GoA Intensifies Fight Against Misuse of

UNCLAS SECTION 01 OF 02 VIENNA 001188

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E.O. 12958: N/A
TAGS: EFIN PTER ETTC AU
SUBJECT: GoA Intensifies Fight Against Misuse of
Financial Markets


Summary
--------------


1. The GoA has approved new regulations that will give
the Austrian Financial Market Authority (FMA) additional
powers against the misuse of financial markets for money
laundering and terrorist financing. The legal
regulations will authorize the FMA to prosecute the
unauthorized operation of financial entities, file
receivership or bankruptcy procedures for investment
service providers, and impose fines for failing to comply
with enforcement orders. These regulations follow-up on
the binding guidance, which the FMA issued in January, on
the complex customer identification regulations, which
aim to enforce and clarify the know-your-customer
principle. End Summary.


Strengthening Financial Oversight
--------------


2. The Austrian Parliament's Plenary recently passed a
GoA omnibus bill on financial issues. The legislation
helps the Austrian Financial Market Authority (FMA) to
fight the misuse of financial markets for money
laundering and terrorist financing, prosecute the
unauthorized operation of financial entities, and
strengthen enforcement measures. The new regulations
also provide for an increase in administrative fines by
50% or more.


Prosecuting Unauthorized Business
--------------


3. The new law allows the FMA to prosecute unauthorized
financial service providers and gives the FMA additional
means to execute these provisions. (Note: The current
law only allows FMA oversight of licensed businesses.
End Note.) The FMA will be able to request information
and data from natural and legal persons, check books,
documents and electronic data storage media, and can
publicize information about sanctions against individuals
and firms. Independent from criminal proceedings, the
FMA can order unauthorized businesses to regularize their
legal situation. In case of non-compliance, the FMA can
undertake a wide variety of measures, from stopping
websites to closing down the business. Penalties to
enforce any such FMA decision will rise to Euro 30,000
($37,500) from Euro 726 ($908). FMA fines for
unauthorized banking or other financial services
providing will rise from Euro 20,000 ($25,000) to Euro
50,000 ($62,500).


Sharp Increase in FMA Fines
--------------


4. The legislation provides for substantial increases in
fines in a wide variety of areas. A new default fine of
Euro 7,000 ($8,750) in cases in which financial service
providers do not meet their legal obligations, do not
implement FMA orders in a timely manner, or fail to
provide the FMA requested documents, data, financial
statements, and audit reports. Moreover, the omnibus
bill foresees a general 50% or more increase in FMA fines
for administrative violations of the Banking Act,
Investment Fund Act, Real Estate Investment Fund Act,
Securities Supervision Act, E-money act, Stock Exchange
Act, Capital Market Act, and Insurance Supervision Act.


Stricter Regulations for Securities Supervision
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5. The legislation also tightens the Securities
Supervision Act to prevent financial losses for customers
of investment service providers. The FMA may prohibit
the withdrawal of equity or profits or the distribution
of profits, appoint a qualified lawyer or accounting
professional as government commissioner, or forbid the
current managers from directing the firm. The FMA will
be party to any receivership and bankruptcy procedures.


FMA Outlines Customer Identification Procedures
-------------- --


6. In January, the FMA issued a "Circular Letter on
Identification" to intensify efforts to combat money
laundering and terrorist financing. The circular aims to
establish uniform interpretations of customer
identification regulations, which in practice have
varied. It also serves as binding guidance and
establishes the know-your-customer principle as the
supreme principle for banks, insurers and financial
services brokers. The FMA stated that financial
providers "must not accept funds from anonymous
individuals." Financial service providers must
furthermore ensure that they do not establish business
relations with persons who are under criminal
investigation or who are on international lists of wanted
persons. Financial service providers must know their
customers and have their ID data available at any time.
Among other things, the circular elaborates on procedures
for the identification of legal persons, in case of
trusteeship, and for non-face to face transactions. The
full text of the circular is available on the FMA's
homepage (in German language only):
http://www.fma.gv.at/de/pdf/rs-id-31.pdf

MCCAW