Austria
Detailed Assessment Report on Anti-Money Laundering and Combating the Financing of Terrorism

This paper presents a Detailed Assessment Report on Antimoney Laundering (AML) and Combating the Financing of Terrorism (CFT) for Austria. The authorities have designed and are implementing a comprehensive AML/CFT system, supported by well-developed federal administrative and supervisory bodies, and active professional organizations. The supervisory system for financial institutions is generally sound and efficient. Licensing requirements and the regime of sanctions need to be strengthened, and additional resources should be allocated to supervisory bodies.

Abstract

This paper presents a Detailed Assessment Report on Antimoney Laundering (AML) and Combating the Financing of Terrorism (CFT) for Austria. The authorities have designed and are implementing a comprehensive AML/CFT system, supported by well-developed federal administrative and supervisory bodies, and active professional organizations. The supervisory system for financial institutions is generally sound and efficient. Licensing requirements and the regime of sanctions need to be strengthened, and additional resources should be allocated to supervisory bodies.

1. General

1.1 General Information on Austria

40. Situated in the heart of central Europe, Austria is an alpine country with a land area of almost 84,000 square kilometers and a population of just over 8 million inhabitants. Austria, along with all its neighboring countries, Germany, the Czech Republic, Slovakia, Hungary, Slovenia, and Italy, are Member States of the European Union (EU), with the exception of Switzerland and Liechtenstein1 on its western border. German is the official language, while Croatian, Hungarian and Slovenian have the status of local official languages in some parts of the country.

Economy

41. Austria is a well developed and competitive market economy, which benefits from a successful integration to the global economy, and from the single EU market, which it joined in 1995. Its robust economic performance, which has repeatedly outgrown EU average growth, comes from a network of small and mid size industrial enterprises, and a growing service sector, supported by a highly skilled workforce. Intrinsic economic strengths are reinforced by social and political stability, based on a longstanding culture of cooperation among institutionalized interests groups and political parties (Social Partnership). Austria remains one of the wealthiest countries in the EU, with a GDP per inhabitant of EUR 31,139 (2006), well above the member country average of EUR 24,628.

42. As a member of the Euro zone, Austria is also attractive to foreign investors for its access to the EU market and its proximity to new European emerging economies. Geographical proximity, as well as strong cultural and historical ties, fostered the early development of activities in Central Eastern and Southeastern Europe (CESE) countries. Austrian banks, in particular, have acquired leading positions in these economies, which accounted for a significant share of their income in recent years.

System of Government

43. Austria is a democratic republic established as a federal state comprising nine autonomous states (Länder): Burgenland, Carinthia, Lower Austria, Salzburg, Styria, Tyrol, Upper Austria, Vorarlberg, and Austria’s capital, Vienna. Initially enacted in 1920 and reintroduced in 1945, the Federal Constitution assigns specific legislative and executive powers to the federal state and to the Länder, with a larger share of prerogatives given to the federal level. The parliament consists of two chambers. Elected by direct popular vote to a six year mandate, the Federal President (Bundespräsident) is the head of state; he commands the army and represents the country abroad. He designates the Federal Chancellor (Bundeskanzler), usually the leader of the party with most seats in the National Assembly (Nationalrat), and appoints the vice Chancellor and the ministers; he convenes -and may dissolve- the Nationalrat. The Bundeskanzler leads the government and exercises all executive functions which are not assigned to the Bundespräsident. Most of the drafts for bills are formulated by the ministries, and must be approved unanimously by the government before being sent to parliament.

44. The legislative function consists mainly of the Nationalrat, jointly with the Federal Assembly (Bundesrat). The Nationalrat is designated by direct popular vote on a proportional representation basis for a five-year term, whereas the Bundesrat’s members are delegated by the assemblies of the Länder, in proportion to their population. In the legislative process, the Bundesrat has only a veto power which can be overruled by the Nationalrat. The parliamentary bodies are empowered to monitor the activities of the federal government, and to voice their wishes in the form of parliamentary resolutions on the implementation of executive powers. The constitution provides also mechanisms of direct democracy: voters can intervene directly in the political process by legislative initiatives and referendums. Constitutional laws, or provisions specified as constitutional in other laws, have to be passed by the Nationalrat by a two-thirds majority vote and a quorum of half of the members, and may be subject to a referendum if requested by one-third of the deputies.

45. In each of the Länder, the state government, elected by the state parliament (Landtag), and the governor act as the state executive branch. In matters relating to indirect federal administration, the state governor and the state authorities wield federal executive power and are subject to directives issued by the federal government and the federal ministers. Legislation passed by a Landtag is subject to the federal government’s approval when its execution requires the cooperation of federal bodies.

Legal System and Hierarchy of Legal Source

46. Austria is a civil law country. The Federal Constitution states that the federal state is the source of all legal jurisdictions, and guarantees the right of any individual person to proceedings before a lawful judge. Criminal law and civil law matters, except for real property, belong to the federal competence, as well as the administration of justice, and the organization and command of the federal police. Judges are independent in the exercise of their functions and can be dismissed or removed only by a judicial decision. They are appointed by the Bundespräsident. Criminal procedures are initiated on, and defined by, the claims of the public prosecution which is in charge of protecting the public interest of justice in penal affairs. The procedure, in which hearings are oral and public, follows the Code of Criminal Procedure (Strafprozessordnung, StPO). Offices of public prosecution are structured hierarchically and placed under the Federal Minister of Justice’s authority.

47. Within the judicial system, a distinction is drawn between private law and public law jurisdictions. Private law jurisdictions, which are competent for all civil and criminal law matters, are organized in district courts (Bezirksgerichte) and regional courts (Landesgerichte). Bezirksgerichte (about 140) are competent as courts of first instance for lesser civil cases and offenses (value in dispute below EUR 10,000 and offenses subject to a fine or a sentence not exceeding one year of prison), and decisions are taken by a single judge. The 17 Landesgerichte act either in appeal of Bezirksgerichte’’s decisions, or as first instance court in civil and criminal cases above Bezirksgerichte’’’s competence. For cases involving crimes subject to more than five-year imprisonment, the court is constituted by a jury of eight people, in addition to three professional judges. Four Courts of Appeal (Oberlandesgerichte) in the country decide in second instance on Landesgerichte cases. Each president of Oberlandesgerichte is responsible for the administration of justice in his region and reports directly to the Federal Minister of Justice for these matters. The Supreme Court (Oberster Gerichtshof), the highest judicial instance in Austria, hears all civil and criminal cases at last instance. Its decisions are not legally binding, but, in practice, they provide direction as to lower courts decisions.

48. Independent administrative tribunals review the legality of decisions and exercise of power by the administrative authorities. The Administrative Supreme Court (Verwaltungsgerichtshof) seats in Vienna.

49. Administrative bodies can sanction administrative crimes and disciplinary matters under the administrative penal law. Appeals are brought to the Independent Administrative Chamber (Unabhängiger Verwaltungssenat) and to the Constitutional Court (Verfassungsgerichtshof). The Verfassungsgerichtshof pronounces also on the civil rights of the citizens, the conformity of laws with the constitution, claims on the federal state and Länder, or conflict of competence between jurisdictions.

Transparency, Good Governance, Ethics, and Measures Against Corruption

50. Austria, which ranks 12th out of 180 countries in the 2008 Transparency International Corruption Perception Index, figures regularly among the countries which are the less exposed to corruption. The criminal responsibility of legal entities and partnerships has been established, and both the payer and the recipient of a bribe face criminal penalties.

51. Austria is an active participant to international agreements and fora against corruption. It is party to the 2003 United Nations Convention against Corruption, which it ratified on January 11, 2006, and is involved in the voluntary pilot program aimed at designing methods for assessing the implementation of the Convention. Amendments to the Criminal Code (Strafgesetzbuch, StGB) were passed in 2008 in order to satisfy the requirements set out in the Convention, as regards to provisions on bribery of deputies.

52. Austria has signed the Council of Europe’s criminal law and civil law conventions on corruption. The latter only has been ratified and came into force on December 1, 2006. In June 2008, the Groupe d’États contre la Corruption (GRECO) conducted an evaluation of the country’s compliance with the Council of Europe anti-corruption standards which covered the themes of GRECO’s First and Second Evaluation Rounds. The evaluation report concluded that “Austria is at an early stage in the area of the fight against corruption” and that a concerted approach to the issue is lacking.

53. Additionally, Austria has ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and is a member of the OECD Working Group on Bribery in International Business Transactions.

54. On the EU-level, Austria has signed, ratified and implemented the First Protocol to the Convention on the Protection of the Communities’ Financial Interests and the Convention on the Fight against Corruption Involving Officials of the European Communities or Officials of Member States of the European Union. It has also ratified the Second Protocol to the Convention on the Protection of the Communities’ Financial Interests.

