- Professional News
- 30 September 2014
Large fines for breach of Danish Money Laundering Act
For the first time, the Danish Financial Supervisory Authority has published fines for breach of the Danish Act on Measures to Prevent Money Laundering and Financing of Terrorism. The fines are substantial, underlining the Money Laundering Act's requirements on the undertakings.
Undertakings carrying on activities relating to financial leasing must, according to the Money Laundering Act, be registered with the Danish FSA and meet a number of requirements as to internal work flows and employee training.
Publishing large fines on three different undertakings, the FSA has now underlined those requirements.
The anti-money laundering regulation
The purpose of the anti-money laundering regulation is that undertakings are to contribute to limiting possibilities of abuse of the financial system for money laundering and financing of terrorism.
The purpose is fulfilled by undertakings carrying on financial activities being registered with the FSA, which will then supervise such undertakings. Furthermore, the undertakings must have internal rules and procedures fulfilling the additional requirements of the Money Laundering Act.
Finally, a general investigation and reporting duty applies concerning activities which, due to their nature, could be regarded as being particularly likely to be associated with money laundering or financing of terrorism.
Requirement for registration
In order for an undertaking to be able to carry on its activities, it must register with the FSA. That means that undertakings carrying on financial leasing without being registered with the FSA are carrying on illegal activities.
The FSA has underlined this by publishing the three cases, in which three undertakings were fined DKK 400,000, DKK 580,000 and DKK 700,000, respectively.
These cases concerned undertakings carrying on financial leasing without being registered with the FSA, thereby carrying on illegal activities.
Customer identification requirement
The Money Laundering Act imposes a number of requirements on the undertaking to obtain adequate customer documentation if suspicion is aroused of money laundering or financing of terrorism as well as on regular customer relationships.
The undertaking must consider the procedures to be applied as well as the identification material to be obtained. Records of identity information must be kept for five years.
Internal rules and training
In addition to the requirement to register, undertakings carrying on financial leasing are also required to implement internal rules and training programmes for the handling of the anti-money laundering regulation's identification and investigation requirements.
If the undertakings do not meet such requirements, they are subject to fines. The internal rules must include rules on
- customer identification
- requirement of attentiveness, investigation and recording
- reporting and record-keeping
- internal control
- risk assessment and risk management
- management control of communication
- training and instruction programmes for the employees.
The undertaking must also appoint a member of management to be responsible for ensuring compliance with the rules.
Amount of the fines
In two of the three published cases, in addition to the failure to register, the undertakings had not observed those requirements. That was also reflected in the amount of the fines.
It is the first time that the FSA publishes fines relating to such breach of the Money Laundering Act, and the level of the fines is remarkable.
The undertaking which had "merely" failed to register, was fined DKK 400,000.
The other two undertakings in breach of the Act by in addition not having prepared the necessary internal rules and not making the employees aware of the requirements, were fined an additional DKK 180,000 and DKK 300,000, totalling fines of DKK 580,000 and DKK 700,000, respectively.
Considerations for the undertaking
As an undertaking carrying on activities related to financial leasing, it is, therefore, important to make sure whether the undertaking's registration with the FSA is correct, whether the necessary internal procedures have been adopted and whether adequate employee training has taken place in order for the undertaking to comply fully with the requirements of the anti-money laundering regulation.
In this way, the undertaking will avoid fines and can ensure that it carries on legal activities.