The Securities Commission, pursuant to the provisions of Article 84 of the Law on Prevention of Money Laundering and Terrorism Financing ("Official Gazette of RS", No 20/2009, 72/2009, 91/2010 and 139/2014) hereinafter the Law), supervises application of the Law by its supervised entities (Article 4, paragraph 1, point 1 of the Law, in the part concerning custody and broker-dealer activities (Article 4, paragraph 1, point 3 and 8 of the Law). The enforcement of this Law concerns investment fund management companies, broker-dealer companies, authorized banks and custody banks. When carrying out their registered activities, obligors are required to act in compliance with the Law and its provisions on detection and prevention of money laundering and terrorism financing.
The Securities Commission adopted a Form of the Questionnaire on activities implemented by obligors - supervised entities within the remit of the Securities Commission, which was made for the purposes of enforcement of the Law on Prevention of Money Laundering and Terrorism Financing (AML/TF Questionnaire).
The main purpose of the AML/TF Questionnaire is to monitor the state of business activities of obligors in the observed time period and continued observation of activities for the purpose of the enforcement of the Law on Prevention of Money Laundering and Terrorism Financing. In addition, the purpose of the AML/TF Questionnaire is to indirectly monitor the development of the system for prevention of money laundering and terrorism financing, and to collect information about the level of comprehension of regulations governing prevention of money laundering and terrorism financing.
Pursuant to the responses to the AML/TF Questionnaire submitted by the obligors on activities implemented in money laundering risk management and prevention of money laundering and terrorism financing for the period January 2013-December 2014, the following conclusions have been drawn:
- In the observed period and in 4 Questionnaires, the responses to the AML/TF Questionnaire were submitted by 55 obligors (32 broker-dealer companies, 16 authorized banks and 7 custody banks).
- The responses have shown that all obligors have appointed compliance officers and their substitutes, all have procedures for prevention of money laundering and terrorism financing and analyses of ML/TF risk have been devised in compliance with the Decision on Guidelines for ML/TF risk assessment adopted by the Commission.
- The client classification was conducted in accordance with the level of exposure to the money laundering risk and terrorism financing by all obligors who filed the completed Questionnaire in most of the cases, on three levels of risk (low, middle and high). In accordance with the information stated in the submitted questionnaires on the day of 31.12.2014, obligors had classified their total of 243,323 clients with whom they have established relations into low risk category 200,897 (82.56%), and not more than 1,332 clients (0,54%) into the high risk category.
- The obligors have been applying the simplified customer due diligence to 20.88% of clients, while the customer due diligence has been applied to 75.99% of the total number of clients. The enhanced customer due diligence has been applied to the percentage of 0.51% of the total number of clients. When analyzing the above data it should be taken into account that the period preceding the reporting period, a number of broker-dealer companies and authorized banks had stopped working and their clients were transferred to one of the other active investment firms.
Therefore, it ensues that the total number of clients certainly contains a portion of clients inactive for longer periods of time which obligors could not evaluate and categorize.
- When it comes to the preparation of the List of indicators for identification of persons and transaction for which there are grounds for suspicion of money laundering and terrorism financing, all obligors who submitted their questionnaires answered positively, but only seven of them indicated that the List contains special indicators in addition to those specified in the Indicators published on the website of the Administration for Prevention of Money Laundering and Terrorism Financing.
The most common special indicators were:
Trading in securities by legal persons – rapidly growing companies the values of transactions are rapidly increasing; A client is a newly founded domestic legal person whose founding capital is small but which invests significant amounts of money in trading in securities; Reentering of shares into books of account where the legal grounds were court or out-of-court settlements between natural persons, in higher amounts (exceeding EUR 5,000) A client often (several times in a month) buys or sells shares in amounts slightly below the 15,000 threshold; An inactive client (in the course of the last year) suddenly starts with larger value transactions, contrary to the client's earlier behavior; A client buys certain securities and then immediately after sells them without a cost analysis, i.e. consciously loses money; A client earned money for purchase of securities in an illegal way; The trading occurred off the organized market; In the previous period the client had been penalized for irregularities and misconduct by a competent authority; FOP (free of payment) transactions –pledges for defaulting on loans, gifts to non-related persons, entry of shares for incorporation of a company, contracts on mergers cum acquisition); Extreme departures from price change bands; Open joint stock companies going closed (sales to suspicious investors).
- In the period to which the Questionnaire refers, five obligors entrusted some of the customer due diligence to a third party, for 510 clients.
