The Parliament of Bosnia and Herzegovina (“BiH“) has adopted a new Act on Prevention of Money-Laundering and Financing of Terrorism (“AML Act“).
New obligors under the AML Act
The new AML Act of B&H brings virtual currency service providers and real estate lease agents when the monthly value of a lease is BAM 20.000 (approx. EUR 10.000) or more among the obligors under this legislation.
Heightened obligation to identify client
In addition to the obligation to identify the client at the beginning of a business relationship and each time when effecting a transaction for the client which equals BAM 30.000 or more (approx. EUR 15.000), an AML obligor will also have to identify the client with whom the obligor does not have an established business relationship, each time such ad hoc client effects a transaction involving a transfer of BAM 2.000 (approx. EUR 1.000) or more.
Certain AML obligors have additional obligations specific to their business. For example, gaming organizers must identify and monitor clients conducting gaming transactions where the value of the transaction, or a series of interconnected transactions equals or exceeds BAM 2.000 (approx. EUR 1.000). Under the old law, the minimum transaction value triggering this obligation was set at a twice higher level. As a separate obligation, casinos and “gambling venues” (kockarnice), must verify the identity of the client upon entry onto the premises. The term “gambling venue” (kockarnica) is not defined under any law, which may cause compliance issues in practice.
Obligation to identify Ultimate Beneficial Owner (UBO)
Contrary to some expectations, the new AML Act does not set up a UBO registry of Bosnia and Herzegovina. Consequently, there is no such registry in the country yet. Nevertheless, the AML obligors have the obligation to identify UBOs of their clients.
Under the previous legislation, client’s UBO, whom the AML obligor had an obligation to identify, was defined as a person having at least 20% of business shares, stocks, voting rights, or other controlling rights. Now, UBO is the person having 25% of such interest.
The new AML Act provides that the AML obligor is not obliged to identify UBO of a listed company which is subject to disclosure obligations in accordance with the BiH’s legislation. If this provision were read literally, it would mean that AML obligor does not have the obligation to identify UBO only if the ultimate corporate shareholder of the client is a company listed in BiH, whereas when the ultimate corporate shareholder is a company listed in another country, its UBO would have to be identified even though this would be sometimes impossible because of dispersion of ownership over listed companies. The cited provision of the new AML Act is probably a bad translation of Article 3 paragraph 6 point (a) under (i) of the AML Directive, which states in the relevant part: “other than a company listed on a regulated market that is subject to disclosure requirements consistent with Union law or subject to equivalent international standards which ensure adequate transparency of ownership information.”
One could argue that the relevant part of the new AML Act should be read in light of Article 3 paragraph 6 point (a) under (i) of the AML Directive which it aims to implement, and that the obligation to identify UBO should not exist not only when the client or the ultimate corporate shareholder of the client is a company listed in BiH but also when the client or the ultimate corporate shareholder of the client is a company listed in the EU or in a third jurisdiction if it is subject in that third jurisdiction to equivalent disclosure requirements which ensure adequate transparency of ownership information. Confirmation from the competent BiH authority to this effect would be welcome.
Manner of identification
The new AML Act permits video identification of clients if all of the following conditions are fulfilled:
- products, services, planned transactions, or delivery channels present low AML risk;
- the client’s identity is verified via biometric ID document issued in a country not considered high AML risk and the client’s place of residence is in such country; and
- the client is an adult.
In contrast to the new Montenegrin AML Act, which we have recently reported on, the BiH AML Act does not specify that video identification of clients is possible only with the involvement of the human factor.
Identification by means of qualified electronic signature certificate or qualified electronic corporate seal certificate is permissible as long as the certificate states the user’s real name and not the pseudonym and as long as the AML obligor has technical means to properly verify the client’s qualified electronic certificate for its continuing validity and against any restrictions related to transaction amount, funds, business methods, etc.
Limitation on cash transactions
The AML Act prohibits businesses engaged in the sale of goods, real estate, boats, vehicles, or aircrafts, or sale of services, from accepting cash payments in excess of BAM 30.000 (approx. EUR 15.000). Payments under real estate sale and purchase transactions, irrespective of the status of the parties, cannot be in cash if the value of the transaction is equal or exceeds BAM 30.000 (approx. EUR 15.000). The Council of Ministers of BiH is entitled to impose additional restrictions on cash payments in specific sectors.
Reporting obligations with respect to certain transactions
Where cash transaction is permitted, AML obligor must nevertheless report it to the BiH Financial Intelligence Unit if the value of an individual transaction or a series of connected transactions equals or exceeds BAM 30.000. Furthermore, any transaction equal to or exceeding this value, whether effected in cash or via bank transfer, must be reported if any of the parties is from an AML high-risk country.
The New AML Act requires notaries and lawyers to report any real estate purchase and any loan agreement with the value of BAM 30.000 (EUR 15.000) or more, as well as any document created to transfer management and disposal rights over property, within 8 days from certification of signatures or, as the case may be notarization of documents. It is unclear why this obligation is imposed on both lawyers and notaries.
