Banks Receive Stricter Rules on Money Laundering

By , 24 Oct 2018, 16:22 PM Business
Officials and their relatives “clients with high risk of money laundering”  Officials and their relatives “clients with high risk of money laundering” SHUTTERSTOCK

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October 24, 2018 - The new rules on indicators and guidelines for the identification and prevention of money laundering have increased the obligation on Montenegrin banks to monitor and analyze client transactions from high-risk countries and offshore zones, as well as those related to virtual currencies, electronic transfers and currency trading, the General Secretary of the Montenegrin Banking Association Branislav Pejakovic said in an interview for "Vijesti”.

Are these new and amended ordinances adopted to respect new EU anti-money laundering and terrorist financing directives? Which of the transactions will now be under the monitoring of the competent authorities? What are the most important novelties in comparison with the current standards?

The legal regulations in Montenegro in the area of money laundering and terrorist financing have been harmonized with the relevant regulations in this area and follow the recommendations of the international institutions. The new standards and obligations deriving from the IV Directive and the 40 new FATF Recommendations (Intergovernmental Anti-Money Laundering Organizations) pose more complex demands on money laundering and terrorist financing systems on the states members of the Council of Europe. As a basis for determining the doubt, there is a list of indicators issued by the Management Board or set out by the taxpayers in their internal procedures and regulations. Control of the application of these rules, procedures and indicators, when assessing the basis of suspicion by authorized bankers, and submitting reports to the Money Laundering and Financing Terrorism Prevention Board (USPNFT), is performed by the Central Bank of Montenegro as a supervisory body. As far as banks are concerned, there is a growing need for profound analysis of clients from high-risk countries, as well as enhanced transaction analysis using new technologies (electronic transfers, virtual currency etc), and new risk indicators in virtual currency trading and trade currency trading (FOREX platform). The most significant new indicators relate to the business risk with tkz, as well as countries that do not fully apply international standards in preventing money laundering and terrorist financing. The USPNFT has significantly increased the number of its initiatives, i.e. notifications sent to other competent authorities, indicating suspicions of money laundering or terrorist financing, or other criminal offenses that have been carried out ex officio.

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Pejaković PHOTO: Boris Pejović


The action plan defines the continuous improvement of the normative-legal framework, administrative and material-technical capacities of the relevant state authorities;

To whom are the banks providing the information required by these regulations?

There are no novelties here, the Money Laundering Management is informed about cash transactions above the limit, but also about all suspicious transactions and clients. Data is delivered in a protected electronic way, and banks respect the adopted procedures, and set deadlines in submitting the report.

Will the application of these standards increase the security and reputation of the Montenegrin banking system? 

The new legal norms have completely matched Montenegrin regulations with the EU regulations that apply to this area. Novica Radovic, a member of the Anti-Money Laundering and Financing Committee of the Montenegrin Banking Association, confirmed that there has not been a lag or disagreement in this area until now, just about accepting and installing new solutions, according to the dynamics applied in the EU. Namely, standards for combating money laundering and terrorist financing are constantly being drafted, as well as the normative norms that these standards accept, which is due to the adequate response of states and international organizations to new methods of enforcing these crimes, which are specifically related to the application of the new technology. 

Do banks have costs due to these standards?

Every improvement in the banking system's business demands additional costs, so we have the support of automated backing not only for individual bank and client transactions but also for occasional transactions of €1,000 or more, which initiate payments with which the banks are not in a business relationship. Consequently, the largest expenditure is related to IT adjustments, automation in the use of various lists (sanction lists, list of real owners, list of politically exposed persons, etc.) and provision of overall risk assessment for the purpose of categorizing the degree of risk by a combination of relevant risk factors.

How do you assess the current money laundering system in Montenegro? Is it known to you that, in recent years, a correspondent bank that provided services to domestic Montenegrin banks canceled cooperation with Montenegro due to the high risk of money laundering?

Nevertheless, the state institutions and external partners, consultants for this area are invited to give a rating, but according to the previous comments, I think we are approaching this issue well. The money laundering system was established in Montenegro 15 years ago and is constantly improving by adopting and implementing the applicable international standards and regulations. In establishing correspondent relations with European and global banks, our banks provide evidence of the full application of these standards. This is an unavoidable condition that must be fulfilled in order for the correspondent relationship to be established. We do not know that a reference bank has refused to establish or demanded the termination of this business relationship with any of the Montenegrin banks for failure to comply with standards in preventing money laundering and terrorist financing. 

A deeper analysis of transactions for both relatives and politician’s partners. Will there be more stringent and more detailed controls on cash transactions of politically exposed personalities? Do you also report and control the transactions of affiliated persons with politically exposed personalities? 

The law defines precisely those who have the status of politically exposed persons. In addition to the functionaries, there are also members of their families as well as those with whom they have joint business activities. The list of politically exposed persons is made by the state body, and banks are under obligation to apply it, as well as treat these persons as clients with a high risk of money laundering. This implies the use of deep analysis and transaction tracking. The Law on the Implementation of Amendments to the previously applicable SPNFT Law defines the obligation to establish and maintain the Registry of Real Owners of Legal Entities and Corporations by the Tax Administration (CRPS), which will enable the taxpayers (besides other banks and financial institutions) as well to the supervisory authorities, collecting accurate data within the framework of customer identification and verification measures. The Central Bank made the recommendation of MONEYVAL (Committee of Europe for the Prevention of Money Laundering), which related to the obligation of direct control of microcredit financial institutions.

Text by Marija Mirjacic, on October 24th, 2018, read more at Vijesti

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