are prohibited from accepting cash payments exceeding EUR 15,000 from their customers or third persons for the sale of products. The limitation for accepting cash payments also applies to payments for products effected by several linked cash transactions that in total exceed EUR 15,000. Dealers in precious metals receive payments from their customers or third persons on their payment accounts.
3.1 Customer due diligence
Customer due diligence is the key element in the system for the identification and prevention of money laundering. Through customer due diligence procedures, persons under obligation in a credible manner establish and verify the identity of a customer, the purpose of a transaction or intended nature of the business relationship in order to reduce the risk of doing business with an unknown customer who might abuse them for money laundering or terrorist financing purposes.
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Customer due diligence measures are applied:
1. when establishing a business relationship with a customer, whereby a business relationship means any business or other contractual relationship that is associated with the obliged person's activity and is, at the time of its establishment, expected to be of a lasting nature;
2. when carrying out a transaction amounting to EUR 15,000 or more, irrespective of whether the transaction is carried out in a single operation or in several operations which are clearly linked;
3. where there are doubts about the veracity and adequacy of previously obtained customer or beneficial owner information;
4. where there is a suspicion of money laundering or terrorist financing associated with a transaction or customer, irrespective of the transaction amount.
A single purchase or sale made between a dealer in precious metals and his customer is considered a transaction and not a business or any other contractual relationship. In such cases customer due diligence is carried out only if a single operation (or several operations which are clearly linked) equals or exceeds EUR 15,000. When such transactions are carried out on the basis of or within a previously established business relationship, only the missing information referred to in paragraph 2 of Article 21 of the APMLFT must be obtained.
3.1.1 Normal customer due diligence procedure
In line with the first paragraph of Article 7 of the APMLFT, customer due diligence comprises the following mandatory measures:
1. identifying the customer and verifying the customer’s identity on the basis of authentic, independent and objective sources;
2. identifying the beneficial owner of a legal entity or similar foreign law entity;
3. obtaining information on the purpose and intended nature of the business relationship or transaction, and other data under the APMLFT;
4. conducting ongoing monitoring of business activities undertaken by the customer with the person under obligation.
The person under obligation must define procedures for the implementation of these due diligence measures in its internal regulations.
Under item1 – Identifying a customer and verifying a customer's identity
Identifying a customer and verifying a customer's identity includes the following:
– identifying the customer by collecting information about the customer, whereby the person under obligation defines the method of identification (e.g. the customer completes a questionnaire – first and last name, address, number of personal identification document, etc. – but the customer does not have to be present at the dealer in precious metals unless otherwise stipulated by regulations); and
– verifying the customer’s identity or the collected information about the customer on the basis of authentic, independent and objective sources (e.g. official personal identification documents, public records, qualified digital certificates, passwords, etc.).
By verifying the customer's identity, a person under obligation verifies the accuracy of identity information provided by the customer. The identity can be established on the basis of information provided by the customer or information from reliable and independent sources. When the customer is a natural person, his identity is normally established and verified in one step, i.e. on the basis of an official personal identification document.
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The identity of legal entities or similar foreign law entities is established and verified in the same manner, i.e. on the basis of entries in the court register or any other similar register, and other official documents.