- To the question asked whether the client uses a special software for identification of suspicious transactions and persons, 12 obligors responded that they used a special software (10 authorized banks, 1 investment fund management company and 1 broker-dealer company).
- It is stated in the part of the AML/TF Questionnaire concerning the number of suspicious and reported transactions and clients that in total 170 transactions were reported to the Administration for the Prevention of Money Laundering and Terrorism Financing by 8 authorized banks, 7 custody banks and one broker-dealer company. Also, 359 internal reports were made, which were submitted to the compliance officers and moreover, 910 official notes were made on unusual transactions.
- Pursuant to the information submitted in the part of the AML/TF Questionnaire concerning the number and the type of clients, it was established that non-resident clients make approximately 0.13% of the total number of clients, and that was the group which exposed the obligors to higher ML/TF risk. The largest number of the total number of residents are still natural persons, i.e. put in another way, resident natural persons make 97.45% оf the total number of residents. Nonresident natural persons make 41.91% of the total number of nonresidents, while legal persons make 58.09% of the total number of nonresident clients.
- Pursuant to the information submitted in the part of the AML/TF Questionnaire concerning the number and type of transactions it ensues that the number of gifts in the total number of transactions participates with only 0.05% while their value makes 0.01% of the total value of executed transactions. In addition, with regard to the information about the number and value of block transactions executed, it ensues that the number of block transactions in the total number of transactions participates with merely 0.007%, while their value makes 0.12% of the total value of executed transactions. Of the total percentage of respondents, 8 broker-dealer companies, 2 authorized banks and 1 investment fund company specified to had carried out transactions with clients from the high-risk and off-shore areas. Of the number, 4 broker-dealer companies executed more than 50 of such transactions in the reporting period and 1 broker-dealer company effected 9,837 transactions with off-shore clients. This consequently point out to the increased money laundering and terrorism financing risk, with these obligors.
- When it comes to the part of Questionnaire which deals with employee training questions, the respondents wrote that all employees who were directly engaged on prevention of money laundering and terrorism financing activities underwent trainings. They also devised annual programs for capacity building and employee trainings of employees. however, only a limited number of obligors stated that all employees received external trainings, went on seminars or lectures in the area of prevention of money laundering and terrorism financing.
With a view of all the stated, and taking into consideration the results of the National ML/TF Risk Assessment Strategy from 2013 and the other criteria for assessment of exposure to the money laundering and terrorism financing risk, the Securities Commission adopted a Supervision Plan for Enforcement of the Law on Prevention of Money Laundering and Terrorism Financing for obligors - supervised entities within its remit for the year 2015.
The Securities Commission adopted a Form of the Questionnaire on activities implemented by obligors - supervised entities within the remit of the Securities Commission, which was made for the purposes of enforcement of the Law on Prevention of Money Laundering and Terrorism Financing (AML/TF Questionnaire).
The main purpose of the AML/TF Questionnaire is to monitor the state of business activities of obligors in the observed time period and continued observation of activities for the purpose of the enforcement of the Law on Prevention of Money Laundering and Terrorism Financing. In addition, the purpose of the AML/TF Questionnaire is to indirectly monitor the development of the system for prevention of money laundering and terrorism financing, and to collect information about the level of comprehension of regulations governing prevention of money laundering and terrorism financing.
Pursuant to the responses to the AML/TF Questionnaire submitted by the obligors on activities implemented in money laundering risk management and prevention of money laundering and terrorism financing for the period January 2013-December 2014, the following conclusions have been drawn:
- In the observed period and in 4 Questionnaires, the responses to the AML/TF Questionnaire were submitted by 55 obligors (32 broker-dealer companies, 16 authorized banks and 7 custody banks).
- The responses have shown that all obligors have appointed compliance officers and their substitutes, all have procedures for prevention of money laundering and terrorism financing and analyses of ML/TF risk have been devised in compliance with the Decision on Guidelines for ML/TF risk assessment adopted by the Commission.
- The client classification was conducted in accordance with the level of exposure to the money laundering risk and terrorism financing by all obligors who filed the completed Questionnaire in most of the cases, on three levels of risk (low, middle and high). In accordance with the information stated in the submitted questionnaires on the day of 31.12.2014, obligors had classified their total of 243,323 clients with whom they have established relations into low risk category 200,897 (82.56%), and not more than 1,332 clients (0,54%) into the high risk category.
