We are an obliged entity under the Slovak Act No. 297/2008 Coll. on protection against money laundering and terrorist financing (AML Act). Many of our clients are entities funded from the state budget, established by law, or otherwise part of public administration. For such entities, we typically perform simplified due diligence in accordance with Section 11 of the AML Act. However, even for these clients, we identify and verify the ultimate beneficial owners (UBOs). Since in most of the cases of these entities, there are no physical persons meeting the criteria set out in Section 6a(1)(a) of the AML Act, we consider members of the statutory body to be the UBOs. Recently, however, representatives of such entities have been refusing to provide their identification details or documents for identification verification, arguing that the identification of UBOs is not required for legal entities established by law. However, we have not found any such exemption in the act. So, what does the law say? Are we required to identify and verify the UBOs for budgetary and contributory organisations, legal entities established by law, and other public administration entities?
In our view, for the types of clients you describe, indeed it is not required to identify UBOs. For this purpose, we will collectively refer to these entities as public administration entities. The fact that UBO identification is not required for these entities is explicitly stated in Section 10a of Act No. 297/2008 Coll. (AML Act).
According to Section 10a (1) of the AML Act: “Any legal entity that is not a public administration entity41a) or a special-purpose trust without legal personality shall be obliged to identify their ultimate beneficial owners and keep up to date identification data on the ultimate beneficial owners in a written or electronic form…” The reference 41a points to Section 3(1) of Act No. 523/2004 Coll. on budgetary rules for public administration, which defines public administration entities as legal entities registered in the Register of Organisations maintained by the Statistical Office of the Slovak Republic under a specific regulation. The specific regulation is Act No. 540/2001 Coll. on state statistics, under which the Statistical Office maintains a list of public administration entities. The latest list can be found on the Statistical Office’s website under the “Databases” section and the “Public Administration Entities” subsection. In our view, Section 10a (1) of the AML Act, makes it clear that all entities listed in the Statistical Office’s public administration entities register are not required to identify their UBOs.
As you mentioned, for clients financed from the state budget, you conduct simplified due diligence under the AML Act. In our view, for clients registered as public administration entities, this is undoubtedly the correct approach. This follows from Section 11 (1)(d) of the AML Act: “An obliged entity may only conduct simplified due diligence in relation to a client with a low risk of money laundering or terrorism financing… if the client is a public administration entity…”
Furthermore, the AML Act states that only legal entities not classified as public administration entities are required to identify their UBOs. In addition, the AML Act specifies that UBO identification is also not required when simplified due diligence is conducted under Section 11. Simplified due diligence (Section 11(3)) only involves client identification. The AML Act does not require UBO identification during simplified due diligence. However, there is a new amendment effective from 15 January 2025. Under this amendment, during the performance of simplified due diligence pursuant to Section 11(1)(a) of the AML Act, appropriate and proportionate recording of the data specified in Section 10(1)(b) and (d) is required. However, this does not apply to public administration entities, as their simplified due diligence is governed by Section 11(1)(d) rather than Section 11(1)(a) of the AML Act.
We can thus confirm that UBO identification for the public administration entities you mentioned is not required. This is also logical, as public administration entities are funded by the state budget, and their ultimate beneficiary owners are the public or the state. The perceived risk of money laundering for such entities is low. The more relevant issue might be the potential corruption of representatives of these entities, who are often political appointees. However, such evaluation falls under evaluating the conduct and transactions of the representatives themselves rather than the public administration entities.
In conclusion, we believe it is appropriate for you not to request or verify data about the statutory representatives of public administration entities for the purpose of UBO identification.
