AML inRegulations and Compliance
Austria is one of Europe’s major financial hubs, attracting a range of commercial business interests and offering financial services to customers from all over the EU and the world. The primary financial regulator in Austria is the Financial Market Authority (FMA) which is responsible for supervising the country’s banks, insurance companies, pension companies, investment and securities firms, and other financial institutions. The FMA provides regulatory oversight, issues operational licenses, and works with the government to develop and implement new anti money laundering and counter-financing of terrorism legislation.
What is the FMA?
The FMA was founded in 2002 as a way to provide a broader, risk-focused regulatory oversight across all sectors of Austria’s financial market. Headquartered in Vienna, the FMA is an independent, autonomous organization but works in coordination with the Austrian Federal Ministry of Finance (BMF) and its central bank: the Oesterreichische Nationalbank (OeNB).
The FMA shares its regulatory duties with the OeNB: the OeNB takes on responsibility for macro supervision of banks, including supervision of payment settlement systems and onsite inspections and audits of financial institutions. Where the OeNB finds violations or deficiencies in AML/CFT compliance, it informs and works with the FMA to address the situation.
The FMA also contributes to the global fight against money laundering and terrorism financing by working with various international organizations, especially within Europe, to promote international cooperation and the standardization of AML/CFT regulations.
In its supervisory role, the FMA maintains the stability of the Austrian financial system and the confidence of consumers, creditors, and investors. In addition, the FMA monitors financial institutions’ compliance with Austria’s AML/CFT regulations and takes steps to sanction and penalize financial institutions where violations are detected. The FMA’s supervisory responsibilities are shared across the following departments:
- Banking: Handling the licensing, authorization, and notification procedures relevant to banks operating in Austria and the development of new financial legislation. The banking supervision department commissions the OeNB to carry out on-site inspections of banks where necessary.
- Insurance and pensions: Handling the supervision of insurance firms and pension providers (Pensionskassen) including on-site audits and inspections and the development of legislation.
- Securities: Handling the reporting and licensing obligations of credit institutions in Austria and the supervision of stock markets and exchanges. The FMA also works to develop and implement new securities legislation.
- Integration: Ensuring the homogeneity and consistency of financial supervision across all financial sectors. The responsibilities of the integrated supervision department include supervising conglomerates, handling certain legislative issues, and coordinating the FMA’s collective international activities, and communicating and distributing compliance information to firms within Austria’s financial markets.
FMA Sandbox: The FMA hosts a sandbox to help banks and financial institutions test their business models, products, and supervisory status, and smooth the path towards licensing and authorization. The FMA offers targeted support to help firms enter Austria’s environment and operate successfully.
As a member of the Financial Action Task Force (FATF), Austria requires financial institutions to take a risk-based approach to AML/CFT compliance, putting AML measures in place that are commensurate with the risks that they face. In order to comply with the FATF recommendations, Austria has enacted the following domestic legislation:
- Financial Markets Anti-Money Laundering Act: The primary AML legislation in Austria is the Financial Markets Anti-Money Laundering Act which requires financial institutions in Austria to implement a range of risk-based AML/CFT compliance regulations with a focus on know-your-customer (KYC).
- Banking Act: The Banking Act concerns the licensing of credit and other financial institutions and sets out various operational rules and requirements including those regarding governance, ownership, and contractual issues. The Banking Act also sets out penalty provisions for firms that fail to comply with AML/CFT legislation.
- Beneficial Owners Register Act: Under the Beneficial Owners Register Act, the owners of companies, trusts, and other legal entities must be included in a register of beneficial owners.
EU Directives: As an EU member-state, Austria must transpose the requirements of EU Anti-Money Laundering Directives (AMLD) into its domestic legislation. The Fifth AMLD came into effect on 10 January 2020, while the Sixth AMLD will come into effect on 3 June 2021.
In order to comply with Austria’s AML/CDT requirements, firms must develop and implement a risk-based program that features the following procedures and measures:
Customer due diligence: To establish and verify the identity of their customers, firms must obtain a range of information, including names, addresses, and dates of birth. The CDD process should also include beneficial ownership of customer entities.
Transaction monitoring: Transactional behavior may indicate when a customer is involved in money laundering. Firms should monitor customer transactions for suspicious activity, including unusual volumes and frequencies of transactions, and transactions with high risk countries. Where suspicious activity is detected, firms must submit suspicious activity reports to the FMA.
Sanctions screening: Firms must screen their customers against international sanctions and watch lists to ensure their customers are not subject to sanctions. In Austria, screening requirements include the EU’s sanctions list and the UN sanctions list.
PEP screening: When customers are elected to political positions their money laundering risk may change. Accordingly, firms must screen their customers and their close relatives and associates for politically exposed person (PEP) status,
Adverse media monitoring: Customers that are the subject of adverse media stories may present a higher risk of money laundering. In order to detect that change in risk, firms should monitor for negative or adverse media stories around the world, including both traditional screen and print media and online sources.
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