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Matched Legal Cases: ['art.164', 'art. 165', 'art. 44', 'art. 5', 'Art. 13', 'art. 17', 'Art. 19', 'art. 8', 'art. 269', 'art. 5', 'art. 17']

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Dissertation submitted as partial required for the award of L.L.M.
Title: The role of the banking system in preventing and fighting money laundering – a comparative study of Romania and the United Kingdom legislations
Submitted by: 670057835
Declaration: “I certify that all material in this dissertation which is not my own work has been identified with appropriate acknowledgement and referencing and I also certify that no material is included for which a degree has previously been conferred upon me.”
Signed by: 670057835
Word count: 13985
“The role of the banking system in preventing and fighting money laundering – a comparative study of Romania and the United Kingdom legislations”
Student ID: 670057835
Dissertation submitted in part fulfilment for the requirements of the
L.L.M. Degree
General Aspects of the Money Laundering and the Banking System
Overview of the Romania and the United Kingdom Anti – Money Laundering Legislations
The comparative analysis of the Romania and the United Kingdom Anti – Money Laundering Legislations
The concept of money laundering represents a subject of great importance for both the academia and the practitioners. Although the multiple aspects of this illegal activity were well studied and analyzed for a long period of time, nowadays the implications of this issue are becoming more complex and unpredictable. The evolution of the new technologies allows the state authorities to exert a more rigorous and inclusive control and monitoring of the financial transactions of both the individuals and legal entities. In the same time, new developments imply the evolution and diversification of the money laundering techniques, the criminals finding new ways of creating a legal appearance to their illicit finances.
The market is becoming more and more digitalized and, as a consequence, in the near future cash money will be totally excluded from the world financial circuit. The banks, in this sense, will not only gain a greater influence in the economies of the states, but will become a fundamental element of the daily operations of both individuals and legal entities. This situation will make some money laundering techniques through cash further impossible and would increase the role of the banking system in preventing and fighting money laundering. On the other hand, due to some legal gaps and corruption, currently there are some “efficient” possibilities of money laundering in the banking system that criminals make use of.
The main purpose of the present work is to reveal the essential role of the banking system and all its constituent elements in preventing and fighting money laundering. The focus of the research is made on the legislations of the two jurisdictions: Romania and the United Kingdom (England and Wales). The choice for these particular states is based on the research interest to compare and analyze a jurisdiction with hundreds of years of clear and stable legal rules and traditions, particular in the banking world, with a former socialist state where the banking system was represented, managed and formed by the state. The democratic transformations of Romania after 1989 permitted the establishment and consolidation of a free capitalist market. The Romanian current banking system is very “young”, being only 28 years old. From this perspective, it is interesting to identify and analyze the aspects that are common or different in fighting money laundering through banks in these states. Not to be neglected is the corruption that is present in both states, but especially in Romania. As one the most prevalent causes and facilitating factors of the money laundering, corruption has to be analyzed and practical measures must be identified, in order to increase the effectiveness of the anti – money laundering measures. In the same time, both countries have totally distinct legal systems, the United Kingdom being the “parent” of the common law system and Romania having a civil law system, with strong French influence. The analysis of the two jurisdictions would reveal the effectiveness, strengths and weaknesses of the both legal systems in preventing and fighting money laundering. Last but not least, the present work will reveal the main advantages and disadvantages of being a European Union member, as in the case of Romania, and of exiting from this economic and political union, for preventing and fighting money laundering.
As stated above, one of the main objectives of the present research is to identify and reveal the role and the importance of the banking system in preventing and refuting money laundering. In this sense, the banking system as a whole will be examined, in order to identify its structure and constituent elements. Additionally, special attention will be granted to the banks’ and other financial institutions main functions, as these matters underline the modality of their rebutment of the money laundering. Also, in the light of the above, the legal duties of the financial institutions regarding the identification and report of the suspicious transactions will be analyzed. Although this function does not represent one of the main characters of the banking activity, the present work will reveal the importance and necessity of this duty, among other, for preventing and fighting money laundering.
The actuality of the above mentioned subject is suggested by the astonishing amount of the illicit money that is laundered each year by drug and human traffickers, corrupt government officials, different organized crime groups, etc. According to a research report published by the United Nations Office on Drugs and Crime in 2011, it is estimated that the amount available for laundering through the world financial system is equivalent to 2,7 % (2,1 % – 4 %) of global Gross Domestic Product, or 1,6 trillion USD ($) in 2009. The same publication indicates that the amount of all criminal proceeds constitutes approximately 2, 1 trillion USD ($). Therefore, as can be deducted from the above data, 76 % of all world illicit money is laundered via the banking system. This incredible and revolting amount of illicit money is circulating daily through the world financial institutions, despite all the efforts that different states and international organizations are undertaking lately. The money laundering activities, in general, and the laundering operations through financial institutions, in particular, represent a serious threat for the global legal order, the states’ economies, the social stability and well-being. The successful outcome of these illicit actions assures the perpetuation of the criminal organizations and other misdemeanants. It allows them to capitalize their illegal efforts and to reinvest the legal finances in the future criminal actions or to invest them in legal ventures. The laundering of the illicit income compromises the normal free market relations and increases the level of corruption. The modern economic and financial opportunities, new technologies and means of communication provide ample capabilities for criminals to disguise the origin of funds received as a result of their illegal activities. It is possible nowadays to use different methods, such as instant money transfers from one country to other, the misuse of the corporate tools with the purpose of concealing the identity of the true owner of the funds, etc. In this sense, it is extremely important to analyze the existing measures of the financial institutions to prevent and fight such illicit actions, in order to identify and rectify the loopholes. Also, it is necessary to propose measures that would increase the efficiency of the banking system in the counteracting the legalization of the criminal funds.
The methods utilized in the present study are: the logical method, the comparative method and the applicative method.
The logical method represents the multitude of operations and means which assures the study of the structure and dynamic of the necessary relations between the components of the concept. This method supposes the existence of different approaches. In this sense, in the research will be applied the singular and general analysis. Thus, the concept of money laundering will be analyzed in general, as a social, legal, economic phenomenon, as well as in particular to specific situations. Another utilized approach is the cause-effect relation. In this way, the entire research will be carried out based on the conditions that caused the occurrence of a situation and the consequence of that condition. Last but not least, the necessity-incidence approach will be applied, as a way of explaining the advent of a specific regulation, event, fact, consequence.
The comparative method represents a study practice which consists in revealing the similar and distinct characteristics of two or more phenomena. This method will be utilized as a necessary and relevant tool to study in contrast the existing anti-money laundering legislations of the United Kingdom and Romania.
The applicative method represents the connection between the theoretical concepts and the practical situations. Attention will be granted to the case law in both jurisdictions, in this way analyzing the effects of the regulations on the subjects involved in money laundering operations and vice versa.