1.2 General Situation of Money Laundering and Financing of Terrorism

Predicate Offenses

55. Theft, drug trafficking and fraud are the main predicate crimes in Austria according to the statistics of convictions and investigations (see detailed statistics under section 2.1.1). Among other major proceed-generating offenses, the authorities identify human being trafficking, burglaries and smuggling. Austria is considered by EUROPOL as one of the four main destination countries for human being trafficking in the EU. The number of convictions for drug trafficking, theft, smuggling, corruption and bribery decreased sharply since 2004.

56. According to the authorities, in the case of theft and burglary, the proceeds are usually from predicate crimes committed in Austria. As regards narcotics, a part of the illicit proceeds were gained in Austria, while profits from fraud or smuggling are usually made abroad. The authorities did not provide any study on the revenue generated by the major sources of illegal proceeds or on the losses and damages resulting from criminal activities.

57. In comparison with other EU Member States, the crime level in Austria is among the lowest. In 2006, Austria was among the three countries of the 27 members of the EU that had the lowest number of homicides per inhabitant and around 29 cases of drug trafficking per 100,000 inhabitants were recorded, to compare with an average of 59 at the EU level.

Money Laundering

58. According to the authorities, the most important money laundering problems faced by Austria are money remittance systems, offshore business and hawala. Money remittance systems are considered as the main tool used by drug-traffickers, internet-fraudsters, pickpockets, traffickers in human beings and burglars to launder money. Concerning offshore business, the authorities noted, as a recent trend, that companies are founded by “remote methods” and that individuals taking decisions (economic operators) often rent virtual office space with additional services, such as telephone and/or fax switching, in writing and for advance payments. The criminals attempt to create many different spheres of influence, for example by spreading their activities over various countries, using services (accounts, virtual office space, address services/post boxes, place of registration, etc.). Finally STRs and undercover investigations convinced the authorities that hawalas are mainly used by foreign criminal organization and networks.

59. The authorities did not conduct any study on the evolution of the pattern of money laundering following the introduction of AML measures or on the types of groups involved in laundering operations. They consider that Austria’s exposure to the risk of money laundering is low.

60. In 2007, the A-FIU received 1,085 STRs, rising from 373 cases in 2004. More than 95 percent of the declarations came from banks, including one single money remittance institution counting for a sizeable share. It has to be noted that information on phishing emails and 419 letters/emails are counted among the STRs. The number of ML convictions is very low. According to Statistics Austria, only three convictions for money laundering have been pronounced in 2005 and in 2006. The penalties provided for these convictions were extremely low, and the most severe penalty imposed was a one to three years imprisonment sentence pronounced in 2006. The authorities explained that the convictions are counted only in relation to convictions for the offense which has the highest punishment (which is hardly the case for ML, when this is concurrent with other crimes). According to separate statistic compiled by the A-FIU and based on the actual number of ML charges underlying a conviction, there were 12 ML convictions in 2003, 10 in 2004, 5 in 2005, 10 in 2006 and 18 in 2007. The authorities further indicated that the low figures can be explained by the lack of criminalization of self-laundering in Austria and by the fact that the prosecutors prefer to indict the ML activities under “participation”, because a higher penalty provided in the case of participation in the predicate offense can be applied and, in practice, it is easier to prove participation in the predicate offense than the ML activity as a stand-alone crime.

61. In the absence of studies, the assessor team reviewed the Austrian and international press during a two year period before the assessment. A number of cases involving politically exposed persons from Eastern Europe, Central Asia, the Baltic States and the Balkans have been mentioned. The most common typology is that the predicate offense is committed abroad and the funds are allegedly laundered in Austria. The press reported a number of mutual legal assistance, extraditions requests and investigations in cases involving foreign PEPs. Financial investigations relating to corruption or embezzlement schemes by major foreign companies were also reported in the press. Finally, the press also mentioned several cases of suspicion of ML-related schemes involving subsidiaries of Austrian banks in CESE. This situation has led the Austrian parliament to consider the Austrian bank’s eastern businesses and their possible relation with ML in an inquiry concerning the Austrian banking supervision system and two commercial banks in 2007.

62. The absence of comprehensive risk analysis conducted by the authorities, associated with the general view in financial and non-financial institutions that the level of ML risk is low in Austria, may be a source of vulnerability in a country that attracts significant foreign financial flows based, among others, on a tradition of secrecy. It has to be noted that the aggregated balance sheets of banks show a growing trend in the ratio of foreign nonbank deposits to total nonbank deposits, amounting to 17 percent in 2007, after raising more than 20 percent from the 2005 level.

Financing of Terrorism

63. The authorities deem the risk of FT in Austria low, compared with other European jurisdictions. There have only been a few cases of terrorism investigations in the recent years. In 2007, eight persons were arrested for terrorist-related offenses, five of them related to Islamist organizations, and three related to right-wing organizations. On March 12, 2008, a court condemned a couple in Austria on charges of membership in a terrorist association (Al-Qaeda), threatening the Austrian Government and attempted coercion for producing an Al-Qaeda promoting video. The Supreme Court annulled the verdict on procedural issues and remitted it to the court for re-examination. It also needs to be noted that Austria hosts a number of minorities, including of Kurdish origin. In this context, members of an EU and US designated terrorist group were found to have stayed in Austria in 2007. The authorities assume that, like in several other EU member States, a very small part of the Kurdish community collects funds for terrorist purposes, but they currently have no available evidence to confirm this assumption. There is also no information on how FT techniques and trends have changed following the introduction of counter-terrorist financing measures.

64. In the last four years, the authorities consider that the suspicious cases and complaints did not only rise in quantity, but also in quality. While there have been fewer matches with the different terrorist lists, more STRs have been registered due to the increased due-diligence by reporting entities. The authorities mentioned two cases that they consider illustrating the range within terrorist financing. In the first case, legally acquired money was transferred via official bank transfers to organizations in the Near East, whereas in the second case, the amounts acquired by traditional criminal activities were transferred as quickly and anonymously as possible via “Money Transmitter Systems.” Both cases were initiated by STRs from the financial sector.

65. Concerning the transfer methods, the authorities assume that new payment methods—such as Internet-based transfer systems or transfer by use of mobile phones—will gain in importance, since these methods result in advantages for the terrorist organizations such as few and weak control possibilities and faster transfer. To date, however, such methods have not been ascertained in Austria yet and no such cases of suspicion have come to the authorities’ knowledge.

66. Between 2003 and 2006, 18 criminal cases related to FT have been registered, but none of them have led to an indictment. In 16 cases, the proceedings were dismissed by the public prosecutors. Two FT cases initiated in 2006 are still pending. In 2007, four new FT cases were registered, thereof two criminal investigations by public prosecutors, and two preliminary investigations by investigative judges; three of them have been terminated, one case is still pending. Therefore there are actually three FT cases pending, none of them has resulted in an indictment. Until 2007, there have been no convictions of FT.

1.3 Overview of the Financial Sector and DNFBP

Overview of the Financial Sector

67. Austria has a developed and diversified financial sector, which contribution to the country’s total value added was 5.4 percent in 2005.2 The core of the country’s financial system is formed by the credit and domestic financial institutions, dominated by a few large groups which conduct a full range of financial activities, notably through insurance and mutual fund management subsidiaries. The five largest credit institutions hold almost 50 percent of total banking assets, and two of them are foreign-owned. Post office’s financial services have been privatized. There are 12 exchange offices in the country, mostly located in Vienna. All these activities are conducted by credit institutions and regulated by the Banking Act (Bankwesengesetz, BWG).

68. Thirty-one out of the 82 insurance companies which are active in Austria are engaged in the life business. There are no independent reinsurance companies. The insurance sector remains small in comparison with other EU countries (total assets equal 32 percent of GDP, vs. 63 percent in the EU), notably in the life segment, which is not supported by incentives granted by some other tax regimes. The major insurance companies are associated with Austrian banking groups. Insurance activities fall under the provisions of the Insurance Supervision Act (Versicherungsaufsichtgesetz, VAG).

69. Insurance products are also marketed by insurance intermediaries. These independent agents and brokers are natural or legal persons who can work on preparing for the conclusion of contracts, or conclude contracts, as well as participate in the administration and performance of such contracts.

There are 18,374 registered intermediaries who are regulated by the Trade Act 1994

(Gewerbeordnung, GewO).

70. The securities business includes:

  • 145 investment firms (Wertpapierunternehmen) which can perform the following functions: reception, transmission, execution of orders, portfolio management on mandate, investment advice and underwriting; and 163 investment service providers/undertakings (Wertpapierdienstleistungsunternehmen) which can receive and transmit orders in transferable securities and units in collective investment undertakings (only to investment firms). Both are regulated by the Securities Supervision Act (Wertpapieraufsichtgesetz, WAG);

  • 29 investment fund management companies which are credit institutions, regulated by the BWG. The three major management companies account for 57 percent of the whole business; and

  • 2,364 domestic investment funds which manage EUR 166 billions of assets. Total assets under management, which doubled since 2000, amount to 64 percent of the GDP, well above the EU average, 57 percent (2006). Many of the investment funds are promoted and managed by banks. They do no enjoy legal personality, and their assets are deposited with banks. The number of foreign investment funds marketed in Austria has also grown substantially over the recent years (4,962 in 2007).

