The Law on Anti-Money Laundering and Combatting the Financing of Terrorism (“Anti-Money Laundering Law”) (No. 49/NA, 21 July 2014) became effective on 24 February 2015.
The Anti-Money Laundering Law provides for new measures and obligations for the purposes of implementing anti-money laundering controls and combatting the financing of terrorism.
The Anti-Money Laundering Law applies to all local and foreign individuals and legal entities/organizations undertaking business within or outside the Lao PDR and activities relating to anti-money laundering and combatting terrorism financing.
The law creates “reporting units”. These include “financial sector institutions” such as commercial banks, micro-finance institutions, loan and credit providers, pawn shops, hire purchase companies, money transfer and foreign exchange dealers, insurance companies and securities companies. Reporting units also include “non-financial sector institutions” and these include firms that settle financial instruments, commercial real estate representatives, dealers in antiques or precious metals, law firms, auditors and casino operators.
All persons (and not only “reporting units”) are required to provide information and participate in activities to combat money laundering and terrorism financing, however certain specific obligations are imposed on “reporting units”. These include:
- The obligation to adopt an anti-money laundering and terrorism financing policy;
- Conducting training of employees on the policy measures that are adopted;
- Auditing internal compliance with policy measures and continual assessment of the implementation of policy measures;
- Conducting customer identification and verification exercises before transacting business;
- Monitoring customer accounts and transactions with an emphasis on unusual, complex, high-value or irregular transactions;
- Maintaining records of customer identification and verification information; and
- Reporting certain transactions to the Anti-Money Laundering Information Office.
If a “reporting unit” is unable to verify the identification of a customer (typically through requesting documents such as identity cards, family registration books, passports, Enterprise Registration Certificates, then the “reporting unit” may not continue or commence a business relationship with that customer.
In identifying and verifying the identity of customers, “reporting units” are also required to establish who the ultimate shareholders are (in the case of companies), the intention and objectives of the business relationship and the beneficial owner of funds which are the subject of the transaction or transactions.
For “reporting institutions” that are financial institutions, such as banks or insurance companies, the receipt of funds from any person who cannot be identified must be returned to the transferor and a report of the transaction must be made with the Anti-Money Laundering Information Office.
All customer identification and verification information must be maintained for a period of not less than 10 years. All information relating to transactions with customers must be maintained for a period of not less than 5 years.
“Reporting units” have an obligation to report (i) transactions which exceed certain thresholds (“Threshold Reports”); and (ii) transactions which are suspected to be, or ought to be suspected to be, connected to money laundering or terrorism financing (“Suspicious Transaction Reports”). There is no general prohibition that prevents a “reporting unit” from proceeding with the transaction, provided that the necessary reports have been filed with the Anti-Money Laundering Information Office. The precise monetary thresholds for Threshold Reports are yet to be determined by the Bank of Lao PDR under separate regulations. Both Threshold Reports and Suspicious Transactions Reports must be filed within 3 business days of the transaction even if the transaction is not completed.
It is important to note that any person who files a Suspicious Transaction Report must keep the existence of the report confidential. While a breach of this obligation is not specifically addressed as an offence, a person who fails to maintain the confidentiality of a report may be liable under the general provisions for violations which include re-education measures, fines and any applicable criminal charges. Although not expressly stated in the law, it appears that the obligation to maintain confidentiality is to avoid what is internationally known as “tipping off”. Care should therefore be taken that a “reporting unit” does not disclose to the customer that a Suspicious Transaction Report has been or will be filed.
“Reporting units” and their staff are indemnified from any wrongdoing if they file a report in good faith in a manner that is consistent with the law.
The “relevant officers” (presumably intended to refer to the Anti-Money Laundering Information Office) may order a “reporting unit” not to proceed with a transaction by seizing assets that are the subject of a transaction if money laundering or terrorism financing might have taken place. In such instances the rights of third parties must be protected and the procedures for such a seizure must be determined in separate regulations.
For more information on many other obligations imposed on ordinary persons and entities, reporting units and definition of money launder, terrorism financing and the penalties applicable to violators, please contact DFDL Legal & Tax in Vientiane.