The present work is structured in five parts: Introduction, The General Aspects of the Money Laundering and the Banking System, The Overview of the Romania and the United Kingdom Anti-Money Laundering Legislations, The Comparative Analysis of the Romania and the United Kingdom Anti-money Laundering Legislations and the Conclusion.
The Introduction suggests the key-facts of the present work, such as the objective, actuality and necessity of the subject, methods of studying used and the general preface of the dissertation.
The General Aspects of the Money Laundering and the Banking System represents the first chapter of the present study, which has the aim of highlighting the general aspects of the “money laundering” phenomenon in the present-day societies. The concept of money laundering will be analyzed as a whole, regardless of the particular characters of the specific money laundering operations. This part of the work will include the definition of the subject and the prominence of the money laundering action from the legal point of view. Additionally, the three steps of the money laundering will be presented, as the necessary condition of the illicit operation, such as: placement, layering and integration. Furthermore, the methods of money laundering through the banking system will be identified and analyzed in their complexity, emphasizing the entire chain of operations that includes one method or another.
Also, this part determines the definition and the structure of the banking system, in order to identify and analyze the integral parts of the system. The chapter aims to reveal the universality of the concept, either the elements of the banking system are identical in every legal system or not. In this sense, the role of the banks, central banks, currency exchanges, non – bank crediting institutions will be described, as a serious and efficient tool in preventing and fighting money laundering.
The second chapter of the present dissertation represents the overview of the Anti-Money Laundering Legislations of the United Kingdom and Romania. This part will include the analysis of the current anti-money laundering regulations, highlighting the aims, target institutions and the legal effects of the above-mentioned legislations. The main pieces of law behind the United Kingdom anti-money laundering regime represent: The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, The Proceeds of Crime Act 2002 (as amended by the Crime and Courts Act 2013 and the Serious Crime Act 2015), The Money Laundering Regulations 2007 and the newest Sanctions and Anti-Money Laundering Act 2018. All these regulations will be explored in the light of the banking system. In this sense, concrete and practical procedures of the anti-money laundering acts will be identified, determining the attributed to the banking system role by the United Kingdom legislator.
Furthermore, the relevant Romanian regulations will be analyzed, such as: Law no. 656/2002 for the prevention and sanctioning of money laundering, as well as for measures to prevent and combat terrorism financing, which transposed most of the provisions of Directive 2005/60/EC and Directive 2006/70/EC, both repealed by the new Directive (EU) 2015/849, Emergency Ordinance of the Government No. 99 of 06.12.2006 on credit institutions and capital adequacy, Government Decision no. 1599/2008 for the approval of the Regulation on the organization and functioning of the National Office for Preventing and Combating Money Laundering, etc. Last but not least, in both jurisdictions will be analyzed the role and the functions of the national anti-money laundering bodies: The Financial Conduct Authority in the United Kingdom and The National Office for Preventing and Combating Money Laundering in Romania.
The third chapter of the present work will comprise the analysis of the Anti – Money Laundering Legislations of the two states. Using the comparative and logical research methods, the strengths and weaknesses of the two jurisdictions will be identified and analyzed. As mentioned earlier, the dissertation has as an objective the constructive observation and study of the states’ Anti – Money Laundering legislations, not the criticism, for the sake of principle. In this sense, the work will represent a modest attempt to reveal those aspects that one country can learn from another, and vice versa.
The last part of the dissertation represents the conclusion of the dissertation. The conclusion summarizes the main arguments and ideas of the present study, revealing the principal findings and deductions. A subjective evaluation of the existing legal framework will be given, in the light of the theses exposed in the main text of the dissertation. Additionally, actual and practical solutions will be suggested to the present loopholes of the anti-money laundering legislations in both states.
The term “money laundering” represents a concept that is often greatly misunderstood and unascertained in its complexity by the present day-society. Although the media abounds in highlighting breaking news regarding laundering scandals, there is little awareness of the nature, concept, methods and consequences of these operations for the public, in general. The issue of money laundering is not new. The tendency to disguise the illicit source of the obtained funds has its origin in the middle ages, when, for example, the loan sharks concealed the interest for the rendered credit, given the fact that the Catholic Church had forbidden lending money. In this sense, money lenders appealed to different methods of hiding the illicit income. Soon afterwards, illegal financial sources, as well as the methods of disguising, have expanded, thus important revenues originating mainly from underground economic activities were infiltrated through various modalities in the real economy. Only during the 20th century, the issue of money laundering gained special attention from the state authorities. It is worth mentioning the Italian-American organized crime groups which triggered various investigations regarding their origins of income and their ambiguous investments in different legal businesses. The term “money laundering” comes from the United States where it seems to have been “invented” around the 1920s when street gangs led by people like Al Capone or Bugs Moran began looking for a legitimate explanation of the money they obtained from criminal activities. To achieve these goals, the criminal organizations of the era initiated small businesses, usually public laundries or car washes, where it seems the term “money laundering” originated from. It was essential to mix the “dirty money” with the legal funds, and to declare everything as a profit for the cover business.
The legal doctrine contains different definitions of the money laundering, but all of them present similar characteristics of the nature of the term. In fact, money laundering represents a process, a multitude of actions and operations which are performed by a criminal or a criminal group which obtained revenue, with the scope of rendering a legal appearance to it, in his/their personal benefit.
Professor Brigitte Unger defines money laundering as “the process of disguising the unlawful source of criminally derived proceeds to make them appear legal”.
Professors Stefan Popa and Adrian Cucu consider money laundering a complex process through which the revenues originating from criminal activities are transported, transformed or mixed with the legal funds, with the purpose to hide the true nature, provenance, disposition, movement or ownership of the assets.
The term “money laundering”, as a concept, came into existence in the early 1970s when the United States passed the Bank Secrecy Act (BSA). This Act was aimed to provide law enforcement authorities of the United States of America with the tools necessary to combat money laundering. Records required in the Bank Secrecy Act include a Suspicious Activity Report (SAR), a Currency Transaction Report (CTR), a report on foreign bank accounts, and reports on cross-border movement of currency and monitoring instruments. The rationale for these reporting-based systems was to create a “paper trail” that aids law enforcement agencies in prosecuting money laundering cases.
The term “money laundering” was popularized in the rest of the world through the adoption of the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (UN Vienna Convention 1988). The Convention recommended its parties to criminalize money laundering and drug trafficking. This Convention is acknowledged as the most important step in the internationalization and criminalization of money laundering activities. The Convention also played a significant role in introducing the concept of “money laundering” worldwide. From this international initiative, the term “money laundering” spread to the rest of the world through the enactment of domestic legislations and regulations.
According to the Proceeds of Crime Act 2002 of the United Kingdom, a person commits a money laundering offence if he conceals, disguises, converts criminal property or removes the criminal property from England and Wales, from Scotland or from Northern Ireland or if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person or if the person acquires, uses or has possession of criminal property except where adequate consideration was given for the property.