71. Other segments of the capital market include the debt securities which volumes are comparable to those in similar EU countries, and the stock market, which total capitalization is small in comparison to EU peer countries. Securities clearing is processed by CCP-A. The Oesterreichische Kontrollbank (OeKB) operates securities trading settlements and is the Central Securities Depository for Austrian issuances; as a credit institution, it is subject to the AML/CFT provisions of the BWG. The Stock Exchange Law (Börsegesetz, BörseG), regulates the stock and commodity exchange activities.

Statistical Table 1.

Categories of Financial Institutions

(As of end-December 2007)

article image
(Source: FMA)

72. Organic growth being limited in the competitive domestic market, Austrian banks and insurance companies have greatly developed their cross border business in recent years. They have become key players in most of the financial markets in CESE and more recently in some CIS countries. Banks have expanded their activities in the retail and corporate banking business, and insurance companies collected 24 percent of their premium written in CESE countries in 2006.

Statistical Table 2.

Market shares of Austrian banks in CESE and CIS countries

article image
(Source: FMA)

73. Additionally, many Austrian banks market to both nonresident and resident foreign customers, promoting the country’s reputation for political stability and strict banking secrecy provisions, as well as its attractive tax regime for foreign investors. About 30 credit institutions offer private banking and wealth management services in Austria. No data are available for total assets under management in the private banking business segment, but aggregated balance sheets of banks show a growing trend in the ratio of foreign nonbank deposits to total nonbank deposits, which was 17 percent in 2007 compared to 14 percent in 2005.

74. Notably, because of the dominant cooperative structure, Austria has a large number of banks. The three main cooperative banks, which generally target different segments of the market, are organized on a decentralized tiered structure with apex entities providing limited centralized services in the areas of payment and settlement, liquidity management and funding.

Statistical Table 3.

Credit institutions

(December 31, 2007)

article image
(Source: FMA)

75. Most of the institutions operate as universal banks. The major banks maintain an extended network of domestic and international subsidiaries and branches, and the global domestic distribution channel is large by European standards (each branch serves on average 1,945 people, for an EU average of 2,569).

76. Domestic financial institutions, as defined in Article 1, paragraph 2 of the BWG, are authorized to conduct at least one of the following activities as their main activity: leasing, advice on capital structure, industrial strategy, mergers and acquisitions, credit reporting services, and safe deposit services.

Statistical Table 4.

Domestic Financial Institutions

article image

77. All traditional and new payment methods are used in Austria. Supported by a dense network of point of sale (POS) terminals, debit cards (6.9 million cards in 2005) are more common than credit cards (1.1 million cards) for which the number of transactions remains relatively small, but the average payment is relatively high. The use of other electronic payments, such as prepaid cards, is increasing, but remains limited; and cash, which is notably distributed through a large number of ATMs, is still widely used for day-to-day payments.9 Banks offer internet banking services which are limited to transactions on, and consultations of, existing accounts.

78. The BWG defines a large array of banking activities, the provision of which is restricted to credit and domestic financial institutions according to its Article 1, paragraph 2. Under the BWG, are defined as banking transactions all types of lending and deposit business and securities trading and underwriting, as well as the management of investment funds, and foreign exchange and remittances operations. Credit institutions are institutions authorized to carry out one or more banking transactions defined in the law, while domestic financial institutions (according to Article 1, paragraph 2 BWG) have limited allowed activities (leasing, financial advice, and safe deposits notably).

79. The following table sets out the types of Austrian financial institutions that can engage in the financial activities that are within the definition of financial institutions in the FATF Recommendations.

Statistical Table 5.

Financial Activities Listed in the Glossary of the 40 Recommendations which are Conducted by Financial Institutions in Austria

article image
article image

80. The Financial Market Authority (FMA) is the integrated regulator and supervisor for the financial sector, with the exception of domestic financial institutions and insurance intermediaries which are supervised by the local district authorities. As a result of a recent revamp of the supervision framework (January 2008), the Austrian National Bank (Oesterreichische Nationalbank, OeNB) has sole responsibility for conducting offsite monitoring and onsite examinations of banks, but the overall responsibility for banks’ regulation and enforcement stays with the FMA. The focus of OeNB supervision is on systemic banks, and external auditors retain the function of assessing compliance with regulations of all credit institutions annually.

Overview of the DNFBP Sector

Casinos

81. Organization of games of chance is regulated in the Gambling Law (Glücksspielgesetz, GSpG). The GSpG does not know the words “casinos” and “internet casinos”, but refers to gaming houses (Spielbanken defined in Article 21, paragraph 1 GSpG) and electronic lotteries (Elektronische Lotterien, defined in Article 12a GSpG) which may be run as internet casinos, offering casino games with non-face-to-face transactions between the customer and the licensee.

82. The gaming legislation establishes a monopoly of the Federal Government executed by a system of licenses granted by the Federal Ministry of Finance (MoF). Currently all legally permitted licenses have been assigned to only two licensees, Casinos Austria AG (CASAG) for 12 Austrian casino licenses and the Österreichische Lotterien GmbH (ÖLG) for electronic lotteries. There are currently legal proceedings regarding card casinos, which have developed quickly in recent years and are not regulated, but that the authorities consider as game of chance providers.

83. The MoF is the supervisory authority for casinos and internet casinos with extensive supervisory powers. The following table gives an overview of casinos and internet casinos currently operating in Austria:

84. The total betting volume more than doubled between 2005 and 2007 and foreigners account for 70 percent of the bets.

Statistical Table 6.

Activity of Casinos in Austria

article image

Real Estate Agents, Dealers in Precious Stones and Metals, TCSPs

85. All these professions are regulated by the GewO and have to be registered. The competent authority for authorization and registration, prudential or market conduct supervision, and for AML/CFT supervision are the local district authorities (Bezirksverwaltungsbehörden), in cooperation with the police. Local district authorities are under the command of the States’ Governors who are directly under the control of the Federal Ministry of Economy, Family and Youth (MoE) as the supreme authority (police authorities are under the control of the Federal Ministry of the Interior, MoI).

86. Real estate agents are involved in transactions for their clients concerning the buying or selling of real estate. They are allowed to represent their clients in front of authorities. As shown in the table below, their number has increased in recent years:

Statistical Table 7.

Real Estate Activity in Austria

article image

87. In Austria, all dealers—not only the ones dealing with precious stones and metals—fall under the AML/CFT legislation when carrying cash transactions above EUR 15,000. No information was available on the precise number of dealers in precious stones and metals.

88. According to the authorities, the profession of management consultant (Unternehmensberater) carries out the functions of TCSPs regarding the FATF definition, and has to comply with the AML/CFT provisions of the GewO. But their core function is to give advice to companies, not to provide the services listed in the FATF glossary concerning TCSPs. In 2008, 12,507 management consultants were registered with the Austrian Federal Economic Chamber (Wirtschaftkammer Österreich, WKO).

89. Other professions used to provide services which are listed in the FATF definition of TCSPs. These are office services, consisting of writing, messenger services, receipt and forwarding of messages (Büroarbeiten bestehend of Schreibarbeiten, Botengängen, Entgegennahme und Weiterleitung von Nachrichten) and office services consisting on provision of office equipment and office facilities (Büroservice zurverfügungstellen von Büroeinrichtungen). Six hundred and seventy-nine firms are registered with the WKO in these two categories. Pursuant to the new provisions of the GewO, each provider of an activity listed by the FATF as TCSP will have to be registered as a management consultant. The implementation of these provisions was not effective at the time of the on-site visit.

Accountants

90. The two professions of chartered public accountants-tax consultants (Wirtschaftstreuhänder), and certified management accountants-accountancy professions (Bilanzbuchhalter) perform activities that are listed in FATF Recommendations 12 and 16. Both professions are authorized to prepare for or carry out transactions for creating, operating or managing legal persons or arrangements, and buying and selling business entities. They also can assist in managing client money, securities, or other assets.

91. In March 2008, 8,027 natural persons and 2,345 companies were registered with the Chamber of Chartered Accountants and Tax Consultants, and 2,079 natural persons and 62 companies were registered for the Accountancy Profession (2,052 certified management accountants, 61 certified management accountant companies, 3 bookkeepers, 24 payroll accountants and 1 payroll accountant-company).

Lawyers

92. Lawyers typically engage in the representation of parties before all courts and authorities in Austria and the representation and advice of parties in all court and out-of-court, in all public and private matters. They are organized to the Lawyer’s Act (Rechtsanwaltsordnung, RAO). They are also able to engage in the following activities:

  • the purchase or the sale of real estate or enterprises;

  • the administration of money, securities or other assets, the opening or administration of bank accounts, saving accounts or accounts regarding securities; and

  • the foundation, operation or administration of trust companies, companies or similar structures like endowments or foundations, including the procurement of means necessary for the foundation, operation or administration of companies.

