New rules under EGO no. 111/2020 transposing AML5
- EGO no. 111/2020 implements the AML5 package, bringing changes to the general provisions regarding AML rules
- New market players (such as real estate developers) are included under the umbrella of reporting entities
- Cryptocurrency businesses are now required to follow an authorization procedure and comply with AML rules
Emergency Government Ordinance no. 111/2020 on the amendment and supplement of Law no. 129/2019 on the prevention and fighting against money laundering and terrorism financing, as well as on the amendment and completion of several legislative acts, with the subsequent amendments, of the Emergency Government Ordinance no. 99/2006 approved with amendments and supplements by Law no. 227/2007, with the subsequent amendments and supplements and of Law no. 207/2015 on the Fiscal Procedure Code, with the subsequent amendments and supplements („the EGOno.111/2020”) was published in the Official Gazette of Romania no. 620 dated 15.07.2020.
EGO no. 111/2020implements the AML5 package, namely the Directive (UE) 2018/843 of the European Parliament and the Council as of 30 May 2018 for the amendment of the Directive (UE) 2015/849 on the prevention of the use of the financial system for money laundering or terrorism financing, as well as for the amendment of Directive 2009/138/CE and 2013/36/UE. Notably, AML4 Directive was implemented in Romania approximately 1 year ago, as per Law no. 129/2019 on the prevention and fighting against money laundering and terrorism financing („Law no. 129/2019”).
EGO no. 111/2020brings a number of significant changes (including new players under the umbrella of reporting entities, regulating crypto currencies), but also amends the general provisions regarding the reporting entities’, more specifically credit institutions, non-banking financial institutions, payment institutions and electronic money institutions.
Under EGO no.111/2020, the linked operations are included under the obligation to report to the National Office for Prevention and Control of Money Laundering (the ”AML Office”)cash transactions in RON or in foreign currencies having as minimum limit the equivalent in RON of EUR 10,000. Moreover,the previous threshold with respect to reporting obligations regarding foreign bank account transfers was reduced from the equivalent in RON of EUR 15,000 to EUR 10,000 and, as a consequence of the above mentioned amendment, these transfers shall include also linked operations.
Under the new rules, the identity verification method can be completed also through any safe identification process, remotely or electronically, which is regulated, acknowledged, approved or accepted by the Authority for the Digitalization of Romania (in Romanian, Autoritatea pentru Digitalizarea Romaniei). This new possibility completes the provision which stated that such verification can be made through electronic identification means or trust services regulated by Regulation 910/2014 of the European Parliament and the Council on the electronical identification and reliable services for electronic transactions on the internal market and for the abrogation of the Directive 1999/93/CE (“eIDAS Regulation”).
Therefore reporting entities using third parties must ensure that they obtain, as soon as possible, copies of documents based on which the third party applied the KYC measures, including, when they are available, data obtained by electronical identification means, relevant reliable services provided by the eIDAS Regulation or any other safe identification process, remotely or electronically,regulated, acknowledged, approved or accepted by the Authority for the Digitalization of Romania.
Furthermore, with respect to the reporting entities’ obligation to designate one or more conformity officers responsible for the enforcement of the provisions of Law no. 129/2019, EGO no. 111/2020 introduces a new provision, respectively that this obligation shall depend on the nature and the dimension of their business activity. By comparison to the previous enactment of the Law no. 129/2019, it is important to stress that a new category of reporting entities was included under the scope of the above mentioned obligation to appoint a conformity officer: other entities or natural persons trading goods or providing services, as professionals, to the extent that payments are made or received in cash in an amount of EUR 10,000 or more, whether the transaction is carried out in a single operation or in several operations which appear to be linked.
Moreover, under the new amendments, reporting entities part of a group are required to enforce and apply their policies, procedures and instructions (such as data protection policies and information exchange within the group in order to fight the money laundering and the terrorism financing) to its majority-owned agencies and distributors as well. The former provision included solely the majority-owned branches and subsidiaries under this obligation.
Another notable amendment is that under EGO no.111/2020 providers engaged in exchange services between virtual currencies and fiat currencies, as well as the custodian wallet providers are, on one hand, included as reporting entities and required to comply with AML rules, and, on the other hand, are now required to follow an authorization and/or registration procedure which shall be conducted by the Commission for the authorization of exchange services (in Romanian, Comisia de autorizare a activitatii de schimb valutar). Moreover, the Authority for the Digitalization of Romania shall have the competence to issue a technical notice for the above-mentioned entities. The authorization and/or registration procedure, as well as the procedure for issuing the technical notice shall be established by a Government Decision in a 120-days period after EGO no. 111/2020 enters into force.
How does it change the real estate sector?
A new category of reporting entities included under EGO no. 111/2020, by way of comparison to Law no. 129/2019, which included as reporting entities only real estate agents, are real estate developers, including when acting in their capacity of intermediaries for the lease of real estates, only for transactions for which the monthly rent represents the equivalent in RON of at least EUR 10,000.
The inclusion of real estate developers as reporting entities under EGO no. 111/2020 entails several new rules thereof, such as:
- real estate developers are required to comply with the reporting obligations regulated by Law no. 129/2019, including the reporting obligation to the AML Office of cash transactions, in RON or in foreign currencies, having a minimum limit representing the equivalent in RON of EUR 10,000 (e. including linked operations). Such reports shall be submitted with the AML Office only by electronic means and according to the methodology adopted by order of the AML Office`s president;
- real estate developers, in their capacity as reporting entities, shall apply, under EGO no. 111/2020, customer due diligence measures with respect to all new clients. These measures shall be applied also to existing clients, depending on the risk, or when the relevant circumstances on the client change, or when the reporting entities have, during the calendar year, the legal obligation to contact the client for the examination of all relevant information on the beneficial owner, or when the Fiscal Procedure Code impose this obligation.
Reporting entities shall apply the above-mentioned measures not only to customers, but also to business partners, as under Law no. 129/2019, the client is not defined as the customer, but as any individual, legal entity or entity without legal personality with whom the reporting entities conduct business relations or other temporary or permanent operations (including the persons with whom the reporting entities negotiated a transaction irrespective if the transaction was finalized or not, as well as the persons which benefited in the past or benefits from the services of the reporting entities);
- real estate developers acting as reporting entities shall designate, with the approval of the entity`s management, corresponding to the nature and the dimension of their business activity, one or more conformity officers which shall be responsible for the implementation of the provisions of Law no. 129/2019, with the indication of the nature and the limit of such responsibilities;
- real estate developers shall, corresponding to the nature and the dimension of their business activity, and in compliance with the sectorial regulations, prudential requests and instructions issued by the competent authorities, establish internal norms and policies, internal control mechanisms and procedures for the management of money laundering and terrorism financing risks.
These policies, internal norms, mechanisms and procedures shall be approved and monitored by the senior management of the reporting entity. Moreover, depending on the dimension and the nature of the bussiness activity of the real estate developer, it shall ensure the independent audit function for testing the above-mentioned policies, internal norms, mechanisms and procedures.