Obliged entity

What it means

An obliged entity is a company or profession on which the Slovak law against money laundering and terrorist financing imposes special duties. It includes banks, insurers and payment institutions, but also accountants, tax advisers, auditors, lawyers in certain transactions, estate agents and dealers accepting cash above the limit.

The core duty is customer due diligence, known as KYC. The obliged entity must identify the client, verify their identity, establish the ultimate beneficial owner and the purpose of the relationship, and, where risk is higher, the source of funds, for example with a politically exposed person.

It must also monitor the client’s transactions on an ongoing basis, report unusual business transactions to the financial intelligence unit, keep records for the statutory period and maintain its own programme of activity, an internal AML policy.

How it works in practice

As an accounting firm, we are an obliged entity ourselves. For every new client we therefore establish the director’s identity, the ownership structure and the beneficial owner, as well as what the company does. We ask clients for understanding: we ask these questions because the law requires it, not out of distrust.

Part of the process is assessing the client’s risk. A company with a clear structure and Slovak owners passes standard checks, while one with owners in high-risk countries, a complex structure or large cash transactions requires enhanced due diligence and more frequent updates.

The programme of activity also includes sanctions screening of clients and their owners against EU and UN sanctions lists. If there is a match, the obliged entity must stop the transaction and follow the law on international sanctions.

What to watch out for

An obliged entity must not tell a client that it has filed an unusual transaction report about them. This tipping-off ban is strict and breaching it is a separate offence, even if it might seem fair to the client.

If an obliged entity cannot vet a client adequately, for instance because they refuse to name the beneficial owner, it must decline or end the relationship. Carrying on “on trust” breaks the law and carries high fines.