Anti-money Laundering and Anti-Terrorism Funding

This term means any direct or indirect means of supplying, collecting, negotiating, depositing, storing or dispensing funds and economic resources, in any shape or form usable for purposes of terrorism as provided for by criminal law, irrespective of the actual use of funds and economic resources for the aforementioned commission.

Anti-money laundering concerns a broad spectrum of subjects (natural and legal people) and professional categories. Among these:

• Banking and financial intermediaries (the decree lists the types of companies included in this category, among them Banks, Poste Italiane…);
• Other financial operators (including trustee companies and credit brokers);
• Professionals (in an individual, associate or corporate form) fall within:
• • Accountants, accounting experts, job advisor;
  • Any other person who provides expert services, consultants and other people who perform professionally, including in relation to their associates or affiliates, accounting and taxation activities (including business associations and traders, CAFs and patrons);
• A peculiar discipline is reserved for notary lawyers: they are obliged when performing, in the name or on behalf of their clients, to make financial or real estate transaction and when they assist their clients in the preparation or execution of operations relating to the following activities :
  • Transfer to any title of real rights on immovable property or economic activities;
  • Management of money, financial instruments or other assets;
  • Opening or managing bank accounts, deposit accounts and securities accounts;
  • Organising the necessary contributions to the establishment, management or administration of companies;
  • Establishment, management or administration of companies, entities, trusted legal entities analogous;
• Statutory auditors
• Other non-financial operators; among them, the subjects who carry out the following activities:
  • Trade of ancient things. Eg. auction houses, galleries of art;
  • Professional gold workers;
  • Real estate agents;
  • Civilian mediators,
  • Holders of out-of-court recruitment of third party creditors;
  • Custody and transport of cash, securities or securities by sworn guards, etc.;
• Gaming service providers

The competencies of the various supervisory authorities involved in the prevention and repression of money laundering are regulated in detail. Among them, the Ministry of the Economy and Finance, the Financial Security Committee, the sectoral supervisors, the Information Unit (UIF), the National Anti-mafia and Counter-Terrorism Directorate, the Special Finance Guard, and so on.

An active role is attributed to self-regulatory bodies, which through their respective territorial associations and disciplinary boards also promote and control the fulfillment of anti-money laundering obligations by professionals registered in their lists.

The main anti-money laundering obligations relate to the proper verification of the client and the actual holder and the reporting of suspicious transactions.

This obligation applies among other cases, such as:

• When establishing a business relationship;
• When carrying out occasional transactions amounting to EUR 15 000 or more, whether the transaction is carried out in a single operation or in several operations which appear to be linked; a transfer of funds of more than 1,000 euros.

In any case, the obliged people proceed to the appropriate audit of the customer and the actual holder:

• when there is a suspicion of money laundering or terrorist financing, regardless of any derogation, exemption or threshold
• When there are doubts about the veracity or adequacy of previously obtained customer identification data.

For banks, Poste Italiane SpA, electronic money and payment institutions, the obligations of adequate customer verification are nevertheless observed when they are carrying out or are involved in the transfer of cash in euros or a foreign currency, made to any title between different subjects, of a total amount of 15,000 euros or more.

The obligations of adequate customer verification are not observed in relation to carrying out the task of mere drafting and transmission or the transmission of declarations arising from tax obligations and staffing obligations.

The requirements for proper customer verification are implemented through:

• The identification of the customer and the verification of his/ her identity with the proof of an identity document or an equivalent identification document and on the basis of documents, data or information obtained from a reliable and independent source;
• The identification of the actual holder and verification of his/ her identity;
• The acquisition and evaluation of information on the purpose and nature of the continuing relationship or of the professional performance;
• The constant monitoring of the relationship with the customer throughout its course, through an examination of the overall operation of the customer itself, the verification and updating of the data and information gained in carrying out the activities.

The activities of establishing and verifying the identity of the client, the performer and the actual holder are carried out prior to the establishment of the ongoing relationship or assignment of a professional performance or before the execution of the occasional transaction.

When there is a low risk of money laundering or terrorist financing, the verification of the identity of the client, the investor and the actual holder may be postponed to a later date (within 30 days) of the establishment of the report. A situation may occur where it is required to allow the ordinary conduct of the activity covered by the report to expire, if the verification of the identity is impossible, the obliged parties must then abstain and evaluate, subject to the assumptions, if a suspicious operation report is made.

For professionals, limited to cases where they consider the client’s legal position, perform customer defense or representation tasks in a judicial proceeding, this includes assisted negotiation agreement and advice on whether to intend or avoid it, are exempt from the obligation to verify the identity of the customer and the actual holder until the moment of the assignment.

