AML

Act on Certain Measures against the Legalisation of Proceeds of Crime and Terrorist Financing

You may have heard of this Act and have a vague idea of what it covers. To some of you, however, it may sound like something from the world of multinational corporations and banking institutions. Unfortunately, this Act also affects you as our clients.

Under the AML Act, we as accountants are so-called obliged entities. And, as is usually the case, obliged entities tend to have certain obligations. Our obligations fall into three main areas:

1. Client identification

• Record and verify the information on the identity document and check that the client's appearance matches the photograph on the identity card:
  • An individual in business: first name, surname, personal identification number (or date of birth if no number has been assigned), place of birth, sex, permanent or other residence, nationality, business name (if different from the individual's first name and surname), place of business and company registration number, type and number of the identity document, the country or authority that issued it, and its period of validity.
  • A legal entity: business name (or name), including any distinguishing suffix, company registration number, and information for verifying the identity of the individual who is a member of the statutory body.
• Establish whether the client is politically exposed: For a politically exposed client, the law requires us to exercise greater caution and creates an obligation to ask about the origin of their assets.

2. Client due diligence

• Obtain information about the purpose and intended nature of the transaction (this means the client's business transaction, not the transaction between the accountant and the client), establish the client's ownership and management structure, identify the beneficial owner and examine the sources of the funds involved in the transaction. For example, this includes checking the entry in the Register of Beneficial Owners, asking about transactions that do not appear to relate to the client's business, and so on.

3. Reporting a client's suspicious transaction

• If client identification and due diligence reveal discrepancies that give rise to a suspicion of a breach of the law involving the criminal offence of tax evasion, the accountant is obliged to report this to the Financial Analytical Office.

Why do all this? Because taxes should not be evaded. Because the law requires it. And because we accountants face substantial penalties if we neglect any of the obligations mentioned above.

If you would like to learn more about this topic, we recommend visiting the website of the Financial Analytical Office, which supervises and enforces compliance with the AML Act in the Czech Republic.