Czech Republic: Criminal liability of companies for money laundering by negligence

→ Miroslav Pokorný

→ Helena Chadimová

The Czech Republic’s Anti Money Laundering Act (AML) is not new. But it is still neglected and underestimated, even by big companies. This stance is connected to companies’ general unawareness of being a bearer of legal obligations, and to their mistaken belief that if they do not launder the money deliberately, they cannot be sanctioned. However, under the new Act on Criminal Liability of Legal Entities (ACLLE), the crime of money laundering can easily be committed without anyone in the company noticing.

Liable person under the AML

In the first place, liable per­sons are cred­it and oth­er finan­cial insti­tu­tions and their inter­me­di­aries, providers of ready-made com­pa­nies, nom­i­nee and reg­is­tered office ser­vices, or per­sons trad­ing with used goods or receiv­ing goods in pledge (typ­i­cal­ly bazaars and pawn­shops).

While these enti­ties are more or less con­scious of their oblig­a­tions under AML, most entre­pre­neurs have no idea that they too are liable per­sons when­ev­er they receive cash of EUR 15,000 or more, regard­less of their line of busi­ness. More­over, the amounts (advance pay­ments, instal­ments, etc.) received in con­nec­tion with one trans­ac­tion are aggre­gat­ed.

Obligations under the AML

All of these per­sons have sev­er­al key oblig­a­tions. In par­tic­u­lar, the client must be iden­ti­fied if the amount of the trade exceeds EUR 1,000. The iden­ti­fi­ca­tion oblig­a­tion aris­es irre­spec­tive of the amount when the trans­ac­tion is sus­pi­cious; for exam­ple, when a client trans­fers prop­er­ty with­out an explic­it eco­nom­ic rea­son or with­draws or trans­fers mon­ey imme­di­ate­ly after cash is deposit­ed. The iden­ti­fi­ca­tion of a com­pa­ny is done by sub­mit­ting an extract from the Com­mer­cial Reg­is­ter or oth­er evi­dence of its exis­tence.

In spe­cif­ic cas­es the client must be checked, in par­tic­u­lar when the val­ue of the busi­ness exceeds EUR 15,000, the trans­ac­tion is sus­pi­cious or at the begin­ning of a busi­ness rela­tion­ship. The check relates inter alia to the pur­pose and nature of the busi­ness or source of funds. The check must be car­ried out to the degree nec­es­sary to assess the extent of the risk of mon­ey laun­der­ing for the type of client or the busi­ness rela­tion­ship.

A sus­pi­cious trade must be noti­fied with­in five days.

Criminal liability

Since 1 Jan­u­ary 2012, ACLLE reg­u­lates the crim­i­nal lia­bil­i­ty of com­pa­nies. A crime by a com­pa­ny is an offence com­mit­ted (i) in its name, inter­est or with­in the scope of its activ­i­ty com­mit­ted by the statu­to­ry body or oth­er per­son enti­tled to act on behalf of or in the name of the com­pa­ny, or (ii) by a per­son car­ry­ing out man­age­ment or super­vi­so­ry activ­i­ty, or exer­cis­ing a deci­sive influ­ence on the man­age­ment of the com­pa­ny. In some cas­es, the com­pa­ny is crim­i­nal­ly liable for the acts of its employ­ees.

The crim­i­nal lia­bil­i­ty also cov­ers the offence of mon­ey laun­der­ing, which means obscur­ing the ori­gin or oth­er­wise seek­ing to make it sub­stan­tial­ly more dif­fi­cult or impos­si­ble to iden­ti­fy the ori­gin of things acquired through the offence, or as a reward for it, or a thing acquired for such thing. Those who enable oth­ers to com­mit this offence are also liable.

Problematic link between the ACLLE and AML

The biggest prob­lem is the men­tioned crim­i­nal lia­bil­i­ty for acts of employ­ees in con­nec­tion with the pos­si­bil­i­ty of com­mit­ting mon­ey laun­der­ing, also by neg­li­gence – espe­cial­ly because it is dif­fi­cult for big com­pa­nies to con­trol.

An employee’s offence is attrib­ut­able to a com­pa­ny if (i) it is com­mit­ted by an employ­ee act­ing on the basis of instruc­tions or (ii) the com­pa­ny did not take mea­sures it should have tak­en pur­suant to a law or which could be rea­son­ably required.

The lat­ter applies in par­tic­u­lar if the company’s bod­ies did not check employ­ees’ activ­i­ty or if they did not take nec­es­sary mea­sures to pre­vent or avert the con­se­quences of an already com­mit­ted crime. Under the AML, this means the duty to estab­lish and imple­ment inter­nal con­trol and com­mu­ni­ca­tion pro­ce­dures, such as sys­tem of inter­nal prin­ci­ples, pro­ce­dures and con­trol mea­sures, includ­ing year­ly train­ings of employ­ees.

Legal consequences of breach of anti-money laundering obligations

Fail­ure to meet the oblig­a­tions set out by the AML may be sanc­tioned by up to CZK 50,000,000. If a com­pa­ny is found crim­i­nal­ly liable, a fine or ban on activ­i­ties may be imposed. In worst case sce­nario, for­fei­ture of prop­er­ty or can­cel­la­tion of the com­pa­ny.

These sanc­tions can seri­ous­ly affect the exis­tence of a legal enti­ty. It is there­fore clear that with­out tak­ing suf­fi­cient mea­sures to adopt inter­nal con­trols and inter­nal reg­u­la­tions, breach of legal oblig­a­tions and con­se­quent sanc­tions may very eas­i­ly ensue.

Most entrepreneurs have no idea that they too are liable persons whenever they receive cash of EUR 15,000 or more, regardless of their line of business.