93. The number of lawyers increases every year. There were 4,494 lawyers registered in the list of Austrian lawyers and 47 lawyers registered in the list of established European lawyers in 2003, but 5,129 Austrian lawyers and 81 European lawyers in 2007. The competent authority for supervision of the profession, including AML/CFT supervision, is the Board of the Bar Association (Ausschuss der Rechtsanwaltskammer).

Notaries

94. Following the legal tradition of continental Europe, Austrian notaries are Latin (civil law) notaries. Organized through the Notaries’ Act (NO), they are self-employed law experts who provide advice to their clients and set up agreements and authentic acts as instructed. As court commissioners, they are also vested with quasi-judicial functions. Notaries are appointed by the government, and endowed with carrying out public functions. They are not public servants, however, and bear the economic risk of running their business.

95. The statutory scope of action of Austrian civil law notaries includes the following activities listed in FATF Recommendations 12 and 16:

  • the purchase or the sale of real estate or enterprises;

  • the administration of money, securities or other assets, the opening or administration of bank accounts, saving accounts or securities accounts; and

  • the foundation, operation or administration of trust companies, companies or similar structures like endowments or foundations, including the procurement of means necessary for the foundation, operation or administration of companies.

96. Notaries play an important role as trustees, and must be capable of exercising accepted trusts independently (Treuhandschaft not in the meaning of an “Anglo-American trust”). Notaries must record trusts in the Trust Register of Austrian Notaries set up by the Austrian Chamber of Civil Law Notaries before making any disposition of the trust property, in order to ensure maximum security and to allow for monitoring of compliance with the duties arising under the execution of trusts.

97. Austrian civil law notaries carry the official title of a notary public. The MoJ is authorized to set up new notarial offices, to close existing ones or to transfer a notarial office to another place by way of official ordinance. Currently, there are 478 notaries and 381 notarial candidates in Austria. Notaries are tied to the bounds of their notarial offices. The competent regional Chamber of Civil Law Notaries exercises professional supervision of notaries in respect of the exercise of their official duties and professional conduct.

1.4 Overview of commercial laws and mechanisms governing legal persons and arrangements

98. The Austrian Law recognizes the following types of legal persons:

  • Limited liability company (Gesellschaft mit beschränkter Haftung);

  • Joint-stock company (Aktiengesellschaft);

  • European Society (Europäische Gesellschaft);

  • Cooperative society (Erwerbs- und Wirtschaftsgenossenschaft);

  • European cooperative (Europäische Genossenschaft);

  • Association (Verein); and

  • Private foundation (Privatstiftung).

99. Legal persons come into legal existence by registration in the Commercial Register, which is maintained at the court of first instance on commercial matters (Firmenbuchgericht). The Commercial Register is accessible online to everybody via special websites authorized by the MoJ and against a small fee. There are local offices of the Commercial Register in each of the 99 districts in which Austria is divided.

100. Newly formed corporations must record the articles of incorporation and submit the application signed by all founders, members of the supervisory board and the board of management to the court responsible for the Commercial Register. When the court decides that all statutory requirements have been complied with, it will order the registration and publication in the official gazette (Amtsblatt zur Wiener Zeitung) and through the Internet (Ediktsdatei, available via www.edikte.justiz.gv.at).

101. Associations have to be registered with the relevant local district authority or Federal Police Directorate (Vereinsbehörde), which can refuse the registration if the association, its purpose etc. infringe Austrian law. Each association is registered under a register number and listed in the Central Register of Associations (Zentrales Vereinsregister, ZVR). The ZVR is a public register, kept by the MoI and accessible online by anyone (http://zvr.bmi.gv.at/Start).

102. Foreign corporations can establish branch offices in Austria, which, before starting business, must be entered in the Commercial Register at the commercial court competent for the district where the branch has its seat. In this case, the disclosure requirements set forth in the case of companies incorporated under Austrian law will be applied analogically, based on the type of mother-company in the incorporating jurisdiction.

1.5 Overview of the Strategy to Prevent Money Laundering and Financing of Terrorism

AML/CFT Strategies and Priorities

103. Austria has not formalized a specific AML/CFT strategy. As a highly developed, open and globally integrated country, Austria’s international approach to combat money laundering and the financing of terrorism emphasizes multilateral coordinated action and cooperation, and the Austrian government actively supports the ongoing work in the EU, the UN, the Council of Europe, the FATF and other international fora. Priority is also given to the appropriate and timely implementation of the Directive 2005/60/EC of the European Parliament and of the Council of October 26, 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (Third EU ML Directive).

104. The MoF leads Austria’s delegation to the FATF, and plays a major role in initiating and ensuring a timely transposition of European norms into the domestic regime. In application of the constitutional principle of cooperation between administrative authorities, defined by Article 22 of the Federal Constitutional Law (Bundes-Verfassungsgesetz, B-VG), several coordinating fora have been established at both executive and operational levels.

105. At the policy level, the quarterly Financial Market Committee (FMC) consists of the Director General responsible for Financial Market issues in the MoF (Chair), and the CEOs of the OeNB and the FMA; its ambit covers all financial market stability matters, including AML/CFT issues, and its recommendations have strong policy effect on the ministers and the parliament. In the monthly MoF/FMA Jour Fixe meetings, the FMA CEOs and MoF Deputy Director General responsible for financial market issues discuss further actions related to the FMC matters.

106. At the operational level, the focus is on developing and implementing policy measures: FATF coordinating meetings involve all authorities responsible for AML/CFT policy, supervision and enforcement (MoF, MoJ, FIU, BVT, MoFA, FMA, OeNB, MoE); in the AML/CFT Task Force, the MoF, FMA, BVT, A-FIU, OeNB and MoJ meet quarterly to assess new ML/FT trends and typologies, discuss operational problems, and review issues arising from the private sector; and the MoF and FMA AML/CFT Jour Fixe takes place monthly, and address operational issues relating implementation of the AML/CFT measures.

107. Austria has a long-standing practice of close and regular cooperation between the authorities and various institutionalized interest groups, represented notably by economic and professional groupings with compulsory membership. The department Bank and Insurance of the WKO published the first professional regulation for AML in 1989, and the WKO still makes a major contribution toward raising awareness of ML/FT risks among its members, especially the DNFBPs. In particular, a two-year activity plan is currently being drawn with the authorities to provide information on ML/FT trends and AML/CFT legislations to the private sector across the country.

108. Political commitment to combating ML and FT is also demonstrated through Austria’s membership of, and participation in, many international fora which contribute to the global preventive efforts, notably UN and OECD Conventions on Bribery, Corruption, Drug and Organized Crime. Austria contributes to, and takes part in, UNODC activities, EU’s specialized institutions (EUROPOL, EUROJUST) and EU’s AML committees and task forces, as well as EU partnership programs to develop legal systems, build institutional capacities and implement preventing measures to combat crimes, particularly ML/FT.

The Institutional Framework for Combating Money Laundering and the Financing of Terrorism

Ministries

Federal Ministry of Finance (MoF)

109. The MoF has a prominent role in the coordination of Austrian AML/CFT policy. It also submits proposals of amendments to legal acts concerning the regulation and supervision of the financial sector. The Tax and Customs Department is a unit within the MoF which has competency to propose revisions of the Customs Law and the Fiscal Penal Code, as regards to sanctions for any breach of the Custom Law. The MoF is the competent authority for proposing amendments to the GSpG for the licensing and supervision of casinos and internet casinos, including appointing state commissioners to the licensees.

Federal Ministry of Justice (MoJ)

110. The MoJ carries out an overall responsibility for criminal law, for example the StGB and the StPO. It is responsible for regulating the activities of lawyers and notaries, as regards to the Lawyer’s Act, the Disciplinary Statute for lawyers and lawyer-candidates, and the Notarial Code. The MoJ has charge of international cooperation, especially extradition and Mutual Legal Assistance (MLA), including the transfer of proceedings to a foreign country. Additionally, it has a statutory role in legal acts relating to legal persons and arrangements.

Federal Ministry of the Interior (MoI)

111. Public security, criminal investigations, and law enforcement are the core functions of the MoI. Within the ministry, the Austrian Financial Investigation Unit (A-FIU) and the Federal Agency for State Protection and Counter-Terrorism (Bundesamt fur Verfassungsschutz und Terrorismusbekämpfung, BVT) are the police and intelligence units specialized in combating ML and FT. The Associations Act and the supervision of its implementation fall also within its ambit.

Federal Ministry for European and International Affairs (MoFA)

112. The MoFA’s functions cover matters relating to public international law, whether Austria’s compliance with international obligations and the negotiation of international treaties, or the coordination of the country’s policy for justice and home affairs in international and European fora.

Federal Ministry of Economy, Family and Youth (MoE)

113. In the area of AML/CFT, the MoE is responsible for preparing legislative proposals related to auditors, external accountants and tax advisors, trust or company service providers, real estate agents and dealers, including auctioneers, and insurance intermediaries. It has competency to issue related secondary regulations and guidelines, and, with its local district authorities, is the supreme authority for the supervision of the above-mentioned professions.

