On July 18, 2019, Law no. 129/2019 on the Prevention of and Combat Against Money Laundering and the Financing of Terrorism, as well as for Amending and Supplementing Certain Normative Acts (the “Law”) was published in Romania’s Official Gazette.
The Law, that entered into force on July 21, 2019, transposes Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or the financing of terrorism (“Directive 2015/849”), as well as Council Directive (EU) 2016/2258 of 6 December 2016 amending Directive 2011/16/EU as regards to access to anti-money-laundering information by the tax authorities.
Some of the main novelties that the Law brings into the Know Your Customer (KYC) and Anti-Money Laundering (AML) processes in Romania are as follows:
- Extension of the scope of “reporting entities”. The new Law extends the scope of reporting entities under the requirements of this special law. Thus, the following entities shall also fall under the requirements set out by the Law: providers of gambling services, fiduciary services providers and agents and distributors of institutions that issue electronic currency.
- The scope of the “Beneficial Owner” was extended. The concept of Beneficial Owners was amended so as to include the settlors, the trustees, the protector, the beneficiaries of the trust, the persons for whose main interest the trust agreement was concluded, as well as any other individual controlling the trust in the end.
Moreover, the members of the managing boards of associations, and the founders and members of the managing board of foundations, as well as the persons holding executive offices and the persons in whose interest such associations/foundations were established, also fall under the category of Beneficial Owners.
- The threshold of reported cash transactions is lowered. The threshold for the obligation to report transactions in cash to the National Office for Prevention and Control of Money Laundering has been decreased from the RON equivalent of EUR 15,000 to the RON equivalent of EUR 10,000.
- Prohibition from issuing bearer shares. The Law imposes an interdiction for companies to issue bearer shares or to sell their existing bearer shares. All bearer shares must be converted into nominative shares within 18 months of the entry into force of the Law, and the updated Articles of Association shall be submitted to the Trade Registry. All bearer shares that are not converted within 18 months shall be considered null and void, with the correspondent reduction in the share capital of the company. Failure to observe these interdictions shall be sanctioned by the dissolution of the company. The company’s dissolution may be requested by any person concerned, as well as by the National Office of Trade Registry.
- Declaration and registration of the Beneficial Owner’s data with the relevant authorities. Within 12 months as of the entry into force of the Law, companies which are already incorporated have the obligation to submit an authentic declaration regarding the identification data of the Beneficial Owners. For companies in the process of being incorporated, the first statement is to be made at the time of registration.
After this, new statements shall be submitted annually (within 15 days of the approval of the annual financial statements) or whenever changes occur in the shareholder structure or ultimate beneficial owner structure (within 15 days of such modification).
Similar provisions are applicable to associations and foundations.
Failure to observe the new requirements leads to the impossibility of registration of the newly set up entity, fines (between RON 5,000 and 10,000 – between approximately EUR 1,100-2,200) or even the dissolution of the entities involved.
- Beneficial owner registries. The Law provides that central registries containing adequate, accurate and up-to-date information on the beneficial owners shall be set up, within 120 days of the entry into force of the Law, at the level of:
- the National Trade Register – for companies;
- the Ministry of Justice – for associations and foundations;
- the National Agency for Fiscal Administration – in the case of trusts.
The supervisory authorities provided under the Law, the reporting entities, as well as any person or organization that may prove a legitimate interest shall have access to these registries.
- More severe sanctions.
For individuals: Administrative sanctions may consist of a warning or an administrative fine (ranging from a minimum of RON 10,000 (approximately EUR 2,300) to a maximum of RON 150,000 (approximately EUR 34,000).
For legal entities: Administrative sanctions may consist of a warning or fine of 10% of the total revenue declared for the previous fiscal period, above the fines applicable for individuals. Separate sanctions may also be applied to the members of the management bodies or other individuals responsible for the breach.
Credit institutions, as well as non-banking financial institutions, that are subject to National Bank of Romania (NBR) supervision, may have special sanctions imposed by the NBR if (i) the supervisory measures imposed by the NBR are not observed; (ii) the institutions do not provide, provide late or provide incorrect data to the NBR; (iii) there is a serious, repeated and systematic breach of the obligations of the credit institutions under the law; (iv) the institutions obstruct, in any way, the NBR personnel from fulfilling their supervision and inspection activities;
The special sanctions that may be imposed by the NBR include, inter alia: (a) written warning; (b) public warning, published on the NBR’s website; (c) a fine of up to 10% of the total annual turnover, or up to RON 23,000,000 (approximately EUR 5,000,000); (d) a fine of between RON 10,000 and 23,000,000 for the natural person responsible (between approximately EUR 2,200 and 5,000,000); (e) withdrawal of the NBR’s approval given to the directors and/or administrators of the entity.
- Secondary legislation. According to the Law, certain secondary legislation is to be adopted with a view to implementing the Law, including:
- an implementing regulation to be adopted by the Romanian Government based on a draft to be proposed by the Office for the Prevention of Money Laundering and the Financing of Terrorism;
- a regulation to be issued by the Office for the Prevention of Money Laundering and the Financing of Terrorism regarding the content and form of reports of transactions;
- a guide to be issued by the Office for the Prevention of Money Laundering and Financing of Terrorism providing the criteria and rules for recognizing high or low AML risk situations;
- sectorial regulations to be issued by supervisory authorities (including by the National Bank of Romania for credit and financial institutions and the National Agency for Fiscal Administration) and self-regulatory bodies.