The decree specifies the ways in which to fulfill the obligations of proper verification, among these are:

• The identification of the customer and the actual holder, carried out in the presence of the same customer or the performer, also through employees or collaborators of the obliged subject. The identification process consists in the acquisition of the identification data provided by the customer, after displaying a valid identity document or an equivalent document in paper or electronic form. It is the customer’s responsibility to provide the information necessary to enable the holder to be identified.
  A number of cases are also indicated in which the identification requirement is deemed to have been granted, even without the physical presence of the customer.
• The verification of the identity of the customer, the actual holder and the executor confirms the veracity of the identification data contained in the documents and information acquired at the time of identification. When there are doubts, uncertainties or inconsistencies; the feedback can be made, among other things, through the consultation of the public system for the prevention of identity theft referred to in Legislative Decree no. n. 64/2011;
• The acquisition and evaluation of information on the purpose and nature of the continuing relationship or of the professional performance;
• Constant monitoring of a continuous professional relationship is carried out through the analysis of the transactions and activities carried out or identified throughout the duration of the relationship. This occurs in order to verify that they are consistent with the knowledge that the obliged subject has of the client and of his risk profile, including if necessary the source of the funds.

When there is a low risk of money laundering or terrorist financing, simplified measures of adequate scrutiny are provided for the extent and frequency of the obligations imposed. To this end, obliged subjects also take into account a number of low risk indices for different types of customers, products, services, operations or distribution channels, geographic areas, etc.

When there is a high risk of money laundering or terrorist financing, the obliged parties apply a series of reinforced measures for an adequate customer verification.

The decree identifies a number of risk factors to be considered, these refer to the following:

• Customers: eg. continuous relationships or professional services established or performed under abnormal circumstances, customers resident or domiciled in high risk geographic areas, qualifying structures such as capital interim vehicles, economic activities characterised by high cash use, etc.
• Products, services, operations or distribution channels: eg. services offered to customers with large assets; products or operations that could favour anonymity; payments received by third parties without any obvious connection with the customer or with his/ her business, etc.
• Geographic areas: eg. third countries without effective anti-money laundering and terrorist financing guards, as recommended by the FATF; third-country nationals, authoritative and independent sources, are characterised by high levels of corruption or permeability to other criminal activities; countries subject to sanctions, embargoes issued by national and international organisations or which finance or support terrorist activities or in which terrorist organisations operate.

In addition to those set out in the decree sector, supervisors and self-regulatory bodies may identify additional risk factors to be considered and establish enhanced customer-tailored verification measures.

Appropriate enhanced verification is however always necessary in the case of: customers located in high risk third countries identified by the European Commission; cross-border correspondence with a corresponding credit institution or financial institution in a third country; ongoing relationships, professional performance or transactions with customers and their actual holders who are politically exposed.

Obliged persons must submit a suspicious transaction report to the UIF (Financial Intelligence Unit for Italy), without delay, “when they know, suspect or have reasonable grounds to suspect that they are in the process or carrying out money laundering or terrorist financing operations or attempted that funds, whatever their size, come from criminal activities. “

The decree then specifies the indexes from which to infer the “suspicion”, also based on the fault indicators elaborated and periodically updated by UIF.

Unless specifically indicated, the operation can only be performed after the signaling has been carried out.

The report contains the data, information, description of the operations, and the reasons for the speculation.

They are exempt from the obligation to report suspicious transactions to professionals for information they receive from a client when examining their legal position, completing their defense or representation duties in a proceeding. This is when it is either before a judicial authority or in relation to that proceeding, including by means of a negotiating convention assisted by one or more lawyers. This equally includes advice on whether to intend or avoid it, where such information is received or obtained before, during or after the procedure itself.

For professionals, reporting suspicious transaction must be sent directly to UIF or to self-regulatory bodies (in this case, a special ministerial decree will establish the specifications and the ways and means of safeguarding the confidentiality of the identity of the notifier).

Self-regulatory bodies, upon receipt of their subscribers’ notification, shall without delay transmit it in full to UIF without the name of the informer.

In order not to frustrate the reporting obligations and not to expose the informer, there are a number of measures taken to protect his/ her identity:

• Obliged entities and self-regulatory bodies must take all appropriate measures to ensure the confidentiality of the identity of the informer;
• The judicial authority shall take the necessary measures to ensure that the identity of the informer is kept confidential; the name of the informer can be entered in the file of the Public Prosecutor’s Office or in the debtor’s file and his/ her identity cannot be disclosed, unless the Judicial Authority states otherwise and gives reasoned justification. One must ensure the adoption of any appropriate remedy to protect the informer if it is indispensable for the purpose of establishing the offenses for which it is proceeding;
• In the event of a complaint or communication of offense, no mention of the identity of the informer is made.

It is prohibited to discuss anything regarding a reported suspicious transaction.

It is forbidden to report any suspected operation and to anyone who is aware of it, to notify the interested customer or third parties of the reported signaling, the sending of additional information required by the UIF or the existence, the probability of investigations or investigations into the subject of money laundering or terrorist financing.

It should be noted that a professional’s attempt to deter a client from engaging in illegal activity is not a violation of the prohibition of communication provided in this article.

Compulsory subjects who are unable to perform proper customer verification must refrain from establishing, running or continuing the relationship, professional performance, operations, and must evaluate whether or not to report it as a suspicious UIF operation.