Criminal Justice and Operational Agencies

The Austrian Financial Investigation Unit (A-FIU)

114. The A-FIU is a police unit within the Criminal Intelligence Service (Bundeskriminalamt, BKA). It receives and investigates STRs, or mandate investigations to the national police services, but the BVT is solely competent to investigate FT related cases.

Federal Agency for State Protection and Counter-Terrorism (BVT)

115. Within the Public Security Department of the MoI, the BVT is competent for state protection, notably counter-terrorism and counter-terrorism financing, and is seconded by States’ Agencies for Protection and Counter-Terrorism (Landesämter fur Verfassungsschutz, LVT) in the nine Länder. BVT investigations can be initiated on the basis of information received from the private sector (Suspicious Transaction Reports, STRs, forwarded by the A-FIU), other national or foreign security authorities, or internal sources.

Courts and Prosecution Authorities

116. The Code of Criminal Procedure (StPO) provides for four different types of courts, depending on the maximum length of the possible sentence. Court rulings in civil law and penal law matters are the exclusive responsibility of independent judges. Judges are appointed by the MoJ on the basis of an objective selection procedure. The appointment of senior judges is reserved to the Bundespräsident.

117. The function of the public prosecution is to protect public interest in the administration of justice. This primarily involves conducting investigations, in cooperation with the criminal police, laying charges against persons, and representing the indictment in penal proceedings. Public prosecution offices are separate from the courts, and are bound by instructions received from the senior public prosecution offices and ultimately of the MoJ. The General Procurator’s Office, set up with the Supreme Court, is directly responsible to the Federal Minister of Justice and does not have the right to issue any instruction to the offices of public prosecution and the offices of senior public prosecutors.

Financial Sector Bodies

Financial Market Authority (FMA)

118. The FMA serves as the integrated supervisor of all financial institutions10 and activities, that is, banking, insurance, securities and pension fund activities. It is an autonomous institution under public law which is placed under direct parliamentary control. The FMA functions include issuing regulations, granting licenses, as well as supervising and enforcing prudential and AML/CFT requirements. Within the FMA, an AML Competence Center monitors international and domestic developments on AML/CFT issues and provides technical support to functional departments. The FMA is responsible for conducting specific AML/CFT examinations in financial activities which are in its remit.

Central Bank (Oesterreichische Nationalbank, OeNB)

119. In 2007, the banking supervision functions have been restructured, the OeNB being granted sole responsibility for carrying out offsite analysis and conducting onsite examinations of credit institutions, while the FMA remains entrusted with regulatory, licensing and enforcement powers. Procedures and operational arrangements have been institutionalized to maintain close cooperation and regular consultation between the two institutions. The OeNB is, within the scope of the Foreign Exchange Act (Devisengesetz, DevG), also in charge of enforcing financial sanctions in international payment transactions.

DNFBPs

Casino Supervisory Body

120. The MoF is the responsible supervisory authority for casinos. The surveillance of casinos is conducted by a team of independent inspectors of the MoF. An appointed state commissioner attends all meetings of the supervisory board and the general meeting of the shareholders. Additionally, a special department of the Local Tax Authority for Fees and Transaction Taxes mandates independent inspections of casinos, in order to control proper determination of the tax base, such control contributing to the overall prevention of ML/FT. Local tax authorities report to the MoF.

Traders, TCSPs

121. Under the responsibility of the MoE and the state governors, local district authorities are responsible for the licensing and prudential supervision of all activities conducted under the GewO, including trust or company service providers, real estate agents and dealers including auctioneers and insurance intermediaries. Their function includes checking compliance with AML/CFT measures and issuing administrative sanctions for regulatory breaches. The MoE can give instructions to lower level authorities. Since the last amendment of the GewO in 2008, police services must cooperate with and support the trade authorities in the execution of AML/CFT provisions.

Lawyers, Notaries and Accountants

122. The Board of the Bar Association, where a lawyer is registered, is the responsible authority for monitoring compliance with professional regulations, including AML/CFT requirements. Board members are elected by the plenary meeting for a three-year term. Disciplinary offenses are to be handled by the Disciplinary Council, elected by the Bar Association.

123. The competent regional Chamber of Civil Law Notaries is the responsible supervisory authority for notaries, and this function includes verifying whether notaries comply with the provisions serving to prevent or fight ML or FT.

124. The Chamber of Chartered Public Accountants and Tax Consultants and the Parity Commission for the Accountancy Professions, which are the competent supervisory authorities for AML/CFT preventive measures for accountants, are subordinated to the MoE.

Registry for Companies and Other Legal Persons, and for Legal Arrangements

125. The Central Register of Associations (ZVR) is administered by the MoI. The Commercial Register contains records about the ownership and control details for all companies and other legal persons, and is administered by the Commercial Courts. Changes in ownership and control information must be kept up to date. All information is available to the public.

Non-Profit Organizations (NPOs)

126. NPOs are mainly organized as associations which are listed in a public register administered by the MoI. The MoI is the authority responsible for regulating associations and has the competence to give instructions to the lower level authorities. Associations (as well as other NPOs) with charitable or welfare purposes or purposes connected to a state-approved church are tax-exempted, independently of their legal form (association or otherwise). Tax authorities have to verify the purpose of the organization, based on the statutes and accounts. In 2002, the eight most important umbrella organizations (representing more than 350 charities and all catholic orders in Austria) signed a contract with the Chamber of Chartered Public Accountants and Tax Consultants on a seal of quality for donation organizations.

Other Bodies

127. The local district authorities, in the first instance, and the regional governors, as the second instance, are competent for the supervision of domestic financial institutions, according to the provisions of the General Administrative Procedure Act (Allgemeines Verwaltungsverfahrensgesetz, AVG).

128. The Austrian Federal Economic Chamber (WKO) and its nine state chambers, as well as other chambers of various professions (e.g., lawyers and notaries, accountants and tax consultants), play an important role in Austrian public life. Their duties include representation of membership interests domestically and internationally, as well as information and advisory service to their members. By law, governments are obliged to consult with the chambers on legislative projects and important regulations. Many legal provisions involve the chambers in decision-making and administrative procedures, and may entrust them with supervisory or regulatory powers.

129. In the course of their auditing work, external auditors carry out particular investigations on financial institutions’ compliance with prudential and AML/CFT legal requirements and report on these issues to the FMA.

Approach Concerning Risk

130. Austria has transposed the Third EU ML Directive, including the risk-sensitive measures that it requires, into the Austrian legal framework, with effect on January 1, 2008. The authorities underlined that, as a member state, Austria contributed to the risk assessment and analysis conducted at the EU level and to the resulting legal provisions. The risk-based approach in place since January 2008 therefore, stems from the EU Directive; it is not the result of a domestic assessment of the overall money laundering and terrorist financing risk in Austria. The authorities pointed that some risk analysis had been conducted prior to the implementation of the EU Directive and resulted in the introduction of legal provisions such as those that require customers to indicate if they are acting on behalf of a third party, as well as those that subject non-face-to-face business to enhanced due diligence and include the money remittance business into financial activities subject to licensing. While this would indeed tend to indicate that some partial risk analysis was conducted at the time, it does not however point to a comprehensive assessment of the money laundering and terrorist financing risks in Austria. It is unclear for instance why the level of risk posed by other areas of relevance to the Austrian financial sector (such as private banking for example) has not been assessed.

131. The new regime entrusts persons and entities subject to AML/CFT provisions with defining and operating preventive measures adjusted to risks, while it lists situations allowing lower or higher CDD. Persons and entities subject to AML/CFT provisions are required to conduct a risk-analysis of their business, using suitable criteria, and to take appropriate risk-based measures to ascertain customer information and conduct ongoing monitoring.

132. Austria’s financial sector structuring in decentralized and multi-tiered groups results in a large number of financial institutions. Supervisors have long adopted a risk-sensitive approach to onsite examinations. Mission planning and inspection scope are based on assessments of ML and FT risks across institutions, and weaknesses in preventive measures detected by external auditors or OeNB and FMA supervisors.

Progress Since the Last Evaluation

133. The last assessment of Austria compliance with the previous FATF Recommendations was conducted by the IMF in the course of the 2003 FSAP, using the former methodology. The assessors concluded that the overall legal and institutional framework was comprehensive and that Austria had achieved a good level of compliance with the FATF 40+8 Recommendations. However, they identified several areas which needed further strengthening:

  • greater clarity in some of legal provisions, defining suspicion of money laundering and the obligation to screen unusual transactions;

  • further guidance to financial institutions on AML/CFT duties, in particular on the identification of customers;

  • enhanced monitoring of compliance by the supervisors in all financial institutions subject to AML/CFT obligations, including through on-site inspections; and

  • sustained supervisory attention during the process of phasing out anonymous savings deposit accounts.