- The obligors have been applying the simplified customer due diligence to 20.88% of clients, while the customer due diligence has been applied to 75.99% of the total number of clients. The enhanced customer due diligence has been applied to the percentage of 0.51% of the total number of clients. When analyzing the above data it should be taken into account that the period preceding the reporting period, a number of broker-dealer companies and authorized banks had stopped working and their clients were transferred to one of the other active investment firms.
Therefore, it ensues that the total number of clients certainly contains a portion of clients inactive for longer periods of time which obligors could not evaluate and categorize.
- When it comes to the preparation of the List of indicators for identification of persons and transaction for which there are grounds for suspicion of money laundering and terrorism financing, all obligors who submitted their questionnaires answered positively, but only seven of them indicated that the List contains special indicators in addition to those specified in the Indicators published on the website of the Administration for Prevention of Money Laundering and Terrorism Financing.
The most common special indicators were:
Trading in securities by legal persons – rapidly growing companies the values of transactions are rapidly increasing; A client is a newly founded domestic legal person whose founding capital is small but which invests significant amounts of money in trading in securities; Reentering of shares into books of account where the legal grounds were court or out-of-court settlements between natural persons, in higher amounts (exceeding EUR 5,000) A client often (several times in a month) buys or sells shares in amounts slightly below the 15,000 threshold; An inactive client (in the course of the last year) suddenly starts with larger value transactions, contrary to the client's earlier behavior; A client buys certain securities and then immediately after sells them without a cost analysis, i.e. consciously loses money; A client earned money for purchase of securities in an illegal way; The trading occurred off the organized market; In the previous period the client had been penalized for irregularities and misconduct by a competent authority; FOP (free of payment) transactions –pledges for defaulting on loans, gifts to non-related persons, entry of shares for incorporation of a company, contracts on mergers cum acquisition); Extreme departures from price change bands; Open joint stock companies going closed (sales to suspicious investors).
- In the period to which the Questionnaire refers, five obligors entrusted some of the customer due diligence to a third party, for 510 clients.
- To the question asked whether the client uses a special software for identification of suspicious transactions and persons, 12 obligors responded that they used a special software (10 authorized banks, 1 investment fund management company and 1 broker-dealer company).
- It is stated in the part of the AML/TF Questionnaire concerning the number of suspicious and reported transactions and clients that in total 170 transactions were reported to the Administration for the Prevention of Money Laundering and Terrorism Financing by 8 authorized banks, 7 custody banks and one broker-dealer company. Also, 359 internal reports were made, which were submitted to the compliance officers and moreover, 910 official notes were made on unusual transactions.
- Pursuant to the information submitted in the part of the AML/TF Questionnaire concerning the number and the type of clients, it was established that non-resident clients make approximately 0.13% of the total number of clients, and that was the group which exposed the obligors to higher ML/TF risk. The largest number of the total number of residents are still natural persons, i.e. put in another way, resident natural persons make 97.45% оf the total number of residents. Nonresident natural persons make 41.91% of the total number of nonresidents, while legal persons make 58.09% of the total number of nonresident clients.
- Pursuant to the information submitted in the part of the AML/TF Questionnaire concerning the number and type of transactions it ensues that the number of gifts in the total number of transactions participates with only 0.05% while their value makes 0.01% of the total value of executed transactions. In addition, with regard to the information about the number and value of block transactions executed, it ensues that the number of block transactions in the total number of transactions participates with merely 0.007%, while their value makes 0.12% of the total value of executed transactions. Of the total percentage of respondents, 8 broker-dealer companies, 2 authorized banks and 1 investment fund company specified to had carried out transactions with clients from the high-risk and off-shore areas. Of the number, 4 broker-dealer companies executed more than 50 of such transactions in the reporting period and 1 broker-dealer company effected 9,837 transactions with off-shore clients. This consequently point out to the increased money laundering and terrorism financing risk, with these obligors.
- When it comes to the part of Questionnaire which deals with employee training questions, the respondents wrote that all employees who were directly engaged on prevention of money laundering and terrorism financing activities underwent trainings. They also devised annual programs for capacity building and employee trainings of employees. however, only a limited number of obligors stated that all employees received external trainings, went on seminars or lectures in the area of prevention of money laundering and terrorism financing.
With a view of all the stated, and taking into consideration the results of the National ML/TF Risk Assessment Strategy from 2013 and the other criteria for assessment of exposure to the money laundering and terrorism financing risk, the Securities Commission adopted a Supervision Plan for Enforcement of the Law on Prevention of Money Laundering and Terrorism Financing for obligors - supervised entities within its remit for the year 2015.