As a financial institution, we are obliged to identify clients and verify their identity in accordance with the AML Act. Before the latest amendment to the AML Act came into effect, when verifying the identity of corporate clients other than the statutory officers (such as CFOs, COOs, etc.) we accepted powers of attorney, delegations, or mandates even without officially certified signatures of the statutory officers. Section 8(1)(c) of the AML Act stated that verification of identity means the verification of data obtained from a presented power of attorney with a certified signature of the authorising party. We assumed that we were able to certify the signature of a corporate client’s statutory officer ourselves, based on the signature specimen obtained from the statutory officer during their identification and verification or by other similar means using electronic procedures. However, the latest amendment to the AML Act has changed the provision of Section 8(1)(c). According to this amendment, if a legal entity is represented, the signature of the authorising party on the authorisation must be officially certified. Provided that our interpretation is correct, we should now require clients to have the signatures of statutory officers on powers of attorney, delegations, or mandates for chief financial officers or other staff officially certified before a notary, at the registry office, or by a consular official. We should no longer accept our internal signature verification (such as by using the statutory officer’s signature specimen obtained during their identification or electronic identity verification). If this interpretation were correct, it would significantly complicate our processes, and we see no rational behind it. Even though we know the client well and accept their signature or actions of their statutory officer without official certification for various other transactions, should we insist on official certification of their signature for authorising their staff? Is it truly necessary to require an officially certified signature for every representative of a legal entity?
The latest amendment to Act No. 297/2008 Coll. on the Prevention of Money Laundering and Terrorist Financing (AML Act) introduced a subtle but rather interesting change concerning the identity verification of legal entities.
From the wording of Sections 7(1)(c) and 8(1)(c), which were in effect before the latest amendment effective from 15 January 2025, it followed that the law regulated the procedure for identification and identity verification only in cases where legal entities were represented based on a power of attorney. Obliged institutions had no other legal guidance on how to identify and verify the identity of a party acting based on other types of representation.
Other types of representation include statutory representation in the form of a procura (Section 14 of the Commercial Code), representation by the head of an organisational unit (Section 13(5) of the Commercial Code), or so-called corporate authorisations (Section 15 of the Commercial Code). In such cases, requiring official certification of the signature did not make sense. If a procura holder or the head of an organisational unit is listed in the Commercial Register as a representative of the legal entity, their authority to act on behalf of the legal entity is unquestionable. This authority can be easily verified through the Commercial Register entry, where the granting of the authority was sufficiently examined.
In the case of corporate authorisations, where someone was authorised to perform specific business operation activities (such as a Chief Financial Officer), obliged entities verified the scope of the authorised person’s authority to act on behalf of the legal entity based on various mandates or delegations, or they required statutory officers to sign specific powers of attorney defining the authority of such representatives. The signatures of statutory officers on delegations and mandates were typically verified internally by obliged entities through signature specimens of statutory officers, or by accepting the electronic verification of the statutory officer’s identity when granting the mandate. This was similar to the procedure followed when verifying the identity of statutory officers in connection with the execution of regular business transactions on behalf of the legal entity.
For better illustration, consider the following example: if a legal entity executed a transfer of funds from an account amounting to EUR 1 million (the “transaction”), the financial institution carried out standard due diligence, including verifying the identity of the legal entity’s statutory officer and their intent to execute the transaction by checking the signature against the signature specimen on the payment order. Similarly, if the legal entity wanted to authorise its chief financial officer to execute payment orders up to EUR 20,000, the financial institution, upon granting such authorisation, identified the legal entity and confirmed its intent by comparing the statutory officer’s signature specimen in their possession against the signature on the authorisation authorising the chief financial officer to execute payment orders up to EUR 20,000.
In our view, the AML Act amendment did not make this procedure no longer applicable. It does not imply that in cases of the aforementioned mandates or delegations (e.g., for CFOs or other individuals authorised to act on behalf of the company within the scope of their job description), obliged entities must require officially certified signatures of statutory officers on the mandates or delegations.
The newly amended AML Act explicitly distinguishes between representation in general and representation based on a power of attorney. This distinction is appropriate because, as noted above, the original wording of the AML Act did not specify procedures for identity verification for types of representation other than the representation through a power of attorney.
In the explanatory memorandum on the amendment to the AML Act, the amended wording of Section 7(1)(c) is explained as follows: “The proposal addresses a shortcoming identified by the Moneyval Committee concerning FATF Recommendation No. 10.4, which requires existence of a legal obligation to verify whether persons acting on behalf of another are authorised to do so, including in cases other than by powers of attorney. For this reason, the term ‘power of attorney’ is removed from Section 7(1)(c) and replaced with the general term ‘representation,’ which also covers other forms beyond powers of attorney. At the same time, the obligation to verify the validity and scope of representation is introduced.” The explanation of the amendment to Section 8(1)(c) provided in the explanatory memorandum reiterates: “To align Section 7(1)(c) with FATF Recommendation No. 10.4, the obligation to verify the identification of both the represented person and their representative is extended to additional forms beyond powers of attorney.”
Our conclusion, therefore, is that officially certified signatures are only required in cases of representation based on a power of attorney. That is in cases when a legal entity expressly authorises a natural person to act on its behalf who does not have an internal corporate relationship with it. For CFOs, COOs, and other staff of your corporate clients mandated to conduct specific activities as part of their job description, it remains acceptable to continue accepting mandates or delegations without requiring the statutory officer’s signature to be officially certified. We assume that you had been verifying the scope and validity of mandates and delegations even before, but now, this obligation is explicitly stated in Section 7(1)(c) of the AML Act.