The Romanian anti-money laundering law qualifies a person to commit money laundering operations when there is changing or transferring of goods, knowing that they originate from committing crimes in order to conceal the illicit origin of such property or an individual helps the person who committed the offense from which the goods originate to escape from prosecution, punishment, or when the person conceals the true nature of the origin, location, movement or property of the goods, knowing that the goods originate from committing offenses or when there takes place the acquisition, possession or use of property, knowing that they originate from the offense.
As can be seen from above, the two legal definitions of both states are very similar, having the same nature, purpose and legal qualifications. The legislators of the United Kingdom and Romania identify three situations when an individual or a legal entity can be incriminated with money-laundering crime. According to the laws mentioned above, the act of money laundering, as a infringement, will exist when someone disguises the criminal property obtained from his own crimes, when someone facilitates the concealment of the origin of the criminal goods or when someone acquires, uses and has possession of the goods obtained from a crime, knowing its origin.
Regarding the subjects of the money laundering crime, as seen in the laws above, they can be categorized into four main categories. First of all, a money launderer is the main offender who launders the money itself. Secondly, anyone who helps a criminal to launder the proceeds of his crime is also considered a money launderer. Thirdly, people can become money launderers by possessing money known to be or suspected of being criminal activity proceeds. The final category, which is not expressly mentioned in the anti-money laundering laws of the United Kingdom and Romania, can include a person who helps to create a money laundering scheme even if that person does not actually take part in it, such as accountants, notaries, or lawyers who recommend a tax evasion scheme.
The purpose of the money laundering operations is ,therefore, to make funds derived from or associated with an illicit activity seem legitimate, the need to recycle money emanating from the desire to hide the criminal activity.
Some legal authors suggest that the process of money laundering consists of three steps: pre-laundering, laundering and integration. Pre-laundering (prèlavage) represents the step when the nature of the illicit goods is transformed, for example from illegal money into jewellery or real estate. Laundering (lavage) represents the second step, in which the dispersion of the values obtained in the first phase takes place in multiple operations with lower values to make it harder to identify their provenance, for example the opening of multiple accounts with low deposits. The integration (recyclage) represents the last step of the money laundering process and consists in integrating the laundered funds with legal appearance in the legal financial circuit in the form of investments in business ventures or in the form of expenses.
However, the majority of the legal doctrinaires consider that the processes that are being undertaken in order to launder the “dirty money” and to integrate them in the legal financial circuit can be categorized in this way: placement, layering and integration.
The first stage, as suggested by its name, represents the initial phase of the money laundering process, when the criminal/criminal group undertakes the actions of introducing the proceeds of his crime into the legal financial system. In this phase, the money launderer can open various accounts in different banks, crediting the accounts with minimum amounts of money, according to the relevant laws or can invest the illegal money in different financial instruments, for example bank cheques and promissory notes. The main purpose of the criminal in the placement stage is to transform cash as quickly as possible in other assets in order to avoid detection by the law enforcement agencies. This stage is considered the riskiest for the criminal, considering the relative easiness of identification of the criminal proceeds.
The second stage of money laundering takes place after the illegal funds are introduced into the financial system. In this phase, the money launderer undertakes a series of changes or movements of funds in order to conceal the original source. Funds can be directed to the purchase and sale of financial instruments, or the launderer can simply send funds through electronic transfer to a series of accounts from various banks across the globe. The use of several geographically remote accounts for money laundering purpose is mainly used in those jurisdictions that do not cooperate in anti-money laundering investigations. In some situations, money launderers can disguise the transfers as payments for goods and services, thus giving them a legitimate appearance. The separation of the illicit funds from their sources by creating complex layers of financial transactions is designed to mislead the control bodies and ensure anonymity.
After the crime proceeds successfully passed through the first two steps of the money laundering process, the money laundering mechanism enters the third stage – the integration, in which the funds re-enter the legal financial circuit. The money launderer can then choose to invest funds in the real estate market, to purchase luxury goods or to initiate businesses. If the layering stage is successful, through integration schemes, the launderer will introduce again the laundered funds into the legal circuit, so that they will re-enter the financial system by appearing as normal and “clean” funds from commercial activities.
The three steps can be built in separate and distinct phases. However, they may appear simultaneously or, more commonly, may overlap. The way in which the basic steps of money laundering are used depends on the available laundering mechanisms and the requirements of criminal organizations.
Money laundering can occur in any country, especially in those with complex financial systems. Also, countries with permissive, inefficient or poorly funded infrastructure to combat money laundering are a safe target for offenders.
Criminals involved in money laundering operations through the banking system make use of different methods. One of the most easiest and imperceptible possibilities to render a legal appearance to illicit funds is the use of monetary transactions (cash). This method materializes in performing the following actions:
the exchange of large amounts of money in foreign currency without any obvious economic purpose, especially when this is done frequently;
the exchange of large quantities of small-value banknotes;
opening deposit accounts in numerous banks on behalf of a large number of individuals;
depositing illicit funds in cash and cash checks or negotiable policies being required later;
unusually large deposits and withdrawals made by customers (individuals or legal entities) whose activities normally involve the use of checks or other non-cash payment instruments;
substantial increase in cash deposits of foreign currency transactions for no reason, especially if such amounts are subsequently transferred in a short time to a destination that can not normally be associated with the customer;
depositing illicit funds in “tax havens” countries where the bank secrecy is absolute;
use of different counters to perform transactions in large amounts in cash or in foreign currency;
This method represents a very convenient modality to place the illicit funds in the banking system, respectively concealing the true origin. The accessibility of the present method is underlined by the general rule of 10000 $ US constituted by the Bank Secrecy Act in the United States and later accepted and implemented by other states in more or less equal amounts. According to this rule, no bank employee will have the duty to report a transaction that is less than 10000 $ US/per bank. Based on this, criminals and criminal organizations open various accounts in different banks, depositing them with amounts less than the legal threshold. Although the reasoning of the regulation is obvious, given the immense number of daily transactions between individuals or companies, the legislator, in this way, “opened the door” for criminals to launder their illicit money.
Another way of money laundering through the banking system used by criminals represents the banking accounts method. This method materializes in the following activities:
using an account of a company that performs economically reduced activity;
frequent transfers of substantial funds that cannot be clearly identified as having an economic justification;
opening multiple accounts in several banks in the same locality, especially when there is a process of crediting these accounts with large amounts of money;
repeated opening and closing of accounts on behalf of the same client or a member of his family for no relevant reason;
making large deposits of cash and keeping a large balance without using other services such as loans, credit letters, etc.
repeated suspicious transfers of funds from one bank to another;
This method corresponds to the second stage of the money laundering process – layering. Through this technique the money launderers try to create complex layers of financial transactions, in order to mislead the control bodies and ensure anonymity.
