The Legal Framework of Transaction Monitoring
Transaction monitoring is the central institution of legislation on the prevention of money laundering and terrorist financing. Its rules bind obliged entities — financial institutions, the National Agency of the Public Registry and other subjects that maintain client relationships or conclude one-off transactions in cases determined by law. The essence of monitoring is the obliged entity constantly comparing what it knows about the client with his transactions, and establishing how far they correspond to the client's profile, activity and risk level. This page examines the norms on preventive measures, the unusual transaction and the duty to report.
Preventive Measures and Client Verification
Article 10 of the law obliges the obliged entity, in the cases provided by law, to carry out preventive measures: identification of the client and verification on the basis of a reliable and independent source; identification of the beneficial owner and reasonable measures for his verification; establishment of the purpose and intended nature of the business relationship; and monitoring of that relationship. Where a transaction is conducted by a person acting in the client's name, that person is identified as well, and a duly certified document confirming the authority of representation is obtained.
Towards a legal person, an unregistered organisational form, or a trust or trust-like legal structure, the obliged entity studies the client's structure of ownership, control and governance. It must further establish the essence of the client's activity and obtain information on the nature, volume and frequency of expected transactions — the baseline against which an unusual or suspicious transaction can be recognised.
Ongoing Monitoring and Data Updates
In the course of monitoring, the obliged entity examines each transaction prepared, concluded or executed within the relationship: how far it corresponds to what is known about the client, to his commercial or professional activity and risk level, and where necessary — to the origin of the client's property, funds and convertible virtual asset. The identification data and documents obtained must be updated with appropriate periodicity.
Article 12 fixes the timing and manner of the measures: they are carried out according to the client's risk level before a one-off transaction and before the relationship is established, and with appropriate periodicity during it and upon a material change of circumstances. Where the risks are low, verification may be completed after establishment if this is necessary to avoid interrupting the servicing of the client — but then as soon as possible within reasonable limits. Anonymous or fictitious-name accounts are prohibited. If the obliged entity cannot carry out the preventive measures, establishing or continuing the relationship, or concluding or executing the transaction, is prohibited, and it must examine whether grounds exist for a report to the Service.