The Regulation No 2/2019 on the prevention of money laundering and terrorism financing (NBR AML Regulation) was published in the Official Gazette of Romania on 9 September 2019 and it will apply starting with 17 January 2020 to existing: (i) Romanian credit institutions; (ii) Romanian non-banking institutions registered into the special registry held by the National Bank of Romania (NBR) as well as to those registered with the general registry and which were also licensed as payment institutions or e-money institutions; (iii) Romanian payment institutions; (iv) Romanian e-money institutions; and (v) Romanian branches of foreign credit institutions, payment institutions and e-money institutions (together referred as the Obliged Entities).
We summarized below the main obligations established under the NBR AML Regulation at the charge of the Obliged Entities.
1. Money laundering risk assessment
Obliged Entities will need to perform their own assessment of the money laundering risks they are facing at different levels, including at the level of their (1) customers, (2) services, (3) products and of their (4) entire activity.
When performing the risk assessments, Obliged Entities should consider (i) the money laundering risks assessment which is performed at national level under the coordination of the Office for the Prevention of Money Laundering and Terrorism Financing, (ii) the money laundering risk assessment performed at a sectorial level, (iii) the risk factors provided under the Law No. 129/2019 on money laundering and terrorism financing, (iv) the instructions issued by the NBR for the application of the regulatory technical standards issued by the European Supervisory Authorities (EBA, ESMA and EIOPA) and, if applicable, (v) the risk assessment performed at a group level.
Obliged Entities risk management policies and due diligence measures must be based on the results of their respective risks assessments.
2. Methodology for performing and updating the money laundering risk assessment
Obliged Entities will need to set-up their own methodology for performing and updating their own money laundering risk assessment. Such methodology should consider and address the following aspects:
- the categories and the number of information sources used for the assessment;
- the procedure used for identifying the risk factors associated with their activity;
- the methods for establishing the ratio for each of the risks identified, in case the Obliged Entity decides to differently weighed the risk factors identified by it;
- the procedure for taking into account the risk factors identified in order to establish the level of risk associated to clients, products and services, distribution channels, and, if the case, to outsourcing activities and to activities performed via branches and subsidiaries located in third countries;
- the procedure for establishing and reassessing, periodically, the classes of risks related to customers, products and services; and
- the procedure for monitoring the evolution of the risk factors and for identifying the need for updating the risk assessment.
Obliged Entities must update their own money laundering risk assessment and methodology at least on an annual basis or if they decide that no updating is necessary to prepare an explanatory note on reasons for which an update is deemed unnecessary.
3. Policy for the management and decreasing money laundering risks
Obliged Entities will need to establish a policy for the management and decreasing of their money laundering risks. The policy needs to be adopted at the level of the management bodies and should address the following aspects:
- the strategy for clients’ acceptance pursuant to which the Obliged Entities must determine their targeted clients;
- the types of products and services they intend to offer;
- the maximum accepted risk level for the Obliged Entity, at their entire activity, products and services levels; and
- the general directions and measures for decreasing risk at the level of clients, products and services and respectively at the level of the Obliged Entity itself, including, if applicable, through their activity performed via branches or subsidiaries located in third countries.
4. Internal KYC Norms
Obliged Entities must establish and update at least on an annual basis their internal KYC norms that should cover:
- the deciding taking process, highlighting the seniority positions, tasks and level of responsibility allocated to those structures and individuals involved in the implementation of the KYC norms;
- the level of seniority for clients acceptance established based on clearly identified criteria;
- the types of products and services that may be provided per clients’ risk category if the case and in every relevant jurisdiction;
- the procedures for classifying clients in the appropriate clients' risk category and for passing from one category to another;
- the periodicity for updating, on a risk basis approach, the information and documentation regarding clients, as well as the cases where updates are necessary beyond the established periodicity;
- the content of due diligence measures per each client risk category, products and services, with the express indication of the documents and information to be used;
- the procedures for the on-going monitoring of the transactions performed by clients, regardless of the client risk category, for the purpose of detecting unusual or suspicious transactions and the criteria for prioritizing the investigation of the IT applications generated alerts as well as the maximum deadlines for solving those alerts;
- the criteria, the aspects and the scenarios based on which related transactions are tracked as well as the periodicity for tracking different categories of transactions in order to classify them as related transactions;
- methods for approaching transactions and clients directed to or from countries identified by the EU Commission as high risk countries;
- the procedures for managing incidents in the KYC process, including the procedure where there is a need to delay or refuse to perform a certain transaction, as well as the procedure for dealing with repeated information solicitations in the context of bank correspondent relationships;
- the rules for terminating business relationships, by establishing at least the cases where the termination of the business relationship is mandatory, the seniority level for approving such termination, the enhanced measures to be taken in case of business relationships that cannot be terminated (eg leasing or loan agreements) and de minims elements to be included in the communication with the concerned clients;
- records keeping and the way the access to such records can be made;
- internal reporting obligations and procedure;
- specific procedures for implementing the norms in case of outsourced activities;
- seniority levels, tasks and responsibilities for the compliance officer; and
- deadlines for the tasks established under the KYC norms.