In addition, individuals and criminal groups involved in money laundering make use of the credit method. This method implies:
unexpected repayment of loans with unknown source funds;
requesting a credit although the analysis of the economic and financial documents does not result in the necessity of a credit;
the use of the loan in a manner that does not correspond to the purpose specified when the loan was granted;
changing the destination of the loan;
purchase of deposit certificates and their placement as collateral for the loan;
applying for loans to foreign companies;
In order to evaluate the role of the banking system in preventing and fighting money laundering, it is necessary to ascertain and understand the nature of the term “banking system”, what it represents and what the constituent elements of the respective system are.
According to professor Corina Chironachi, a banking system represents a coherent set of banking institutions that operate in a country in order to meet the needs of a stage of social and economic development. The author mentions that the banking system of a country comprises the institutional framework, made up of the central bank, commercial banks and other financial institutions assimilated to them, and the legal framework, representing the multitude of regulations that govern the banking activity.
Legal doctrinaires Sauleanu, Smarandache, Dodocioiu consider that the banking system comprises all the banking sector specific entities that operate in the national economy and which have as their core object the monetary activity. Regarding the components of the banking system in the contemporary stage, the authors suggest that the national banking systems are structured on two levels, namely the existence of both a banking authority, which is the national central bank of each state, which performs various tasks, as well as of credit institutions.
The same thesis is sustained by the Russians legal researchers. Pursuant to them, the banking system, as a single and integral set of certain interrelated elements, represents a two level system, where on the upper level is the Central Bank of a state and on the lower level are all the commercial banks, either with state or private capitals, the non-bank credit institutions and the branches and representative offices of foreign credit organizations.
Currently, almost all countries with market economies have created and are actively developing two – level banking systems, where the central bank of the country operates at the upper level, carrying out monetary emission, legislative, supervisory activities, and at the lower level are the commercial banks and non-bank financial institutions.
Regarding the national regulation of the banking activity in Romania, the legislator does not provide a clear and transparent definition of the banking system. However, the Emergency Ordinance of the Government No. 99 of 06.12.2006 on credit institutions and capital adequacy comprises an answer on this matter. According to art.164, “The National Bank of Romania ensures prudential supervision of credit institutions”. Additionally, art. 165 of the same act stipulates that the Romanian credit institutions are obliged to report to the National Bank of Romania data and information necessary to assess compliance with the provisions of the named Emergency Ordinance. These legal rules indirectly suggest that the Romanian banking system is formed of the National Bank of Romania and all the credit institutions. In the same time, Law No. 93 of 08.04.2009 on non-bank financial institutions clearly specifies that the National Bank of Romania exerts supervision on the non-bank financial institutions. According to art. 44 of the named law, the National Bank of Romania carries out the prudential supervision of the non-bank financial institutions both on the basis of the information provided by these entities through the reports submitted and by inspections at the headquarters of the non-bank financial institutions. Based on this, it is clear that the Romanian banking system is composed of the National Bank of Romania at the upper level, and at the lower level – commercial banks and other non-bank financial institutions. Also, the situation described above reveals the unclear and ambiguous state of the Romanian banking law.
The United Kingdom banking system is also built-up on the two levels: the central bank on the upper level and the private banks and other non-bank financial institutions on the lower one. The Bank of England, as the central bank of the United Kingdom, administers the monetary policy, influencing interest rates, inflation and employment, and it regulates the banking market with HM Treasury, the Prudential Regulation Authority and Financial Conduct Authority. The private banks and other non-bank financial institutions are the legal entities that are engaged in accepting deposits and lending funds, either directly to individuals and companies, or indirectly through capital markets.
The democratic changes that occurred in Romania after 1989 put this country on the path of transition from a socialist state with a planned economy towards a market economy, with the private initiative and free competition as its pillars. Although the transition period was very hard and was characterized by the increase of unemployment and general poverty, the Romanian economy started to recover and develop with new power. The unprecedented intensification of financial and banking activities has triggered a whole range of positive effects, but unfortunately also the emergence of negative phenomena, such as laundering illicit money.
The most relevant act issued by the Romanian Parliament with the purpose of preventing and fighting money laundering represents the Law No. 656/2002 for the prevention and sanctioning of money laundering, as well as for measures to prevent and combat terrorism financing. This legal act is the most important piece of law that introduces measures to prevent and combat money laundering and some measures to prevent and combat the financing of terrorist acts in Romania. It sets up specific rules and procedures for identifying clients and processing information on money laundering. It empowers an exhaustive number of subjects with the duties of observation and report of the suspicious transactions to the relevant authorities.
The importance and the special role that the Romanian legislator renders to the banking system are underlined by art. 5 (7) of the Law No. 656/2002. According to this regulation, the credit institutions and the branches of the foreign credit institutions, as well as the financial institutions and the branches of foreign financial institutions are obliged to report to The National Office for Preventing and Combating Money Laundering in Romania within 10 working days, transactions in cash, in national or foreign currency, the minimum amount of which is the equivalent in lei of EUR 15,000, regardless of whether the transaction is made through one or more operations that appear to have a connection between them. This legal provision represents an efficient measure of preventing the criminals to use the banks and other financial institutions for money laundering purposes.
The prominence of the banking system in preventing money laundering is suggested, also, by the banks’ requirements on the identification of the clients and their income origins. Art. 13 of the Law No. 656/2002 imposes the obligation to apply standard measures of due diligence. Thus, the banks and other financial institutions named above are required to carry out the necessary actions for obtaining the objective customers knowledge. This duty applies:
at the moment of establishing a business relationship with the future customer;
on occasional transactions worth at least EUR 15,000 or equivalent, regardless of whether the transaction is made through a single transaction or several transactions that seem to have a connection between them;
when there is suspicion that the purpose of the operation is to launder money;
if there are doubts about the truthfulness or relevance of customer identification information already held.
The moment of establishing the business relationship between the financial institution and the customer has a great significance, since the bank is put in the situation to clarify the identity of the future client (individual or legal person), his occupation or sphere of activity, the nationality, as well as the source of the funds. At this stage the state authorizes and, in the same time, obliges the banks to ensure the legality of the future operations of the customer and to reject and report any action or situation that is implied to be illegal.
The business relationship between the bank and the individual / legal person can materialize in one of the following forms: opening a current account, opening a savings account, opening a deposit account, making a national / international money transfer, exchanging currency. The Romanian state imposes an exhaustive amount of information that has to be required by the banks, in order to identify the person. Therefore, the individuals must present the civil status data listed in the identity documents, the legal persons – the data specified in the registration documents and the foreign legal persons – those documents showing the identity of the company, the seat, the type of company, the place of incorporation, the special authority of the person who represents it in the transaction, as well as a translation in Romanian of the documents authenticated by a notary’s office.
