by Nicoleta BĂRĂGAN, Associate Lawyer, C.A. LUCA Mihai-Cătălin
It is not a novelty that among the economic operators under the incidence of Law no. 129/2019 for the prevention and combating of money laundering and terrorist financing, as well as for the amendment and completion of some normative acts (hereinafter “AML Act”), are also found the providers of gambling services, expressly designated, by art. 5 para. (1) lit. d) of this law, as reporting entities.
After a period of about two years since the adoption of the AML Act, gambling organizers still face practical difficulties regarding the interpretation and enforcement of the law provisions.
In this context, considering the implications that the legislation in this field has in terms of the activity of organization and operation of gambling, we intend to bring back into discussion the main obligations of these economic operators, as reporting entities.
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Reporting obligations
With regard to the reporting obligations of gambling organizers, we note that they involve two types of reporting, namely reporting of suspicious transactions and reporting of transactions that do not show indicators of suspicion.
In this sense, in accordance with art. 6 of the AML Act, it is necessary to submit to the Office (ONPCSB) a report for suspicious transactions in situations where the reporting entities know, suspects or have reasonable grounds to suspect that the goods originate from the commission of crimes or are related to the financing of terrorism or that the information held by the reporting entity may be used to enforce the law.
As a rule, such reports of suspicious transactions shall be submitted to the Office immediately before any transaction relating to the client, which is related to the reported suspicion.
At the same time, in accordance with art. 7 of the AML Act, it is necessary to report to the Office transactions in cash (which do not present indicators of suspicion), RON or foreign currency, whose minimum amount is the equivalent in RON of EUR 10,000, including related transactions.
However, should these transactions be carried out through a credit or financial institution, the obligation to report is incumbent to the latter, except for the operations pertaining to the money issuance activity, which shall be reported to the Office by the reporting entities, as reports on the transfer of funds with a floor amounting to the lei-equivalent of EUR 2,000.
Such reports on transactions which do not show indicators of suspicion shall be submitted to the Office within a maximum of 3 working days from the time of the transaction.
We consider it useful to mention that “related operations”, in the sense of those mentioned above, are defined by art. 2 let. w) of the law as operations whose value is fragmented into tranches smaller than the equivalent in RON of the prescribed amount, which have common elements, such as the parties to the transactions, including the real beneficiaries, the nature or category of the transactions and amounts involved.
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The obligation to apply know your customer measures
As regards the know your customer measures, such are prescribed by the provisions of the AML Act under three categories, respectively: standard measures, simplified measures and additional measures.
In accordance with art. 13 para. (2) of the AML Act, gambling organizers have the obligation to apply standard know your customer measures when collecting winnings, when buying or exchanging tokens, when transactions are performed whose minimum value represents the equivalent in RON of at least EUR 2,000, through a single operation.
Standard know your customer measures should be applied in a way that allows reporting entities to:
- identify the client and verify his identity;
- identify the beneficial owner and take reasonable steps to verify his identity;
- assess the purpose and nature of the business relationship and, if necessary, obtain additional information about them;
- monitor continuously the business relationship.
The AML Act also provides for an exception in which reporting entities could apply certain simplified know your customer measures to low-risk customers.
However, before applying simplified know your customer measures, reporting entities have an obligation to ensure that the business relationship or the occasional transaction presents a low degree of risk, by evaluating all the identified risk factors, and at least by reporting to the elements regulated by art. 11 para. (6) and art. 16 para. (2) of the AML Act.
The 2021 Norm for the application of the AML Act, issued by ONPCSB, regulates, without limitation, ways in which simplified know your customer measures can be applied. Such modalities refer, inter alia, to: obtaining a smaller volume of information regarding the identification of the client and the ultimate beneficial owner; reducing the intensity of expansion and the degree of monitoring and verification of transactions.
In contrast to the possibility of applying simplified measures, in all situations that may present an increased risk of money laundering or terrorist financing, reporting entities are obliged to apply additional know your customer measures.
The AML Act regulates certain situations in which the increased risk is presumed, for example:
- in the case of business relations and transactions involving persons from countries which do not or do not apply international standards in the field of preventing and combating money laundering and terrorist financing or which are known internationally as non-cooperating countries;
- in the case of transactions or business relations with publicly exposed persons or with clients whose beneficiaries are publicly exposed persons, including for a period of at least 12 months from the date from which that person no longer holds an important public position.
In this regard, we recall that reporting entities have an obligation to have adequate risk management systems, including procedures based on risk assessment, to determine whether a customer or its ultimate beneficial owner, within the meaning of the law, of a customer is a publicly exposed person.
In this case also, the 2021 Norm for the application of the AML Act regulates, without limitation, the modalities of application of the additional know your customers measures, such as: obtaining additional information about the customer; performing additional checks, such as searching the internet using independent and open sources; performing additional monitoring of the business relationship, by increasing the number and duration of verifications performed and selecting transaction patterns that require additional verifications.
Certain additional measures are specifically regulated by the AML Act in the case of occasional transactions or business relationships with publicly exposed persons or whose ultimate beneficial owner is a public exposed person (for example, taking appropriate measures to establish the source of wealth and the source of funds involved in business relationships or transactions with such persons), as well as in the case of business relationships or transactions involving third countries identified by the European Commission as high-risk countries (for example, obtaining additional information on the nature of the business relationship to be established).
As can be seen, the obligation to apply know your customer measures is largely dependent on the reporting entities fulfilling their obligations to assess the associated risks of money laundering and terrorist financing.
According to art. 11 para. (7) of the AML Act, “Reporting entities have an obligation to demonstrate to supervisory and control authorities or self-regulatory bodies that the know your customer measures applied are appropriate in terms of the money laundering and terrorist financing risks that have been identified”.
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Other obligations
In addition to those already mentioned, gambling organizers, as reporting entities, have, under the AML Act, a significant number of other specific obligations, among which we state in general terms: the obligation to assess risks (mentioned incidentally in the previous section), the obligation to keep documents and, where appropriate, the obligation to designate one or more persons with responsibilities in application of the AML Act or the obligation to develop and implement internal policies and rules, internal control mechanisms and procedures for managing money laundering and terrorist financing risks.
In conclusion, we recall that, for the gambling sector, the National Gambling Office (ONJN) has been designated by the AML Act as an authority with the role of sectoral regulation and supervision and control.
In this capacity, ONJN is empowered, inter alia, to issue sectoral regulations, which gambling organizers are obliged to take into account, including, for example, in activities to assess the risk of money laundering and terrorist financing and to apply know your customer measures.
As the deadline for issuing sectoral regulations has been exceeded, the entire industry is looking forward to their issuance, in the hope that sectoral regulations will clarify and facilitate the implementation of the provisions of the AML by gambling organizers.