5. Using third parties to perform customer due diligence
Obliged Entities may use, for the purpose of complying with their obligation to perform standard customer due diligence measures, information from third party financial or credit institutions with the exception of third parties which are (a) foreign exchange offices; (b) payment institutions providing only money remittance or payment initiation services; (c) vendors specialized in account information services; and (d) postal services providers that process payments.
6. Employees’ requirements
Obliged Entities must establish and document standards for employing personnel responsible for the implementation of the KYC norms, including criteria based on reputation and verify the information provided by the candidates. Obliged Entities must include in their employees' job description the employees express competences.
Furthermore, Obliged Entities must provide continuous training to the personnel responsible for the implementation of the KYC norms with a view to ensure that the legal obligations regarding KYC requirements, the consequences of the failure to comply and the implications of risks are known by the personnel and that the personnel has sufficient information allowing them to recognize the operations that may be linked to money laundering. Respective personnel must be periodically assessed to ensure that they are appropriately prepared in line with their respective level of responsibility.
7. Compliance officer
Obliged Entities must establish and document the standards for designation of the compliance officer and must provide, upon the NBR request, the documents evidencing that the designated compliance officer holds the appropriate qualifications for that position. Credit institutions are required to appoint the compliance officer among the members of the superior management bodies within the meaning of the NBR Regulation No 5/2013 on prudential requirements for credit institutions, namely one of their directors where they are companies organized pursuant to the unitary system or one of the members of the directorate where they are organized pursuant to the dualist system.
Obliged Entities must organized the independent auditing of their policies, internal norms, mechanisms, IT systems and money laundering and terrorism financing risk management procedures, including the risk assessment and methodologies for performing and updating the respective risk assessments. Obliged Entities establish the frequency for testing the above depending on the risks to which they are exposed.
9. Verifications performed by the NBR
Upon request made by the NBR, Obliged Entities must provide the NBR with the following assessments, norms, policies and methodologies:
- methodology for performing and updating the money laundering risk assessment;
- money laundering risk assessment;
- the policy for the management and decreasing the money laundering risks;
- the internal KYC norms;
- information on their clients and the transactions performed for clients;
- internal analysis performed by Obliged Entities regarding complex transactions or transaction with unusual high values or of all types of usual transactions which do not have an obvious economic, commercial or legal purpose;
- the documents and correspondence substantiating the decision to launch new products and services, to provide products or services to certain clients or to exempt certain clients, despite the contrary opinion of the persons having anti-money laundering responsibilities;
- reports on the implementation of anti-money laundering policies and procedures at the level of branches and majority owned subsidiaries located in third countries;
- the results of their internal audit;
- standards used for the designation of the compliance officer; and
- any other information and documents requested by the NBR to facilitate supervision.
10. Customer due diligence requirements
The NBR AML Regulation expressly provides for the type of information that Obliged Entities should request from clients (both individuals and legal entities) in order to establish each client risk profile.
Furthermore, Obliged Entities must implement mechanism for the periodical verification of the accuracy and the adequacy of the data held in relation to clients. Those mechanisms should be able to ensure the concerned Obliged Entities a reasonable assurance that the clients' risk profiles, as established, are correct and that the monitoring process is efficient.
11. Transitory provisions
Obliged Entities must ensure compliance with the provisions of the NBR AML Regulation by 17 January 2020. By the time the Obliged Entities will update their internal norms in order to put them in line with the provisions of the NBR AML Regulation. Obliged Entities may still amend their existing internal norms provided they do not establish measures that are less stringent than those in force upon the date of the publication of the NBR AML Regulation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.