Interestingly, the state provides two possibilities of identification of the clients: the simplified identification and the supplementary actions for identification. The reasoning of this legal aspect is that in some situations there is no need for a thorough identification, as this process is assumed to be made earlier and there is less risk and, on contrary, in other situations a more emphatic attention needs to be paid for high-risk individuals or for those nationals that come from high-risk countries. In this sense, art. 17 (d) of the mentioned Law prescribes that banks can apply simplified measures of identification if the client is a credit or financial institution from a Member State of the European Union or the European Economic Area or, as the case may be, a credit or financial institution from a third state, which imposes requirements similar to those provided for by the named law and supervises them in relation to their application. On the other hand, the Law stipulates that the banks and other financial institutions must apply supplementary measures of identification in the situation when there is a high risk of money laundering. Therefore, these situations occur:
in the case of persons who are not physically present in the operations;
in the case of correspondent relationships with credit institutions from countries that are not members of the European Union or do not belong to the European Economic Area;
in the case of transactions or business relationships with politically exposed persons who are resident in another Member State of the European Union or the European Economic Area or in a third country.
Art. 19 of the Law No.656/2002 stipulates, also, that the banks and non-bank financial institutions (payment services providers, currency exchange offices, insurance companies, insurance brokers, financial investment services companies, investment consultants, investment management companies, investment companies, capital market operators, system operators) have the duty to keep a copy of the document of the customer as proof of identity or identity references for a period of at least 5 years from the date of termination of the relationship with the client. Additionally, the named subjects are obliged to keep the secondary or operative records and records of all financial transactions arising from the conduct of a business relationship or an occasional transaction for a period of at least 5 years from the conclusion of the business relationship or from the occasional transaction, so that they can be used as evidence in court.
These rules are mandatory and the banks and non-bank financial institutions in Romania cannot derogate from. The National Office for Preventing and Combating Money Laundering is incapable of monitoring and supervision of the enormous number of daily financial transactions and, therefore, the state empowers the financial institutions to carry out the necessary actions for preventing money laundering. However, the Romanian anti-money laundering regulation is not specifically stringent and thoroughgoing. The state authorizes the banks to apply additional measures of due diligence in other cases than those provided by law which, by their nature, poses a high risk of money laundering or terrorist financing. This aspect proves the crucial role of the banking system for the financial stability and the trust it receives from the state for ensuring legality and order in the financial transactions between the individuals and/or legal entities, in the end preventing money laundering.
In addition to the legal duties specified above, the banks and non-bank financial institutions, shall draft and send to the National Office for Preventing and Combating Money Laundering three types of reports:
1. Suspicious Transactions Report – applicable in case of any reasonably motivated suspicious transactions;
2. Cash Transactions Report – applicable to all transactions in cash, in national or in foreign currency, for the minimum amount of EUR 15,000, regardless of whether the transaction is carried out by one or several operations which might have a connection between them;
3. External Transfers Report – applicable to all external transfers to and from accounts for amounts of minimum EUR 15,000.
The National Office for Preventing and Combating Money Laundering represents the financial intelligence unit of the state, organized and functioning in the subordination of the Government and in the coordination of the Prime Minister. This agency constitutes the specialized body that has as its object the prevention and combating of money laundering and the financing of acts of terrorism, in which it receives, analyzes, processes information and apprises the relevant authorities. The activity of this unit is focused mainly on the analysis of the suspicious transactions that have been reported by the banks and other institutions, or ex officio, when it becomes aware of any suspicious transaction. In the same time, the National Office can request from any competent institution the provision of data and information necessary for its activity and can issue decisions to suspend the transactions that are suspected of having the purpose of money laundering and / or terrorist financing.
Alongside the Law No. 656/2002, the National Bank of Romania Regulation No. 9/2008 on “know-your-customer” rules for the prevention of money laundering and terrorist financing is an important act that supplements the law with detailed rules on customers due diligence. This regulation specifies the narrow information that the law briefly mentions as the civil status data listed in the identity documents. Therefore, according to art. 8 of the Regulation, the identification of individual customers aims to obtain at least the following information:
the first and last name and, where appropriate, the alias;
the personal numeric code or, where appropriate, another identical element;
domicile and, where appropriate, residence;
telephone, fax, e-mail address, if applicable;
the occupation and, where appropriate, the name of the employer or the nature of his / her own activity;
important public position held, if applicable;
the name of the real beneficial owner.
Likewise, the present Regulation specifies the necessary information about the legal persons that the banks and other non-bank financial institutions aim to obtain. For their identification the following details will be requested:
the registered office and, where appropriate, the headquarters and management centre of the statutory activity;
the telephone, fax, e-mail address;
type and nature of the activity carried out;
the identity of the persons who are entrusted with the power to lead and represent the entity;
the name of the real beneficiary;
the identity of the person acting on behalf of the client as well as the information to establish that he / she is authorized to do so.
This legal act expands the level of information that the banks and the non-bank financial institutions are obliged and empowered to request. Together with the previous regulations, it underlines the significance of the banking system in preventing and combating money laundering. The due diligence measures, although not so relevant at first glance, represent an essential formal check that restrain the criminals to launder their illicit finances through the banks and other financial institutions. Additionally, the present Regulation reveals another state authority with supervision and sanctioning rights – the National Bank of Romania. Besides the National Office for Preventing and Combating Money Laundering, the National Bank of Romania can request the modification of the due diligence rules and the replacement of the persons responsible for the deficiencies found.
The infringement of the provisions of money laundering and financing of terrorism legislation may involve civil, disciplinary, administrative or criminal liability.
According to art. 269 of the Romanian Criminal Code, “the legal operation of any kind, carried out to prevent the identification of the illicit origin, the situation, the movement, the real owner of the property or the existence of other rights in respect of a good by a person who either knew or provided for the concrete circumstances, that it derives from a crime, even without knowing its nature, represents a crime and is punished by imprisonment from 3 to 10 years and the ban on the exercise of certain rights”.
Violation of the obligation to report to the National Office for Preventing and Combating Money Laundering suspicious transactions represents contravention and it is sanctioned with fine in amount of RON 10,000 up to RON 30,000. Also, in case of breaching the obligation to transmit to the National Office the requested data and information or in case of not adopting the customer due diligence measures the fine shall be in amount of RON 15,000 up to RON 50,000.
The most relevant anti – money laundering regulation of the United Kingdom represents the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. This legal act comprises the risk assessment rules applicable to the banks and non-bank financial institutions, the customer due diligence rules and procedures, the record – keeping rules of the above mentioned institutions, as well as the regulation of the banks / financial institutions relationships with the supervisory authorities.
The United Kingdom legislator recognizes the banks as the credit institutions and the branches of credit institutions, wherever their head office is located. By non-bank financial institution, the English Parliament suggests an undertaking, including a money service business, an insurance undertaking, a person whose regular occupation or business is the provision to other persons of an investment service or the performance of an investment activity on a professional basis, a collective investment undertaking, when marketing or otherwise offering its units or shares, an insurance intermediary and the National Savings Bank.