134. Subsequent legislative and regulatory revisions and the implementation of the Third EU ML Directive resulted in a large overhaul of the AML/CFT regime, addressing the above-mentioned concerns:

  • identification and verification requirements, notably for beneficial owners in legal entities, and beneficiaries of insurance policies, have been strengthened, and implementing guidelines have been issued;

  • a risk-based approach must be applied to business relationship monitoring, based notably on the customer’s business and risk profile, and the grounds for suspicion have been broadened;

  • supervision of compliance with AML/CFT provisions has been amplified and reorganized, notably reallocating all onsite and offsite banking supervision tasks to the OeNB; and

  • savings deposit accounts review is incorporated into onsite supervisory examinations; credit institutions must inform the A-FIU of all requests to withdraw funds from savings deposits with a balance of at least EUR 15,000, when the identity of the customer has not being ascertained.

135. In addition, amendments to the legal framework have enlarged categories of higher risk customers to include PEPs and correspondent relationships, broadened the scope of activities related the financing of terrorism, subjected money transmitters and exchange bureaus to the BWG provisions, and expanded preventive measures to additional categories of DNFBPs. The Austrian Federal Statute on the Responsibility of Entities for Criminal Offenses provides a general criminal liability for legal persons and entities for all penal offenses. Austria has ratified the Palermo Convention on 23 September 2004. In the area of international cooperation, the Vienna Convention has been ratified and implemented.

2. Legal System and Related Institutional Measures

2.1 Criminalization of Money Laundering (R.1 & 2)

2.1.1 Description and Analysis

Legal Framework

136. In Austria, Article 165 of the StGB set forth the offense of Money Laundering (ML). The offense was established in 1993 and amended several times. Austria has signed and ratified the 1988 United Nations (UN) Convention on Illicit Drugs and Psychotropic Substances (Vienna Convention) and the 2000 UN Convention against Transnational Organized Crime (Palermo Convention).

Criminalization of Money Laundering (c. 1.1—Physical and Material Elements of the Offense)

137. Article 165 sets forth three different types of conducts that constitute the ML offense, all of which are largely in line with the material elements listed in Article 3(1) (b) and (c) of the Vienna Convention and Article 6(1) of the Palermo Convention:

The Laundered Property (c. 1.2)

138. The offense of ML extends to any type of property, regardless of its value, that directly or indirectly represents the proceeds of crime. Article 165 paragraph 4 of the StGB specifically provides that “a property item shall be deemed to derive from an offense when the perpetrator of the crime has obtained it through that offense or received it for the commission of that offense, or when it represents the value of the originally obtained or received property item.” It follows from this provision that the Austrian notion of proceeds covers any property that is the result of, or the reward for the crime, or the value thereof.

Proving Property is the Proceeds of Crime (c. 1.2.1)

139. The conviction of the offender for the predicate offense is not a necessary pre-condition to bringing charges for ML, although the prosecutors and judges met by the assessors indicated that when proving that property is the proceeds of crime, a conviction for the predicate offense is the best evidence that can be submitted. In any case, although the conviction for the predicate offense is not necessary to establish that assets were the proceeds of a predicate offense, the level of evidence required to prove the predicate offense (particularly in the case of the first two types of ML) is “beyond reasonable doubt.” This means that the prosecutor will have to prove the specifics of the predicate offense, for example, that the conduct amounted to a designated offense, the timeframe when the predicate offense was committed, the perpetrator, the types of assets that originated from the predicate offense, which is a rather high standard of proof. The various prosecutors and judges met by the assessors indicated that the standard of proof required to link ML to the predicate offense constitutes one of the most difficult obstacles (especially when the predicate offense was committed abroad). In case of laundering “in the interest of a criminal organization or of a terrorist group” (Article 165, paragraph 5), it is not necessary to link the ML activity to a specific predicate offense and it is sufficient to prove that the property laundered belongs to a criminal organization or a terrorist group. However, as indicated by the authorities, the conditions to prove that an associated group constitutes a criminal organization are also challenging.

The Scope of the Predicate Offenses (c. 1.3)

140. Predicate offenses for ML are all “crimes”, that is, offenses that are intentional acts punishable by life imprisonment or a term of more than three years (Article 17, paragraph 1 of the StGB), as well as a list of “designated misdemeanors” that include public corruption and bribery offenses, forgery of documents, criminal association as well as financing of terrorism. The list of misdemeanors was added in 2002. The range of penalties set forth in the StGB for these offenses does not reach the threshold of three year imprisonment, consequently, these offenses would not have qualified as predicate offenses for ML without their specific inclusion in Article 165 StGB.

141. The list of predicate offenses to ML covers all the categories of offenses designated by the FATF, with the notable exception of counterfeiting and piracy of products, which is a misdemeanor in Austria and which is not included in the list of misdemeanors referred to in Article 165:

Statistical Table 8.

Predicate offenses in Austria

article image
article image
Threshold Approach for Predicate Offenses (c. 1.4)

142. As noted earlier, the predicate offenses to ML include all serious offenses under Austrian criminal law (“crimes” as stipulated by Article 17 of the StGB, that is, intentional criminal offenses punishable with more than three years of imprisonment), as well as a wide range of designated misdemeanors (which does not include counterfeiting and piracy of products).

Extraterritorially Committed Predicate Offenses (c. 1.5)

143. The Austrian authorities state that as a matter of principle they can establish jurisdiction for ML offenses irrespective of the place where the predicate offense was committed, as Austrian criminal law does not require that the latter offense be committed domestically, provided it would constitute a criminal offense under Austrian law. This view is reflected in the language of Article 165, Paragraph 1 (.”.. property items that derive from the crime of another person …”) which does not limit the scope of the ML offense to domestic predicate offenses. Moreover, Article 64, Paragraph 1 (8) of the StGB explicitly provides ground for jurisdiction when it states that: “Austrian penal laws are applicable regardless of the penal laws which are valid for the scene of crime to the following offenses being committed abroad”, quoting explicitly the offense of ML, when the laundering activities are committed abroad and the predicate offense is committed in Austria. In addition, Article 65 of the StGB (“Criminal offenses committed abroad which are subject to prosecution only if they are liable to prosecution according to the laws which are valid for the scene of the crime”), states the general principle (Paragraph 3) that “it is sufficient that the offense is liable to prosecution according to Austrian law if there is no penal power at the place where the criminal act was committed.”

Laundering One’s Own Illicit Funds (c. 1.6)

144. Self-laundering is not criminalized in Austria as Article 165 limits the scope of the ML offenses to assets “that derive from the crime of another person.” ML undertaken by a person “acting on behalf or in the interest of a criminal organizations or the terrorist group” (Article 165, paragraph 5) could however amount to self-laundering in this specific case if the ML activity is undertaken by a member of the criminal organization or of the terrorist group.

145. The authorities explained this limitation by referring to the criminal law principle according to which an offender (i.e., the one having committed the predicate offense) cannot be additionally and separately punished for a “post-offense behavior” that relates to the proceeds of his/her own crime (principle of “post factum delicti”). According to this principle of Austrian criminal law, one punishable act (the predicate offense) includes another concurring act (the concealing or disguising of property items that derive from the predicate offense’s perpetrator) and the penalty set forth for the punishable act is deemed to cover the entire unlawfulness of the offenders’ act. According to a further explanation given, the self-laundering activities are not considered to be subject to criminalization because they are deemed not to entail any additional damage to further rights than the one already caused by the predicate offense. In several rulings, the Supreme Court confirmed that the laundering activities undertaken by the perpetrator of the predicate offense do not constitute autonomous criminal activities, because they have to be seen as part of the “same historical happening” (which is interpreted in very broad terms in regard to the timeframe in which the predicate offense and the laundering activities are undertaken) of the predicate offense and they do not entail an autonomous and additional damage to vested rights, the protection of which is already ensured by the punishment of the predicate offense.

146. However, these rulings do not explicitly indicate that self-laundering is contrary to a fundamental principle of Austrian law and the officials met by the assessors did not have a uniform view as to whether there is a fundamental principle on the subject; it was pointed out that an amendment to the StGB could suffice to overturn this principle of criminal law. With respect to the “same historical happening” jurisprudence, one could argue -especially when the laundering activity does not simply amount to the mere possession or use, but also involves the transfer or the concealment and disguise through the financial system—that an additional damage to further rights than the one already caused by the predicate offense—as well as an additional social danger (to the soundness and the integrity of the financial system) can be envisaged autonomously. In light of the above, it was not established that the non-criminalization of self-laundering is supported by principles that amount to fundamental principles according to the FATF standards.

Ancillary Offenses (c. 1.7)

147. The Austrian criminal law provides for appropriate ancillary offenses to the offense of ML. Attempt (as well as “any participation in an attempt”) is criminalized for all offenses by Article 15 of the StGB, therefore including for ML. Article 12 of the StGB (“Treatment of all participants as offenders”) covers aiding and abetting, facilitating and counseling, for its broad language, as clarified by the authorities, states that “a criminal offense is committed … also by anybody who abets another person to commit the offense or who contributes to its perpetration in any other way.” Article 3 (1) (c) iii of the Vienna Convention, that requires the criminalization of “publicly inciting or inducing others, by any means, to commit any of the offenses established in accordance with this Article [including ML]”) is also covered by Article 12 of the StGB (if the incitement or the induction is for the specific offense of ML) and, more generally, by Article 281 (“Incitement to disobedience of laws”) and 282 (“Incitement to criminal offenses and approval of criminal offenses”), in the case in which the incitement is generically to commit criminal offenses or to disobey laws.

