Czech Republic

Last Updated: 14/10/2008

CENTRAL AUTHORITY FOR REPORTING

Financial Analytical Unit ("FAU") of the Ministry of Finance.

ANTI-MONEY LAUNDERING REGULATOR(S)

Financial Analytical Unit of the Ministry of Finance;
Czech National Bank.

HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?

The Third Directive was implemented by Act No. 253/2008 Coll., “On Certain Measures Against Money Laundering and Financing of Terrorism” (the “AML Act”), which became effective as of 1 September 2008.

The AML Act includes, among other things, the obligation to identify customers (for transactions of EUR 1,000 or more), client’s due diligence (as it is defined in the Third Directive), identification of beneficial owners and enhanced due diligence for politically exposed persons (as defined in the Third Directive).

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

Act No. 253/2008 Coll., “On Certain Measures Against Money Laundering and Financing of Terrorism”, which became effective as of 1 September 2008.

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

Non-EU lawyers having a branch office or premises in the Czech Republic, and all EU lawyers providing their services in the Czech Republic, are subject to the AML Act to the same extent as Czech lawyers. (Section 2 para 2 and Section 27 para 5 of the AML Act).

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

Any guidance for lawyer implementing the AML Act has not been implemented yet by the Czech Bar Association (the “CBA”).

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

Yes. Lawyers have to report potential suspicious transactions to the Control Committee of the CBA. If the Committee considers the transaction suspicious, it must forward the notification to the FAU. (Section 27 para 3 of the AML Act).

Furthermore, the CBA has to supervise, at the request of the FAU, whether a specific lawyer has fulfilled his obligations as set out in the AML Act.

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

Lawyers have to carry out client’s due diligence (the “CDD”) when establishing business relationship with the client subject to the AML Act. The CDD means:

Identifying, where applicable, the beneficial owner;
Obtaining information on the purpose and intended nature of the business relationship;
Conducting ongoing monitoring of the business relationship including scrutiny of transactions undertaken throughout the course of that relationship to ensure that the transactions being conducted are consistent with lawyer's knowledge of the client, the business and risk profile and ensuring that the documents, data or information held are kept up-to-date;
Verifying source of the transaction funds.

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

Yes, a lawyer must determine extent of due diligence depending on its evaluation of risk of money-laundering and financing of terrorism based on the following factors: types of clients, business relationships and transactions. Lawyer must be able to reason determination of due diligence extent to FAU.

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

Yes, lawyer is obliged to carry out enhanced CDD when establishing business relationship with politically exposed persons.

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

Yes, simplified CDD (i.e. identification of client and CDD is not required) is applicable when a client is a (as relevant here):

Credit or financial institution (includes also foreign credit or financial institution meeting anti-money laundering and anti-terrorist financing requirements comparable to those set by the Third Directive);
Company listed on a regulated market;
Beneficial owner of funds deposited on deposit-account of the lawyer;
Central public authority (e.g. ministry), Czech National Bank or regional authority

When simplified CDD should apply, a lawyer has to check whether the above conditions are met and whether its client, business relationship or the respective transaction does not present (pursuant to information available to the lawyer) a higher risk of money-laundering or terrorist financing.

Simplified CDD do not apply when client is a politically exposed person.

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

Yes, a lawyer may rely on a third party CDD when such third party is a:

Credit or financial institution;
Foreign credit or financial institution meeting anti-money laundering and anti-terrorist financing requirements comparable to those set by the Third Directive and the institution is supervised by relevant authority (supervision must include among others possibility of on-site control of activities of the institution).

A lawyer can only rely on third party CDD when he has ensured that it will obtain all necessary information and documentation related to the CDD. Further, the client must consent to the lawyer gathering the necessary information and documents from the third party.

Even if the above criteria are met, a lawyer has to (i) get from his client all information needed for an ongoing monitoring of the relationship and (ii) verify source of the funds used within the relationship (transaction).

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

A lawyer is subject to the AML Act, when providing the following services on behalf of a client or for a client’s account (Section 1a para 7(j) of the AML Act):

Purchase or sale of real property or business undertakings;
Management of client’s money, securities, shares or other client’s assets, including the representation of a client or acting on its behalf in connection with the opening of a bank account at bank or other financial institution or establishing and managing securities accounts;
Acquisition and gathering of finance or other valuables for the purpose of establishing, managing, or controlling a company, business group, or any other similar entrepreneurial entity regardless of its status as a physical/legal person; or
Encashment” (inkaso), payments, transfers, deposits, or withdrawals in wire or cash transactions, or any other conduct aimed at or directly triggering the movement of money.

If a lawyer provides any of the services specified in 1–4. above and develops (in connection with the provision of such services) a suspicion of money laundering pursuant to the AML Act, or any information which could indicate a suspicious transaction pursuant to the AML Act, he/she must report the suspicion to the CBA, unless such information was obtained from a client or otherwise in the course of, or in connection with, the following (Section 14 para 1 of the AML Act):

Providing legal services or subsequent checking of the legal position of client;
Defending client in criminal proceedings;
Representing client in court proceedings; or
Providing any legal advice in connection with b) and c) above, regardless of whether such proceedings have already begun, are running, or have finished.

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

See the previous response.

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

In principle, no one can be held liable for the fulfilment of an obligation imposed by law.

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?

A lawyer may proceed with the legal advice/transaction unless there is an imminent danger that by executing the transaction securing, of the funds would be frustrated or substantially impeded. In such a case, the transaction must be postponed (if possible) for at least 24 hours from the time of notification of the suspicious transaction to the FAU. This period may be prolonged for up to 72 hours upon the FAU’s request (Section 20 of the AML Act).

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

Yes, generally, any person reporting a suspicious transaction to the regulator must keep this fact confidential. No exemption for lawyers has been implemented yet.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT

A lawyer must refuse any new client that refuses to undergo identification procedures (Section 15 para 1 of the AML Act).

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

Yes, if a lawyer is subject to the AML Act (please see above), they must monitor their client’s activities in order to detect any suspicious transaction and keep the client’s data (obtained during the identification and CDD procedure) up to date. If a suspicious transaction occurs, the lawyer must report the transaction to the CBA.

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

Not applicable.

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

This information is not publicly available.

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?

We are not aware of any release of mutual evaluation of the Czech Republic after implementation of Third Directive neither by FATF nor MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism)

The last publicly available report was been released by MONEYVAL in 2007 (a 3rd round report). MONEYVAL found that the Act No. 85/1996 Coll., “On Legal Profession”, constituted “a fundamental legal regulation governing [the] activities of the legal profession”. Act No. 85/1996, is further supplemented by a series of decrees, regulating among other things the remuneration of lawyers and the disciplinary procedures relating to them. The legal profession itself, is also further governed by a series of professional regulations, such as the Code of (Legal Profession’s) Ethics adopted by the Czech Bar Association.

The report found that there is still room for improvement with the implementation by the Czech Republic, particularly with regards to the registration of business entities and the transparency of the legal framework of non-profit organisations. The report is available in pdf format, downloadable here.

Information provided by:

Martin Dancišin
Advokát / Attorney-at-Law
Ve spolupráci s / In Association with
GLATZOVA & Co., v.o.s.
Advokátní kancelár - Law Firm
Betlémský palác, Husova 5
110 00 Prague 1
Czech Republic

Tel: (+ 420) 224 401 419 (direct)
Tel: (+ 420) 224 401 440
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