With no doubts, the English Parliament assigns the banking system of the United Kingdom a significant role in preventing and combating money laundering. The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 represents an exhaustive and clear legal act that regulates in an methodical and transparent manner the duties of the banks and non-bank financial institutions regarding the anti – money laundering actions, but in the same time, it empowers these entities with the rights to determine and handle the suspicious situations with a great degree of independence. This aspect is proved by the legal rule comprised in article 18 of the above mentioned law. According to it, the banks and non-bank financial institutions “must take appropriate steps to identify and assess the risks of money laundering and terrorist financing to which its business is subject”. Additionally, paragraph 2 of the mentioned article clarifies that in carrying out the risk assessment, the banks and non-bank financial institutions must take into account the information made available to them by the supervisory authority and the risk factors relating to its customers, the countries and geographic areas in which it operates, its products or services, transactions and its delivery channels. In this sense, the role of the banking system in preventing and combating money laundering is enormous in the United Kingdom, as the banks and other financial institutions are put in the situation of independent identification and estimation of the risks associated with money laundering.
The importance of the banking system in preventing money laundering in the United Kingdom is suggested, also, by article 27 (2). According to it, the banks and non-bank financial institutions must apply customer due diligence measures if the person or the legal entity carries out an occasional transaction that amounts to EUR 15,000 or more, whether the transaction is executed in a single operation or in several operations which appear to be linked. In the same time, separate from this, the banks and other financial institutions must apply customer due diligence measures in the following situations:
establishment of a business relationship;
suspicion of money laundering or terrorist financing;
questioning the veracity or adequacy of documents or information previously obtained for the purposes of identification or verification.
In the case the above mentioned situations occur, the responsible persons of the banks and other financial institutions are obliged to follow the following steps:
to identify the customer unless the identity of that customer is known to, and has been verified by the relevant person;
to verify the customer’s identity unless the customer’s identity has already been verified by the relevant person; and
to assess, and where appropriate obtain information on the purpose and intended nature of the business relationship or occasional transaction.
In the situations when the customer is a legal person, the financial institutions’ relevant persons must obtain and verify:
the address of its registered office, and if different, its principal place of business;
the law to which the legal person is subject, and its constitution (whether set out in its articles of association or other governing documents);
the full names of the board of directors (or if there is no board, the members of the equivalent management body) and the senior persons responsible for the operations of the body corporate.
In the situation when the customer is beneficially owned by another person, the relevant person must:
take reasonable measures to verify the identity of the beneficial owner so that the relevant person is satisfied that it knows who the beneficial owner is; and
These rules represent the standard customer due diligence measures that the bank employees are obliged to apply in the situations mentioned above. The reasoning of these standards consists in the elucidation of the customer’s identity and possible money laundering risks associated with him. The due diligence measures are not imposed for maintaining a formal approach. Their purpose is to build a clear image of the customer, to create and develop a stable relationship with him and to raise the level of trust. Therefore, it is of great importance for the financial institutions to establish a reliable system of customer knowledge, allowing them to identify unusual money flows and transactions even when criminal groups are using the best of their ability to avoid rules.
In case the standard customer due diligence concludes that a particular customer has a high-risk profile, the financial institution is obliged to conduct an enhanced due diligence. There are specific situations when the enhanced customer due diligence rules apply:
in any case identified as one where there is a high risk of money laundering or terrorist financing;
in any business relationship or transaction with a person established in a high-risk third country;
in relation to correspondent relationships with a credit institution or a financial institution;
if a relevant person has determined that a customer or potential customer is a politically exposed person, or a family member or known close associate of a politically exposed person;
in any case where the relevant person discovers that a customer has provided false or stolen identification documentation or information and the relevant person proposes to continue to deal with that customer;
when a transaction is complex and unusually large, or there is an unusual pattern of transactions;
when the transaction or transactions have no apparent economic or legal purpose;
If the customers with high-risk profile must comply with the enhanced customer due diligence rules, the banks and non – bank financial institutions may apply simplified customer due diligence measures in relation to a particular business relationship or transaction if it determines that the business relationship or the transaction presents a low degree of risk of money laundering and terrorist financing.
In the case of determination whether there is a low degree of risk of money laundering and terrorist financing in a particular situation, and the extent to which it is appropriate to apply simplified customer due diligence measures in that situation, the relevant person must take account of the customer, transaction and the geographical risk factors.
Customer risk factors, in the sense of the simplified customer due diligence, implies the determination of some subjective qualities of the customer. In this situation, the banks’ relevant persons will check whether the customer is a part of the public administration or a public owned enterprise, whether the customer is an individual resident in a geographical area of lower risk and whether the customer is a company whose securities are listed on a regulated market.
By transaction risk factors the Regulation supposes that the banks’ relevant persons will have to check whether the product is a life insurance policy for which the premium is low, or whether the product is an insurance policy for a pension scheme which does not provide for an early surrender option, or whether the product is a child trust or a product where the risks of money laundering and terrorist financing are managed by other factors such as purse limits or transparency of ownership.
The geographical risk factors in enabling the simplified customer due diligence implies the checking the country where the customer is resident or registered. Generally, the countries with low risk of money laundering will be taken into account, such as a EEA state, a country with effective system to counter money laundering and a country with low level of criminality and corruption.
The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 regulate also the record – keeping obligation of the banks and other financial institutions. Article 40 of the law, in this sense, provides that the relevant person must keep for at least five years the copies of any documents and information obtained to satisfy the customer due diligence requirements, as well as the original documents or copies in respect of a transaction which is the subject of customer due diligence measures or ongoing monitoring to enable the transaction to be reconstructed.
The Financial Conduct Authority, the financial regulatory body of the United Kingdom, represents the financial intelligence unit of the state, organized and functioning independently from the Government. This agency constitutes the specialized body that has as one of its purposes the prevention and combating of money laundering and the financing of acts of terrorism, in which it receives, analyzes, processes information and apprises the relevant authorities. Its main function in the area of anti – money laundering is to offer guidance to relevant persons, who are subject to rules made by the Financial Conduct Authority, in relation to the enhanced customer due diligence measures. An innovation in the anti – money laundering activity of the Financial Conduct Authority is the creation of the Office for Professional Body Anti-Money Laundering Supervision. The Office, housed within the Financial Conduct Authority, ensures a robust and consistently high standard of anti – money laundering supervision across the legal and accountancy sectors. It also ensures better collaboration through information and intelligence sharing between professional body supervisors, statutory anti – money laundering supervisors (HM Revenue and Customs, the Gambling Commission and the Financial Conduct Authority) and law enforcement agencies, such as the National Crime Agency.
The Proceeds of Crime Act 2002 of the United Kingdom stipulates that a person commits a money laundering offence if he conceals, disguises, converts criminal property or removes the criminal property from England and Wales, from Scotland or from Northern Ireland or if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person or if the person acquires, uses or has possession of criminal property except where adequate consideration was given for the property.
A person guilty of an offence in the forms described above is liable on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding the statutory maximum or to both, or on conviction on indictment, to imprisonment for a term not exceeding 14 years or to a fine or to both.
The failure to disclose the relevant money laundering offences represents a crime and the person who commits it is liable on summary conviction, to imprisonment for a term not exceeding 6 months or to a fine not exceeding the statutory maximum or to both, or on conviction on indictment, to imprisonment for a term not exceeding 5 years or to a fine or to both.
As mentioned previously, the United Kingdom of Great Britain and Northern Ireland, on one side, and Romania, on other side, have completely different legal systems. The United Kingdom is regarded as the “parent” of the common law system, which is based on the case law. The legal system is founded on the idea that in cases where the parties disagree on what the law is, a common law court looks to past precedential decisions of relevant courts, and synthesizes the principles of those past cases as applicable to the current facts. Romania has a civil law system, as the majority of the European states, with strong French influence. The main feature of this legal system is that its core principles are codified into a referable system which serves as the primary source of law.
The anti – money laundering legislations of both states adjudicate to the banking system a great level of importance and confer it a special place in the anti – money laundering strategy. This aspect reveals the significant role of the banking system for the general stability of the states and their financial order. Being aware that the banks and other non – bank financial institutions represent a prime target for laundering the illicit funds by the criminals and / or the criminal groups, the United Kingdom and Romania established and implemented a series of legal acts that regulate in details the banking activity. At first glance it may seem unnatural and enforced, but the financial institutions’ duties of due diligence and report present mutual benefits for the state and the banking system, as a whole. The market economics theories, as well as the common sense would suggest that the banks, as legal entities, are carrying out a business activity that consists in receiving deposits and lending credits. In a nutshell, these two operations are the main functions of a financial institution. In this sense, it is obvious that the banks do not need and would have no benefits from the reporting function. It represents a whole mechanism of actions that the financial institutions have to exert, in addition to their main activities. The banks engage in a distinct process of identification and comprehension of the customers and their operations, either they open accounts, exchange currencies, make national and international transfers, etc. This aspect is seen and acknowledged as a legal duty, imposed by state, which implies a multitude of unwanted actions and costs. There have to be relevant employees of the financial institutions who would carry out these functions, there has to be elaborated and applied a due diligence policy towards the customers and their operations, and, of course, there are some costs that all these issues arise. Last but not least, the banks and the non – bank financial institutions possess a personal legal liability in the case of not submitting the relevant reports, violating the existing customer due diligence practices, or even favouring its customers to the detriment of the state and the public interests.
On the other hand, indifferent to all these inconveniences, the banks’ involvement in the anti – money laundering actions represents a win – win situation. Marking off the public interests from the scene, the financial institutions, in particular, and the whole banking system, in general, will receive only benefits from preventing and fighting money laundering. It can be tempting to establish business relationships with different criminal elements, since the profits that can be reached are incommensurable with the figures earned from dealing with law – abiding citizens and companies. However, in the long perspective banks will have only to lose. The offenders’ successful money laundering actions lead to their prosperity, and as a result, to the increase of the level of corruption and criminal activity. In this sense, a situation is created when the banking system will face even more risks and challenges. Therefore, the banking system’ involvement in the anti – money laundering actions should not be qualified as a duty that hinders its operational activity, rather as a right to contribute, in the end, to its own well-being.
Both Romania and the United Kingdom adopted legal acts, the sole purpose of those being the setting up of specific rules and procedures for identifying clients and processing information on money laundering. What is different about these regulations is the fact that the Romanian Law No. 656/2002 for the prevention and sanctioning of money laundering, as well as for measures to prevent and combat terrorism financing is more clear and transparent. The law leaves no room for interpretation and prescribes expressly in art. 5 (7) that the credit institutions and the branches of the foreign credit institutions, as well as the financial institutions and the branches of foreign financial institutions are obliged to report to The National Office for Preventing and Combating Money Laundering in Romania within 10 working days, transactions in cash, in national or foreign currency, the minimum amount of which is the equivalent in RON of EUR 15,000, regardless of whether the transaction is made through one or more operations that appear to have a connection between them.
The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, on the other side, have no mention whatsoever about the reporting function of the banks in the United Kingdom. There is no clear statement in the text of the Regulation which would oblige the banks and other financial institutions to assess and report the suspicious transactions. Furthermore, as a consequence of the first aspect, the legal text contains no reference to the types and forms of the reports the banks and the non – bank financial institutions would have to consign to the Financial Conduct Authority. Compared to Romanian anti – money laundering legislation, there is no legal threshold, the advance of which would trigger the relevant persons to identify and report to the relevant authorities the suspicious transaction and the customer who performed it. Truly, there exists this kind of threshold, but only applicable to “high value dealers”, which in the sense of the article 14 of the Regulation represent the companies who trade goods. Therefore, practically there is no legal reference to this kind of duty.
The Romanian regulation, besides stipulating the obligation to determine and report any situation mentioned in its text, prescribes in a direct manner the three types of reports that the banks and non – bank financial institutions must forward to the National Office for Preventing and Combating Money Laundering: the Suspicious Transactions Report, The Cash Transactions Report and the External Transfers Report.
This aspect underlines the idea that the Romanian anti – money laundering legislation is more coherent, detailed and all – embracing rather than the United Kingdom legislation.
What the two legislations have in common is the regulation of the customer due diligence measures. Both the Romanian Law and the United Kingdom Regulation mention the triggering point of the “know – your – customer” rules action. Therefore the situations when the due diligence actions apply are practically identical:
The only additional situation that the United Kingdom legislation stipulates is the situation when a high value carries out an occasional transaction in cash that amounts to EUR 10,000 or more, whether the transaction is executed in a single operation or in several operations which appear to be linked. Taking into account that this legal provision has no relevance for the banking system, the two regulations provide identical situations of the due diligence activation.
Both regulations provide, also, two additional possibilities of identification of the clients: the simplified customer due diligence and the enhanced customer due diligence. In this sense, art. 17 (d) of the Romanian Law prescribes that banks can apply simplified measures of identification if the client is a credit or financial institution from a Member State of the European Union or the European Economic Area or, as the case may be, a credit or financial institution from a third state, which imposes requirements similar to those provided for by the named law and supervises them in relation to their application. This provision underlines that the criteria of the simplified due diligence activation represents the geographical risk factor. The Romanian legislator considered satisfactory for the simplified due diligence procedure the only fact that if a client is a financial institution from the European Union or other states that have similar requirements.
The United Kingdom Regulation is more permissive regarding these matters. According to article 37 (3), the financial institutions must take account of the customer, transaction and the geographical risk factors. This means that the relevant persons from the banks and other financial institutions determine by themselves the applicability of the simplified customer due diligence procedure, if it can be valid, based on the customer, the transaction, product or service the customer requires and where does the customer come from. In this situation, the banks’ relevant persons will check whether the customer is a part of the public administration or a public owned enterprise, whether the customer is an individual resident in a geographical area of lower risk and whether the customer is a company whose securities are listed on a regulated market.
