Armenia

Last updated: 02/02/2010

CENTRAL AUTHORITY FOR REPORTING

Financial Monitoring Centre. The Centre is a member of the Egmont Group.

OTHER ANTI-MONEY LAUNDERING REGULATOR(S)

ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?

Under Article 3 (4) of the Republic of Armenia Law on Combating Money Laundering and Terrorism Financing, 2008, lawyers are specifically included within the definition of ‘Reporting Entities’ and must, therefore, adhere to AML requirements.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.

Republic of Armenia Law on Combating Money Laundering and Terrorism Financing, 2008 (CMLTF);
Republic of Armenia Law on Combating the Legalization of Proceeds From Crime and Financing of Terrorism, 2004, as amended in 2007 (to be annulled by the enactment of CMLTF);
Republic of Armenia Criminal Code, Articles 190 and 217(1);
Board of the Central Bank of the Republic of Armenia Decision, 2008;
Decision N 1/886a on approving the Guidance on the Criteria for Suspicious Transactions;
Decision N 1/913a on approving the Guidance on Money Laundering and Terrorism Financing Typologies

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

N/A.

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

There are no money laundering guidance notes specifically for lawyers. However, the general guidelines for financial institutions released by the Central Bank may be of interest.

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

The Bar Association of the Republic of Armenia (BARA) Charter is silent on this issue.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

Under Article 4 and Article 15 CMLTF, reporting entities must identify customers and prevent any suspicious business relationships or transaction from continuing. Additionally, beneficial owners need to be identified and verified (Article 15(4)).

Under Article 8, reporting entities will need to conduct additional scrutiny of all complex and unusually large transactions, as well as those that contain unusual patterns with no apparent economic or other legitimate purpose.

All records should be kept for at least 5 years after termination of the business relationship or execution of transaction (Articles 8 (2) and 20).

Client due diligence is only required to be undertaken by lawyers in regards to the following transactions prepared and carried out for their clients (Article 15, Clause 12 (2)):

Buying and selling of real estate;
Managing of client money, securities, or other assets;
Management of bank accounts;
Provision of funds or other assets for establishment, operation, or management of legal persons;
Performing functions of establishment, operation, or management of legal persons, as well as buying and selling more than 75 percent of the stocks (contribution, shares and the like) in the authorized capital (equity capital and the like) of legal persons, or buying and selling stocks (equities, shares) of legal persons at a nominal or market value above 20 million drams.

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

Yes.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

Articles 15 (7) and (8) CMLTF specify enhanced due diligence requirements in regards to high risk customers. However, the requirements are specifically aimed at financial institutions.

Lawyers, as reporting entities, are to ‘take measures adequate to the risks of money laundering and terrorism financing’.

Reporting entities should conduct enhanced due diligence when establishing relationships with persons located in foreign states or territories, when international standards on AML are not or insufficiently applied (Article 19 (1)).

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Article 15 (6) states that in the presence of low risk criteria, reporting entities may perform simplified customer due diligence, when identifying or verifying the customer or the beneficial owner.

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Under Article 15 (11) CMLTF, lawyers are allowed to rely on third party due diligence but only in cases and in the manner established by internal legal acts of reporting entities.

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

Article 5 CMLTF sets out when a reporting entity is to file a transaction. However, the article sets out several conditions regarding lawyers that do not relate to other professions.

Under article 5 Clause 1 reporting entities must file a report regarding transactions:

That are above the threshold of 20 million drams, except for transactions stipulated in clause 2 of the article;
That are related to real estate above the threshold of 50 million drams;
That are suspicious or arise from suspicious business relationships, regardless of amount

Clause 2 sets out several clarifications that must be taken into account for clause 1 and specifically of interest to lawyers:

‘Clause 2. For reporting entities, the obligations of submitting reports stipulated in part 1 of the Article shall arise […]:

For notaries, attorneys, as well as for persons providing legal services [..] only with regard to the following transactions prepared or carried out for their clients:

Buying or selling of real estate;

Managing of client money, securities, or other assets;

Management of bank and securities accounts;

Provision of funds or other assets for establishment, operation, or management of legal persons;

Performing functions of establishment, operation, or management of legal persons, as well as alienation (acquisition) of contributions, shares and the like in the authorized capital (equity capital and the like) of legal persons, or alienation (acquisition) of stocks (equities, shares) of legal persons at a nominal or market value’.

Additionally Clause 3 sets out:

‘Attorneys, as well as for persons providing legal services, […] shall submit reports on the transaction stipulated by Clause 2 (3) of this article only in the presence of suspicious transactions or business relationships’

It would seem therefore that lawyers are under an obligation to report a transaction or business relationship when they regard it as suspicious and the transaction falls within the types listed in Clause 2 (3).

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

Article 4(3) CMLTF provides:

‘Notaries, attorneys, persons providing legal services […] shall submit to the Authorized Body the information specified by [the CMLTF] only in cases not contradicting to the confidentiality requirements established under the legislation regulating their activities. Legally defined confidentiality requirements for non-financial institutions or persons shall be applicable only to the information disclosed to the aforementioned organizations or person in performing their legally provided authorities’.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

Article 27 CMLTF provides a lawyer from indemnity regarding criminal, administrative, civil or other proceedings for duly performing their AML duties.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

N/A.

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

N/A.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

Although affecting financial institutions more, reporting entities are not allowed to open anonymous accounts, accounts in fictitious names nor accounts solely expressed in numbers or other conventional signs.

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.

Article 16 CMLTF states that lawyers should conduct ongoing due diligence throughout the course of the business relationship. This requires monitoring of the transactions with the customer in order to ensure veracity of the information regarding the customer, their business, the risk profile and their income.

Lawyers are able to update their data regarding the business relationship on their own determined (but regular) intervals.

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.

Failure to follow AML requirements can lead to fines or penalties as listed in article 27.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

N/A.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

Moneyval released a Mutual Evaluation Report on 11 January 2010, dated September 2009. In the report, Moneyval noted the following:

Armenia has not conducted a systemic assessment of money laundering, terrorist financing threats and risks to support the development and implementation of a robust AML regime;
The implementation of preventative measures by lawyers is inadequate across the sector and no lawyer has ever filed a suspicious transaction report;
In fact, there is concern that lawyers are not fully versed on their obligations in relation to the reporting of suspicious transactions due to the lack of licensing or supervisory provisions in place;
Consequently, a number of lawyers are unlicensed and unsupervised for compliance with the AML regime;
There is an unclear relation between the AML regime and professional secrecy provisions.

Moneyval, therefore, recommends that Armenia designate a competent authority to monitor and ensure compliance with the AML regime by lawyers.

Prepared by:

Constantino Gouvras
Legal Intern
International Bar Association
10th Floor, 1 Stephen Street
London W1T 1AT