148. Conspiracy to commit ML, in the sense generally known in common law systems (that envisage conspiracy also in the case of an agreement of only 2 persons), is not to be found in Austrian criminal law. Austria has a civil-law based criminal system and the basic concepts of such a system do not provide that such behavior constitutes punishable criminal conduct. Instead Austrian criminal law criminalizes “criminal association” (Article 278 of the StGB), as “a union planned for a longer time of more than two persons aiming at the commitment of one or more crimes”, with a specific cross-reference to Article 165 of the StGB. This is in line with the Vienna and Palermo Conventions (Article 3, paragraph 1, c, iv and Article 6, paragraph 1, b, ii, respectively, which require the establishment of an offense either for conspiracy or association, subject to the constitutional/basic concepts of the jurisdiction’s legal system).

Additional Element—If an act overseas which do not constitute an offense overseas, but would be a predicate offense if occurred domestically, lead to an offense of ML (c. 1.8)

149. As noted earlier, Article 65, paragraph 3 of the StGB states the principle according to which “it is sufficient that the offense is liable to prosecution according to Austrian law if there is no penal power at the place where the criminal act was committed.”

Liability of Natural Persons (c. 2.1)

150. The Austrian criminal law knows three types of mens rea that characterize the offender’s action (or inaction): “intentionally”, “willfully” or “knowingly” (Article 5 of the StGB).11 The authorities explained that “intentionally” (dolus) is the broadest standard, for it includes also “dolus eventualis” (blind willfulness or recklessness, bedingter Vorsatz). When a criminal provision does not specify the mens rea required (as in the case of the first type of ML conduct, the one set forth by Article 165, paragraph 1), it is always assumed that the type of mens rea that applies is “intentionally.”

151. In the case of ML the mens rea requirements are differentiated according to the modus operandi of the ML offense: in the case of Paragraph 1 of Article 165 the act of concealing/disguise has to be committed with intent. In this case the mens rea is broader than that required by the Vienna and Palermo Convention, because it also includes dolus eventualis. Paragraph 2 of 165 requires that the acts of acquiring, converting, transferring, etc. be committed “knowingly.” This standard also appears to be broader than the one envisaged by the Vienna and Palermo Conventions, in the sense that it does not require the specific “purpose of concealing or disguising the illicit origin of property or of helping any person who is involved in the commission of the predicate offense to evade the legal consequences of his/her action” (Article 3, paragraph 2, b, i and Article 6, paragraph 1, a, I, respectively). Knowledge that the assets are proceeds of crime is sufficient.

The Mental Element of the ML Offense (c. 2.2)

152. Although the criminal law does not explicitly provide that the intentional element of the offense of ML may be inferred from objective factual circumstances, Austria relies on the principle of free evaluation of evidence by the judiciary, codified by Article 14 of the Criminal Procedure Code (Strafprozessordnung, StPO), which enables the judge to make this inference. As indicated by the authorities, the objective factual circumstances will very often be the most important clue for the judge’s assessment of evidence.

Liability of Legal Persons (c. 2.3)

153. The Austrian Federal Statute on the Responsibility of Entities for Criminal Offenses (Verbandsverantwortlichkeitsgesetz, VbVG), which entered into force on January 1, 2006, provides for general criminal liability of legal persons and other entities such as commercial partnerships (Personenhandelsgesellschaften), private foundations or registered partnerships (eingetragene Erwerbsgesellschaften) for all criminal offenses (therefore including for ML), in addition to and independent from the liability of the natural persons prosecuted for the same act.

154. According to Article 3 of the VbVG, criminal liability is explicitly provided for an offense committed by a person with a leading position (“decision-maker”) on the one hand and for an offense by a person under its authority (“staff-member”) based on the lack of supervision or control of such a person in a leading position on the other. A legal person is responsible for a criminal offense (including ML) if either the offense was committed for the benefit of the entity or resulted from a neglect of the due diligence required of the entity. According to Article 3, paragraph 2 of the VbVG, the entity shall be responsible for offenses committed by a decision maker if the decision maker acted illegally and culpably.

155. In particular, according to Article 3, paragraph 2 of the VbVG, an entity is responsible for criminal offenses committed by a “decision maker” if he/she acted illegally and culpably, whereas in the case of its staff-member the legal person is responsible (paragraph 3) if:

Liability of Legal Persons should not preclude possible parallel criminal, civil or administrative proceedings (c. 2.4)

156. As ML constitutes an offense under penal law also in the case of legal persons, administrative proceedings to address the conduct of legal persons or entities who may have engaged in money laundering offenses are not foreseen by the law. However, the criminal liability of legal persons or entities does not exclude civil liability which may result from the respective unlawful act.

Sanctions for ML (c. 2.5)

157. Penalties for ML vary based upon the amount of proceeds involved. The basic ML offenses defined at paragraphs 1 and 2 of Article 165 are misdemeanors and carry a maximum penalty of two years of prison or a fine, which is calculated on daily rates12 (the maximum amount for this fine equals to 360 daily rates). They become subject to a higher penalty ranging from six months to five years of prison when aggravated circumstances occur, that is when the assets involved exceed the value of EUR 50,000 or when the crime is committed as “a member of a criminal group associated for the purpose of continuous ML (Article 165, paragraph 3). The authorities clarified that this aggravating circumstance occurs also if the criminal association has carried out only one act of ML, as long as it can be ascertained at least that the purpose for which the association was established is “continuous ML”). In case of ML conducted “on behalf or in the interest of a criminal organization … or terrorist group, the penalty is imprisonment for a term not exceeding three years (Article 165, paragraph 5). In this case, if the value of the assets exceeds EUR 50,000, the penalty goes up to a prison term ranging from six months to five years.

158. Article 4 VbVG provides for fines being imposed on legal persons. Similar to fines imposed on natural persons, the VbVG provides a daily rate system, in which the amount of the fine depends on two factors:

159. The maximum daily rate is set at EUR 10,000 and the minimum daily rate, which is only relevant for entities that have not earned profit over a reasonable period of time, is EUR 50.

160. The authorities explained that the VbVG deliberately does not define the assessment basis for revenues or permissible deductions as a result of the broad coverage of all legal persons, which are generally subject to various accounting standards depending on their legal structure. On the other hand, the VbVG does not determinate the relevant time period for the calculation of profits. This provides some protection against manipulations of the amount of revenue. The current provision enables the court to average out the proceeds of the legal person or entity over several years, thus minimizing the risk of manipulating the amount of the fine by transferring gains of one given period to previous periods with losses.

161. The authorities explained that as the minimum daily rate has been fixed at EUR 50 and the maximum daily rate EUR 10,000, the minimum fine for the offense of ML committed by a legal person in the case of ML is EUR 3,500 and the maximum fine EUR 1,000,000.

162. Furthermore, Article 10 of the VbVG stipulates that the legal consequences shall also apply to a legal successor, if the rights and obligations of the legal person or entity have been transferred to another association by way of universal succession. Legal consequences imposed on the legal predecessor shall therefore also apply to the legal successor. If there are more than one legal successor, a fine imposed on the legal predecessor may be enforced vis-à-vis any legal successor. Other legal consequences may be attributed to individual legal successors to the extent that this is in line with their area of activity.

163. The sanctions set forth for ML in the case of natural persons and the minimum sanction established in the case of legal persons are too lenient (particularly in the case of basic ML) and do not seem effective, nor proportionate or dissuasive, especially considering that ML in most instances is not a crime but a simple misdemeanor. The authorities explained that, as a matter of criminal policy, ML is seen mostly as an ancillary offense and that prosecutors prefer to consider the ML activity as “participation” in the commission of the predicate offense (for the broad terms in which Article 12 is formulated, described above), which carries the same penalty as the predicate offense (usually higher than the one envisaged for ML) and may be easier to prove than ML (where, as mentioned earlier, it may be difficult to prove the link between ML and the predicate offense).

164. From a more general standpoint it has also to be noted that the relatively low penalties applied so far (see statistics) do not seem to constitute a strong deterrent to prevent ML activities.

Effectiveness

165. While the ML criminal provision is largely in line with the material elements of the Vienna and Palermo Conventions, questions can be raised in regard to its effective implementation. One issue is that the number of convictions for ML under Article 165 (official statistics are available for 2004-2006 in the case of convictions; for conditional, unconditional and partially unconditional sentences statistics are also available for 2007)13 is extremely low:

Statistical Table 9.

Money Laundering Cases

article image

166. The authorities explained that these figures are not conclusive as in the Austrian system of criminal statistic, convictions are counted only in relation to convictions for the offense which has the highest punishment (which is hardly the case for ML, when it is concurrent with other crimes). Therefore, a conviction in the criminal statistics is counted once only, irrespective of the number of offenses underlying the conviction. So the official statistics for ML include only cases in which ML was the sole offense or the offense with the highest threat of punishment among other offenses proven, but they do not include the number of convictions where ML was proven among other offenses.

