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Goals of the Law
- Counteract the legalization of illicit income;
- Protect the financial system of the Czech Republic from being used for criminal purposes;
- Ensure cooperation with international organizations and other states in the fight against money laundering and terrorism financing;
- Implement sanctions for non-compliance with established requirements.
The primary objective of the Law is to establish responsibilities for both individuals and legal entities to verify and identify their clients and to monitor financial transactions that appear suspicious. The Law aims to:
Key Terms
- Legalization of proceeds from crime refers to actions aimed at concealing the illegal origin of any economic benefit derived from criminal activity.
- Terrorism financing involves the collection and provision of funds (or other assets) for carrying out a terrorist attack, participating in a terrorist group, supporting, and promoting terrorism.
- Financing the proliferation of weapons of mass destruction refers to the collection and provision of funds (or other assets) for the dissemination of weapons of mass destruction.
To eliminate ambiguity and ensure a clear understanding of the Law, key terms are defined:
Key Aspects of the Law
Entities Responsible for Implementing the Law’s Goals
- Credit and non-credit financial institutions and subjects: banks, credit unions, insurance and investment companies, entities issuing electronic money, and those involved in exchange activities, etc.
- Non-financial institutions and subjects: lawyers, notaries, accountants, real estate agents, gambling operators, realtors, auctioneers, and others dealing with financial operations.
- Competent authorities: state bodies and agencies responsible for monitoring compliance with the legislation (financial intelligence and law enforcement agencies).
- Legal entities and entrepreneurs: companies and individual entrepreneurs engaged in activities related to managing finances or providing financial services.
The Law identifies the entities responsible for implementing its goals, including:
Foreign individuals and legal entities operating within the territory of the Czech Republic are also required to implement the Law’s requirements.
Main Duties of the Entities Responsible for Implementing the Law’s Goals
Responsible entities are charged with a set of duties to detect financial crimes, including:
Client Identification
- Definition: Establishing and verifying the identity of clients using the services of financial and non-financial institutions.
- Procedure: Involves checking official documents (passport, driver’s license, legal entity registration document, etc.), gathering client information (name, date of birth, address), and, if necessary, conducting checks to verify document authenticity.
- Purpose: Prevent the use of proxies or fake documents for financial operations.
Client Screening
- Definition: Involves a deeper analysis and risk assessment related to the client and their financial transactions.
- Procedure: Entails collecting and analyzing additional information about the client (sources of income, financial history), checking databases (e.g., lists of individuals suspected of terrorism or under sanctions by the Czech Republic), and monitoring the client’s behavior over a certain period.
- Purpose: Determine the risk level associated with the client and take measures to prevent suspicious transactions.
Data Storage
- Definition: The obligation to save and protect information collected during client identification and verification.
- Procedure: Data must be stored for 10 years after the end of business relations with the client. Documents can be stored in electronic and physical forms, and the responsible person must ensure their confidentiality.
- Purpose: Provide the capability for retrospective analysis and supply information to competent authorities when investigating suspicious operations.
The Law also defines the conditions for enhanced, simplified, and intermediary identification and verification of clients.
Procedure for Dealing with Suspicious Transactions
Upon detecting a suspicious transaction, the responsible person must notify the Administration — a special administrative body in Prague. The Administration functions as the financial intelligence unit of the Czech Republic and is subordinate to the Ministry of Finance.
Notifications about a suspicious transaction are submitted in writing: by registered mail in paper form or electronically. When submitting a notification, the responsible person must ensure the confidentiality of the transmitted data.
Activities of the Administration and Other Competent Bodies
- Request additional information regarding clients from financial and non-financial organizations that have been noted for suspicious transactions;
- Assess the risks of laundering proceeds from crime and financing terrorism.
The Administration cooperates with foreign bodies and international organizations endowed with similar competencies under international agreements and according to the regulations of the European Union. As an administrative body, the Administration has the right to:
If facts indicating the commission of a crime are discovered, the Administration files a notification with the criminal prosecution authority and provides it with the results of its own investigation.
The activities of the Administration are monitored by a permanent commission established by the Chamber of Deputies; the Administration presents an annual report on its activities to the permanent commission and the government.
Administrative Supervision
- The Czech National Bank;
- The Customs Administration of the Czech Republic;
- The Czech Trade Inspection;
- Professional chambers of lawyers, notaries, auditors, judicial executors, tax consultants, and other non-financial subjects;
- The Ministry of Justice of the Czech Republic.
In addition to the Administration, administrative supervision of compliance with the Law is conducted by:
Border Crossing Rules
- Cash in Czech or foreign currency;
- Payment instruments;
- Coins containing at least 90% gold;
- High-purity bars containing at least 99.5% gold;
- Traveler’s checks or monetary vouchers exchangeable for cash;
- Bearer securities or order securities;
- Other investment instruments that are signed but do not contain the name of the recipient, with a total value of 10,000 euros or more.
A physical and legal person entering the Czech Republic from a non-European Union country and leaving the Czech Republic for such a country is required to notify the customs authority in writing about the import and export of:
Imported and exported funds must be checked by the customs authority.
Administrative Offenses
- Failure to comply with client identification and verification duties;
- Violation of the requirement to provide timely information to the Administration;
- Breach of data confidentiality.
The Law defines a list of offenses for which responsible persons may be sanctioned:
