New amendments to the Romanian framework on the prevention and combating of money laundering and terrorist financing

The date of 15 July 2020 marked the entry into force of Government Emergency Ordinance no. 111/2020 on amending and supplementing Law no. 129/2019 on the prevention and combating of money laundering and terrorist financing (Law 129/2019), as well as other legislative acts (GEO 111/2020). The amendments and additions brought to Law 129/2019 serve the purpose of implementing the provisions of Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (i.e. 5th AML Directive).

While the amendments are extensive, we have outlined below a few of the relevant changes instituted through GEO 111/2020 to the general legal framework in the field of money laundering and terrorist financing prevention:

A.Ultimate beneficial owner (UBO)

As one of the main obligations imposed through Law 129/2019, the UBO identification process and subsequent filing of a statement in that regard has been one of the topics that generated much interest and a large number of varying interpretations, since its entry into force. Here are some of the main amendments operated through GEO 111/2020 in this respect:

• In what concerns companies subject to registration with the Trade Registry and foreign corporate entities:
  
  
  1. Ownership of 25% plus (1) one of the shares or an ownership interest of over 25% in a company, held by an individual, directly or, as the case may be, indirectly through one or multiple foreign corporate entities that are under his/her control, is construed now only as an indication of direct or, as the case may be, indirect ownership, while this previously represented the fulfilment of the criteria for direct/indirect ownership ensuring control of the company;
  
  
  2. If no individual can be identified as the beneficial owner of a company by using the above criteria, or if there is any doubt that the identified person is the beneficial owner, the individual(s) holding senior management positions (such as director/directors, members of the board of directors or supervisory board, executive managers to whom the director/board of directors have delegated competencies, members of the directorate) shall be deemed as the beneficial owner(s); previously this provision only referenced the category of “individual(s) ensuring the management of the company”, without a detailed circumstantiation thereof;
• For trusts (Romanian: fiducie) and similar legal arrangements – all of the following shall be deemed as beneficial owners:
  
  
  1. Settlor(s) and the persons designated to represent their interests;
  
  
  2. Trustee(s);
  
  
  3. Beneficiary/beneficiaries or, in case they could not be identified, the category of individuals for whose main benefit the trust or similar legal arrangement has been established;
  
  
  4. Any other individual exercising last instance control over the trust or similar legal arrangement governed by foreign law, by direct or indirect ownership or by other means.
• For non-profit entities (such as associations and foundations), a detailed list of individuals that may be considered beneficial owners is now provided, as follows:
  
  
  1. associates or founders;
  
  
  2. members of the board of directors;
  
  
  3. individuals with executive duties authorized by the board of directors to exercise its competencies;
  
  
  4. for associations, the category of individual(s) or the individual(s) for whose main benefit the association was established;
  
  
  5. for foundations, the category of individual(s) for whose main benefit the foundation was established;
  
  
  6. any other individual exercising last instance control, by any means, over the non-profit entity.
• For other legal entities or entities managing and distributing funds, a new last resort category has been added for the case where no individual(s) could be identified as beneficial owner(s) based on the existing criteria or if there is any doubt with respect to the identified individual(s) being the beneficial owner(s): the individual(s) ensuring the management of the legal entity;
• In the case of legal entities subject to registration with the Trade Registry, the UBO statement can now be also filed as a wet ink document, as an electronically signed document or as a document certified by a lawyer, and not just as a notarized document or, as the case may be, as a statement given before the Trade Registry officials;
• Also, upon the incorporation of legal entities subject to registration with the Trade Registry, the UBO and manner of exercising control may be declared through the articles of association instead of a separate UBO statement, case in which the subsequent change of the UBO’s identification details shall be declared by means of a statement, without the need of amending the articles of association;
• In addition to all the above, the beneficial owners are now under the express obligation to provide all necessary information with respect to their identification to the entity whose beneficial owner they represent, including details of interests generating benefits.

B. Reporting entities

The list of entities and individuals that have reporting obligations under Law 129/2019 has also been amended. We have outlined some of the main changes and additions thereof:

• Service providers for exchange between virtual and fiduciary currencies, as well as virtual wallet providers have been added to the list;
• Real estate agents and developers shall also qualify as reporting entities, including when acting as intermediaries for real estate leases, but only for transactions where the value of the monthly lease is equal to or exceeds the RON equivalent of EUR 10,000;
• Individuals selling artworks or acting as intermediaries in the trading of artworks (including when such activity is carried out by art galleries or auction houses), as well as individuals that store, sell, or act as intermediaries in the trading of artworks (when such activity is carried out in free-trade zones) shall also qualify as reporting entities, but only when the value of the transaction or of a series of linked transactions is equal to or exceeds the RON equivalent of EUR 10,000.

C. Reporting obligations

Some changes in terms of reporting obligations of reporting entities have also been operated, such as:

• Cash transactions equal to or exceeding the RON equivalent of EUR 10,000 must also be reported if such transactions where operated through a number of smaller transactions linked between them;
• The threshold of minimum EUR 15,000 for the financial and credit institutions’ reporting obligation with respect to foreign transactions was lowered to the RON equivalent of EUR 10,000 and now includes also linked transactions that individually don’t meet the threshold.

D. KYC (i.e. customer identification) obligations

• In addition to the previous interdictions as regards anonymous accounts or savings books (Romanian: carnete de economii), financial and credit institutions can no longer offer anonymous safety-deposit boxes or services for accepting payments by anonymous prepaid cards; KYC measures should be applied to all holders or beneficiaries of the above;
• Reporting entities must now obtain the proof of registration of the beneficial owners or information from the central registers of beneficial owners, upon the commencement of any new business relationship with persons under the obligation to register such information;
• Reporting entities should also inform the National Office for Prevention and Combating Money Laundering and the authorities organizing central registers of beneficial owners of any inconsistency between the information they hold and the public registrations;
• The standard KYC measures should now be taken also when: (i) there are suspicions with respect to money laundering or terrorist financing, regardless of the applicability of derogatory measures from KYC obligations instituted by Law 129/2019 and regardless of the value of the operations and (ii) if there is any doubt with respect to the accuracy and sufficiency of the information about the client or the beneficial owner;
• The EUR 150 threshold below which reporting entities were not be obliged to apply KYC measures with respect to electronic currency and the other cumulative conditions for waiving such obligation have been repealed, therefore KYC measures should be applied in all aspects in connection with electronic currency;
• Some additional KYC measures should be employed for transactions or business relationships involving high-risk third countries (as identified by the European Commission).

E. Authorization requirements

Following the new amendments brought to Law 129/2019, the following entities are now subject to authorization by a special Commission at the level of the Ministry of Public Finances:

• Currency exchanges requesting to carry out such activities for the benefit of individuals, as well as activities of cashing travel checks (Romanian: cecuri de călătorie);
• Entities managing structures with tourist accommodation functions, requesting to carry out foreign currency purchase operations from individuals and cashing travel checks;
• Service providers for exchange between virtual and fiduciary currencies, as well as virtual wallet providers.