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Combatting money laundering in the Czech Republic: despite progress more investigations are needed, says Council of Europe report

Strasbourg 11/02/2019
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Combatting money laundering in the Czech Republic: despite progress more investigations are needed, says Council of Europe report

Strasbourg, 11.02.2019 – In a report published today, the Council of Europe’s anti money laundering body MONEYVAL finds that, despite progress in the Czech Republic to combat money laundering (ML) and terrorist financing (FT), the authorities should take a more proactive approach with regard to ML investigations (see the summary of the report).

The report makes a comprehensive assessment of the effectiveness of the Czech Republic’s anti money laundering and counter terrorist financing (AML/CFT) system and its level of compliance with the Financial Action Task Force (FATF) Recommendations.

MONEYVAL acknowledges that the Czech authorities carried out a transparent and realistic analysis of the ML/FT risks faced by the country. ML occurs mostly due to tax crimes, fraud, corruption, phishing and subvention frauds. Whilst FT was also under scrutiny due to its seriousness, the probability of its occurrence remains low. Whereas the national risk assessment is fairly thorough, certain aspects require further analysis and mitigation measures need to be more explicit, MONEYVAL experts said.

The banks have an appropriate understanding of the ML/FT risks whilst awareness is lower with other financial institutions. Designated non-financial businesses and professions (DNFBPs) appeared less clear about the risks. The Financial Analytical Unit and the National Bank are the two main regulators that simultaneously oversee the biggest part of Czech financial sector. This notwithstanding, the report casts doubts on the efficiency of the existing supervisory model in a view of limited resources.

Legislative reforms and increased efforts in pursuing ML investigations represent a commendable progress achieved since the last evaluation. Although MONEYVAL recognises that convictions were obtained in some large scale ML cases, it concludes that more investigative opportunities should be pursued with regard to serious third party and stand-alone ML. The prevalent practice within the Czech justice system of sanctioning multiple offences simultaneously makes it difficult to measure the precise impact of the sentence solely related to ML.

The report underlines the improvements in the legislative and institutional framework on seizure and confiscation. Law enforcement regularly carries out financial investigations in relation to proceeds-generating offences which resulted in significant amounts being seized and confiscated.

Financial investigations carried out in relation to terrorism offences brought to light the possibility of FT activities to occur in the Czech Republic. As a response, the law enforcement managed to plausibly identify the respective roles of suspects in the FT-related schemes.

The Commercial Register in the Czech Republic can be accessed directly and free of charge whilst the quality and accuracy of information held therein vary. The report makes note of the recently established Trust and Beneficial Ownership Registers but also acknowledges that these registers are yet to be fully populated with data.

Finally, the report praises the Czech authorities for being active in cooperation with their foreign counterparts. This has further been substantiated with the fact that, in addition to mutual legal assistance, other forms of international cooperation are routinely used both spontaneously and upon request.

Based on the results of its evaluation, MONEYVAL decided to apply its enhanced follow-up procedure and invited the Czech Republic to report back in mid-2020.

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The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) is a monitoring body of the Council of Europe entrusted with the task of assessing compliance with the principal international standards to counter money laundering and the financing of terrorism and the effectiveness of their implementation, as well as with the task of making recommendations to national authorities in respect of necessary improvements to their systems.

The evaluation of the Czech Republic’s anti-money laundering and combating financing of terrorism system was based on the 2012 Financial Action Task Force Recommendations, and was prepared using the 2013 Methodology.

Fifth round Mutual Evaluation Report on Czech Republic

Summary of Fifth round Mutual Evaluation Report on Czech Republic