Professionals are exempt from the obligation to abstain only in cases where they consider the legal position of their client, perform  or represent a customer’s defense in proceedings before a judicial authority or in relation to such proceedings. The exemption is also extended to consulting whether or not to prosecute proceedings.

The obligation to abstain also applies to those who engage in services which, directly or indirectly, are part of trust companies, anonymous or controlled companies with head offices in high risk third countries.

Here are the main previsions:

• The transfer of cash and securities to the bearer is prohibited in all currencies, carried out in any way between different entities (natural or legal people) when the value of the transfer is equal to or greater than 3,000 euros. The threshold is still considered to have exceeded the limit even when the transfer is made with multiple payments lower than the threshold which appear artificially paid;
• The transfer exceeding the limit of 3,000 euros can only be executed through banks, Italian postal services, electronic money institutions and payment institutions;
• Bank and postal forms are issued by banks and by Poste Italiane S.p.A. with a non-transferable clause. A customer may request in writing the release of bank and postal forms.
• Bank and postal checks of an amount equal to or greater than 1,000 euros must convey the name or business name of the beneficiary and the non-transferable clause;
• Bank and postal checks issued to the trader may only be used for the collection of a bank or Poste Italiane S.p.A;
• Circular checks, postal and exchange orders are issued with the indication of the beneficiary’s name or company name and the non-transferable clause.

Violation of the abovementioned provisions could result in a fine from 3,000 to 50,000 euros.

• The customer may request in writing the issue of circular checks, postal orders and exchange notes of less than 1,000 euros, without the non-transferable clause. For each bank or postal check form required for free or for each circular check, postal or exchange order issued, the applicant is required to pay a stamp duty of EUR 1.50.
• Only the issue of deposit books, bank or postal is permitted;
• It is forbidden to transfer bearer passbooks (bank or post office); if any, are extinguished by the bearer by December 31 2018; in case of violation, the administrative sanction ranges from 250 to 500 euros applies.
• It is forbidden to open any form of account or savings account in an anonymous form or with a fictitious header: The violation of this is punishable by a fine ranging from 20% to 40% of the balance.
• Finally, it is forbidden to use, in any form, accounts or savings accounts in an anonymous form or with dummy headings open to foreign states. In the event of a breach, a financial penalty of 10% to 40% of the balance applies.

Article. 55 of the new Legislative Decree no. 231/2007 states criminal sanctions. These are the main cases, all punished with imprisonment from 6 months to 3 years and a fine from 10,000 to 30,000 euros:

• Subject to the obligation of proper verification that forges data and information, or uses false information about the customer, the actual holder, the performer, the purpose and nature of the ongoing relationship or the professional performance and the operation;
• Subject to the compliance with the retention obligations that acquires, keeps false data or information that is not true to the customer, the actual owner, the performer, the purpose and nature of the ongoing relationship or the professional performance and the operation or uses forged means in order to undermine the proper retention of the data and information above;
• Obligation to provide the data and information necessary for proper customer verification, which is false or untruthful information.

The misuse of credit or payment cards in order to profit for oneself or others is punished by imprisonment from 1 to 5 years and with a fine of 310 to 1,550 euros. The same penalty applies in the event of falsification or alteration of credit or payment cards or other similar documents, or if one possesses, sells or acquires such papers or documents of unlawful, falsified or altered nature.

Confiscation: It has been introduced to the criminal code. 648-quater, which provides for the compulsory confiscation of the goods constituting the product, the proceeds of the offenses or an equivalent. In the case of a conviction or punishment the offenses are referred to art. 648-bis (money laundering) and 648-ter (use of money, goods or utilities of an illegal origin) unless the property belongs to persons who are not members of the offense.

The decree also deals with administrative sanctioning. These are the main cases:

• Failure to comply with the obligations of proper verification and the abstention obligation is punishable by the administrative penalty of 2,000 euros. In the event of serious, repeated, systematic or multiple violations, the fine ranges from 2,500 to 50,000 euros;
• There is an administrative penalty of 2,000 euros for non-compliance with the retention obligations. Once again in the event of serious, repeated, systematic or multiple violations, the fine ranges from 2,500 to 50,000 euros;
• For non-compliance with the reporting requirements for suspicious transactions, a monetary administrative penalty of 3,000 euros applies. In the event of serious, repeated, systematic or multiple violations, the fine ranges from 30,000 to 300,000 euros apply.

A new type of administrative offense has been introduced (Article 25-octies, Legislative Decree No.231 / 2001). In the case of money laundering and the use of money, goods or utilities, the sanction is a fine of 200 to 800 percent (the fine ranges from 40 to 800 percent when money, goods or other benefits come from a crime for which the maximum imprisonment sentence imposed is a maximum of 5 years). Additionally, the penalties referred to in art. 9, paragraph 2, can last for a term of up to 2 years (please note that these penalties are: suspension from the exercise of the activity, suspension or revocation of the authorisations, licenses or concessions to the commission of the offense, a ban on bargaining with the PA, a part from for obtaining the services of a public service, exclusion from allowances, funding, contributions or subsidies and any withdrawal of those already granted, prohibition of advertising of goods or services).