Romania – Know Your Customer (KYC) Rules

 

 

Romania is not a regional financial center but the country‘s geographical location makes it a natural transit country for trafficking in narcotics, stolen vehicles, persons and arms by transnational organized criminal elements. As a result, Romania is vulnerable to financial activities associated with such crimes, including money laundering. Tax fraud, fraudulent claims in consumer lending, and trans-border smuggling of counterfeit goods are additional types of financial crimes prevalent in Romania.

Laundered money comes primarily from international crime syndicates who conduct their criminal activity in Romania. Commercial transactions have been the main method of money laundering, primarily through use of shell and offshore companies; this principally involves fraudulent claims for value added tax (VAT) reimbursement. In a few cases, funds obtained from tax fraud have been transferred to offshore jurisdictions.

Romania also has some of the highest rates of cybercrime and online credit card fraud in the world. Studies have found Romanian servers to be the second largest source of cybercrime transactions worldwide. Although a majority of their victims reside in the United States, Romanian cybercriminals are increasingly targeting victims elsewhere in Europe, as well as in Romania itself.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

Romania – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Romanian Law:

    • Banks
    • Non-banking financial institutions
    • Financial investment service providers
    • Insurers and reinsurers
    • Securities brokers
    • Private pension funds
    • Accounting, consulting, audit and law firms
    • Notaries
    • Casinos
    • Persons responsible for privatizations
    • Non-governmental organizations
    • Real estate brokers
    • High value goods dealers

Romania – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 3,237 from January to November 2011

Number of CTRs received and time frame: 37,332 from January to November 2011

The following is a list of STR covered entities covered by Romanian Law:

    • Banks
    • Non-banking financial institutions
    • Insurers and reinsurers
    • Securities brokers
    • Private pension funds
    • Accounting, consulting, audit and law firms
    • Notaries
    • Real estate brokers

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 48 from January to October 2011
Convictions: Seven, all under appeal; timeframe unknown

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

A review of STRs filed from January to October 2011 shows that 75% of all cases were related to tax fraud. During the same time period, only 16 STRs (less than 0.5% of the total filed) were related to narcotics trafficking; of the 16 reports, the financial intelligence unit (FIU) referred 11 to the General Prosecutor‘s Office.

Romania‘s FIU faces the continual challenge of limited financial, human, and technical resources. The Government of Romania (GOR) should continue its efforts to ensure non-bank financial institutions are adequately supervised. Additionally, the knowledge level of this sector should be increased regarding its reporting and record keeping responsibilities and the identification of suspicious transactions. The GOR should continue to improve communication between reporting and monitoring entities, as well as among prosecutors, investigators, and the FIU. In 2011, Romania’s FIU continued to strengthen its relationships with other FIUs.

Romania has adopted the National Strategy for the Prevention and Combat of Money Laundering and Terrorism Financing. Decision 603/2011 establishes the technical procedures necessary for the FIU to supervise international sanctions implementation; and the FIU issued Order 95/2011, which defines the terms for authorizing financial transactions to and from sanctioned entities.

In order to improve the rate of money laundering prosecutions and convictions, Romania should not become overly reliant on STRs and other forms of financial intelligence but instead empower law enforcement and customs authorities to detect and investigate money laundering at borders and ports and the street level. Romania should improve implementation of existing procedures for the timely freezing, seizure and forfeiture of criminal or terrorist-related assets. Romania should continue to make progress in combating corruption in public procurement.

In 2011, a Romanian national was found guilty in a Washington, D.C. federal court of leading an international money laundering network for a transnational crime network based in Romania and other countries in Eastern Europe. The scheme involved the posting of fraudulent ads on eBay and other websites offering expensive vehicles and boats that the conspirators didn‘t possess. Victims seeking to purchase the items were directed to wire money to an entity that appeared to be affiliated with eBay but wasn‘t. Instead, the money was wired directly to bank accounts controlled by the conspirators in Hungary, Slovakia, Czech Republic and Poland. Similar cases were investigated in Romania.