The geographical risk factors in enabling the simplified customer due diligence implies the checking the country where the customer is resident or registered. The approach in this aspect is similar to Romania, more trust being granted to the countries with low risk of money laundering will be taken into account, such as a EEA state, a country with effective system to counter money laundering and a country with low level of criminality and corruption.
Another conclusion that derives from the simplified due diligence procedure in both countries is the fact that in Romania there are specific situation when the simplified procedure automatically must be enabled. Contrary to Romania, the English legislator empowered the relevant persons of the financial institutions with the prerogative to enable the simplified due diligence on their own consideration, after taking into account the previously mentioned risk factors.
Regarding the enhanced due diligence measures, the United Kingdom regulation is more comprehensive, since it mentions more high-risk situations, such as:
In general, the Romanian approach regarding the enhanced customer due diligence measures is identical with the English one. However, it mentions a new situation, such as when the customers are not physically present at the operations.
Regarding the due diligence situation, the United Kingdom regulations are more cautious than the Romanian. The English legislator prescribes more high – risk situations, when the extra identification measures have to be performed. In terms of the simplified due diligence situations, the United Kingdom Regulation does not provide an exhaustive and well – defined answer, leaving the power of decision in the hands of the banks and other financial institutions.
Similar provisions both legal acts contain regarding the identification information that is required from the customers at the moment of establishing the business relationship. Practically, it is understandable that the banks from the majority of the countries will require the same data, necessary to identify the individual and / or the legal person, as well as his / her / its source of income, and other sensitive information. Likewise, the legislators of both states considered necessary to set up the duty to keep a copy of the documents of the customer as proof of identity or identity references for a period of at least 5 years from the date of termination of the relationship with the client. Additionally, the named subjects in both jurisdictions are obliged to keep the secondary or operative records and records of all financial transactions arising from the conduct of a business relationship or an occasional transaction for a period of at least 5 years from the conclusion of the business relationship or from the occasional transaction, so that they can be used as evidence in court.
An important provision that the Romanian anti – money laundering legislation lacks is the obligation instituted by the 2017 Regulations that requires the regulated entities to prepare a report identifying and assessing the money laundering and terrorist financing risks associated with their businesses. In this sense, the role of the banking system in preventing and combating money laundering is considerable in the United Kingdom, as the banks and other financial institutions are put in the situation of independent identification and estimation of the risks associated with money laundering.
Another positive provision brought by the United Kingdom 2017 Regulations that is distinct and unique compared to Romania, is the establishment of the internal controls, policies and procedures to mitigate and manage the risks identified in the risk assessment. According to the Regulation, these must be proportionate to the size and nature of the company’s business and be approved by senior management, following the increasing trend of holding senior officers responsible for maintaining their company’s compliance systems. Certain key features of such internal controls are prescribed, including:
appointing a director to be responsible for compliance with the Regulations;
establishing an independent audit function to examine and evaluate the controls;
training relevant employees.
The National Office for Preventing and Combating Money Laundering represents the financial intelligence unit in Romania that has the tasks of receiving, analyzing, processing information and apprising the relevant authorities. The activity of this agency is focused mainly on the analysis of the suspicious transactions that have been reported by the banks and other institutions, or ex officio, when it becomes aware of any suspicious transaction. Additionally, the Romanian anti – money laundering legislation reveals another state authority with supervision and sanctioning rights – the National Bank of Romania. Besides the National Office for Preventing and Combating Money Laundering, the National Bank of Romania can request the modification of the due diligence rules and the replacement of the persons responsible for the deficiencies found. Therefore, in Romania two distinct bodies possess relevant functions in the area of preventing and combating money laundering.
The Financial Conduct Authority, the financial regulatory body of the United Kingdom, represents the financial intelligence unit of the state, organized and functioning independently from the Government. This agency constitutes the specialized body that has as one of its purposes the prevention and combating of money laundering and the financing of acts of terrorism, in which it receives, analyzes, processes information and apprises the relevant authorities. Compared to Romania, the regulation of the Financial Conduct Authority is much more deficient, lacking clear and univocal legal rules. The Regulation on the organization and functioning of the National Office for Preventing and Combating Money Laundering, adopted by the Government Decision no. 1599/2008 represents a qualitative legal act that regulates in a transparent manner the rights, duties and functions of the National Office, aspect which is more deficient in the United Kingdom.
Last but not least, both states are members of the European Union and the provisions of the Directive (EU) 2015/849 of the European Parliament and of the Council of 20th May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing are applicable both in Romania and the United Kingdom (United Kingdom will leave the European Union on March 29th 2019).
As mentioned previously, the utility of the banking system in preventing and fighting money laundering is expressed by the banks’ obligations to report to the relevant authorities all the transactions prescribed by law, as well as the suspicious operations. In the same time, the importance of the financial institutions and their stringent necessity for preventing money laundering is underlined by the customer due diligence measures that are carried out when specific situations occur.
The study of the Romania and the United Kingdom anti – money laundering legislations reveals that there is no poor or qualitative legislations. Each jurisdiction has its own strengths and weaknesses, but as a conclusion, the Romanian regulation, besides stipulating the obligation to determine and report any situation mentioned in its text, prescribes in a direct manner the three types of reports that the banks and non – bank financial institutions must forward to the National Office for Preventing and Combating Money Laundering: the Suspicious Transactions Report, The Cash Transactions Report and the External Transfers Report.
A similar legal approach represents the regulation of the customer due diligence measures. Both the Romanian Law and the United Kingdom Regulation mention the triggering point of the “know – your – customer” rules action and both jurisdictions recognize the simplified and enhanced customer due diligence measures. Therefore the situations when the due diligence actions apply are practically identical. The English legislator, however, prescribes more high – risk situations, when the extra identification measures have to be performed. In terms of the simplified due diligence situations, the United Kingdom Regulation does not provide an exhaustive and well – defined answer, leaving the power of decision in the hands of the banks and other financial institutions.
Both regulations provide, also, two additional possibilities of identification of the clients: the simplified customer due diligence and the enhanced customer due diligence.
An important provision that the Romanian anti – money laundering legislation lacks is the obligation instituted by the United Kingdom Regulations that requires the regulated entities to prepare a report identifying and assessing the money laundering and terrorist financing risks associated with their businesses. Also, another positive provision brought by the United Kingdom 2017 Regulations that is distinct and unique compared to Romania, is the establishment of the internal controls, policies and procedures to mitigate and manage the risks identified in the risk assessment.
The analysis of both the United Kingdom and Romania anti – money laundering legislations reveals that in both jurisdictions the banking system has an important role in preventing and fighting money laundering. The anti – money laundering legislations of both states adjudicate to the banking system a great level of importance and confer it a special place in the anti – money laundering strategy. This aspect reveals the significant role of the banking system for the general stability of the states and their financial order. Being aware that the banks and other non – bank financial institutions represent a prime target for laundering the illicit funds by the criminals and / or the criminal groups, the United Kingdom and Romania established and implemented an efficient mechanism of preventing and combating money laundering.
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