167. According to a separate statistic complied by the A-FIU and based on the actual number of ML charges underlying a conviction (“effective number of convictions”), there were 12 ML convictions in 2003, 10 in 2004, 5 in 2005, 10 in 2006, and 18 in 2007.

168. Even so, the number of convictions still appears low, and raises an issue of effectiveness of the ML provisions, considering the statistics on convictions and investigations for the most serious predicate offenses that generate illicit proceeds, particularly drug-related offenses.

Statistical Table 10.

Statistic of Convictions for Serious Offenses

article image
(source: Statistics Austria)
Statistical Table 11.

Statistics on persons under investigation for the designated categories of offenses referred to by the Glossary (2006)

article image

169. The authorities further indicated that the low figures can be explained by the lack of criminalization of self-laundering in Austria and by the fact that the prosecutors prefer to indict the ML activities under “participation”, because by doing so, they can apply the higher penalty provided in the case of participation in the predicate offense and, in practice, it is easier to prove participation in the predicate offense than the ML activity as a stand-alone crime.

170. However the assessors are of the view that criminalizing basic ML as a misdemeanor (therefore perceived as a low-danger offense) and the difficulties encountered by the prosecutors in proving the predicate offense have a significant influence in the low number of convictions.

171. In addition, penalties provided for these convictions were extremely low, (according to the official statistics for 2004-2007, which, as explained above, are compiled for the case where ML was convicted with the higher terms). The most severe penalty imposed was imprisonment for 1 to 3 years, in a case judged in 2006.

Statistical Table 12.

ML Convictions 2004-2007 Conditional, Unconditional and Partly Unconditional Fines

article image
Statistical Table 13.

ML Convictions 2004-2007 Sentences for Imprisonment

article image

2.1.2 Recommendations and Comments

172. The authorities should:

Recommendation 1
Recommendation 2

2.1.3 Compliance with Recommendations 1 … 2

article image

2.2 Criminalization of Terrorist Financing (SR.II)

2.2.1 Description and Analysis

Legal Framework

173. The financing of terrorism (FT) was criminalized in Austrian law by Article 278d of the StGB in 2002 on the basis of the International Convention for the Suppression of the Financing of Terrorism (ICSFT).

Criminalization of Financing of Terrorism (c. II.1)

174. Article 278d of the StGB (“Financing of terrorism”) states the following:

“(1) A person who provides for assets or collects them with the intent that they are used for the commitment:

  1. of a hijacking (Article 185) or an intentional danger to the safety of aviation (Article 186);

  2. of an extortionate kidnapping (Article 102), or the threat with it;

  3. of an attack on life and limb or the freedom of a person protected by international law or a violent attack on an apartment, the official premises or the means of transportation of such a person which is appropriate to expose this person to a danger to life and limb or freedom or a threat with it;

  4. of an intentional endangering by nuclear energy or ionized radiation (Article 171) or a threat with it, of a unlawful use of nuclear materials or radioactive substances (Section 177b), of any other criminal offense to obtain nuclear materials or radioactive substances or of the threat to commit a theft or robbery of nuclear materials or radioactive substances aiming to force another person to an action, permission or omission;

  5. of a considerable attack on life and limb of another person on an airport serving the international civil aviation, of an destruction or considerable damaging of such an airport or a civil aircraft being on it or an interruption of the services on the airport, so far as the offense is committed by the use of a weapon or other device and is appropriate to endanger the security of the airport;

  6. of a criminal offense committed in a way mentioned in Arts. 185 or 186 against a vessel or a fixed platform, against a person being on board of a vessel or a fixed platform or against the cargo loaded on a ship or an equipment of the ship;

  7. of the transportation of a blasting composition or another deadly device in a public place, to a governmental or public institution or a public traffic system or services of supply or of the operation of these means aiming to cause the death or a grievous bodily injury of another person or the destruction of the place, institution or system to a high degree, as far as the destruction is appropriate to bring about a considerable economic damage;

  8. of a criminal offense which shall effect the death or a grievous bodily injury of a civil person or another person not being actively involved in the hostilities of an armed conflict if this act is aimed by the reason of its nature and the circumstances at threatening a group of the population or forcing a government or an international organization to an action or omission; is to be sentenced to imprisonment from six months to five years. But the nature and extent of the sentence must not be severer than the penalty provided for the financed offense.

(2) The offender shall not be punished under paragraph 1 if the offense is subject to a severer penalty under another provision.”

175. This provision, largely in line with Article 2 of the 1999 ICSFT, criminalizes the provision or collection of assets with the intent that such assets be used for committing one of the listed offenses, including hijacking, kidnapping for ransom, offenses against internationally protected persons, offenses involving misuse of nuclear material, offenses against airport staff or material, offenses against the safety of navigation, terrorist bombing or any other terrorist offense against civilians in armed conflicts. The offenses listed by Article 278d mirror the offenses which fall within the scope of the nine international treaties appearing in the annex to the ICSFT and the language of Article 2, Paragraph 1 (b) of the ICSFT and thus fully cover the FT offense defined under its Article 2, Paragraph 1.

176. The StGB has also a separate provision (Article 278c) which criminalizes the commission of terrorist criminal offenses.14 These acts are series of offenses set forth by the StGB or by special laws and coincide to a certain degree with the list of offenses referred to by the FT provision; when they amount to acts of terrorism, the maximum punishment which is set forth for the offenses by the specific provisions of the StGB is increased by half, but it cannot exceed 20 years of imprisonment.

177. As previously noted, the FT offense of Article 278d technically refers to the offenses set forth by Article 2, paragraph 1 of the ICSFT rather than to those listed in the StGB (Article 278c). This distinction is relevant for the following reason: Article 278c, paragraph 3 introduces an exclusion of criminality for the offenses considered as terrorist acts listed in Paragraph 1, because it states that “the offense is not regarded as terrorist criminal offense if it is directed to the establishment or re-establishment of a democratic and constitutional situation or the exercise or observance of human rights.” In this case, the offenses are not considered “terrorist criminal offenses” under Article 278c and are punished according to the penalties set forth by the specific provisions of the StGB. This exclusion of criminality, which was criticized by the UN Sanction Committee, although not technically applicable to the case of FT (because Article 278d does not cross refer to 278c), has some cascading effects on other elements of SR.II, discussed below.

178. Article 278d does not explicitly indicate whether the indirect provision/collection also constitutes FT, but the authorities clarified that this case would nevertheless trigger criminal responsibility under Article 278d. They quoted a case, currently pending at the stage of pre-trial, which involved the indirect collection of money through an organization which was then providing the funds collected to another organization situated in a conflict zone.

179. The prosecutors and judges met by the assessors also confirmed that the offense does not require that the funds be linked to a specific terrorist act, nor that a terrorist act is committed or even attempted; being sufficient the provision or collection of the funds or other assets with the intent they are intended to be used or they will be used for the commission of a terrorist act.

180. The term “assets of property” includes any funds in the term defined by the ICSFT, including funds from a legitimate or illegitimate source.

181. Attempt (including “participation in an attempt”) is criminalized for all offenses, including FT, in Article 15 of the StGB. The types of conduct set out in Article 2, paragraph 5 of the ICSFT -participation as an accomplice, organization and direction of others, contribution to the commission of the offense by a group of persons acting with a common purpose- are covered by Article 12 (“Treatment of all participants as offenders”) and 278b of the StGB (“Terrorist Association”) -though not in all instances. Article 12 covers participation as an accomplice, as it states that “a criminal offense is committed not only by the immediate perpetrator that commits the criminal offense but also by anybody who abets another person or who contributes to its perpetration in any other way.”

182. Organization and direction of others (in regard to the commission of terrorist acts) trigger criminal responsibility for “terrorist group” and in particular for “leading a terrorist association” (Article 278b, paragraph 1). A “terrorist group” is defined as a “union planned for a longer time of more than two persons aiming at the commitment of one or more terrorist criminal offenses—listed by Article 278c—by one or more members of the group. However, the scope of this provision is limited by the exclusion of criminality contained in paragraph 3 of Article 278c, in the sense that if the union is planned for the commission of acts listed in 278c but for the purpose of the establishment or re-establishment of a democratic and constitutional situation or the exercise or observance of human rights”, it will not qualify as a “terrorist group.”

183. More complicated is to envisage criminal responsibility for organization and direction of others, as well as contribution to the criminal activities committed by a group of persons acting with a common purpose when the organization and direction of others or the contribution are only in regard to FT (and not to the commission of terrorist acts). It appears that a group established for the sole purpose of FT is not subject to the criminal responsibility set forth in the case of a “terrorist group” under Article 278b, because of the reference to the acts indicated by Article 278c (which do not include Article 278d) as a qualifying element for the constitution of the offense. Nor can such criminal responsibility always be envisaged by applying Article 278 (Criminal association because when FT is a misdemeanor (i.e., when the act of FT is not punished with more than three years of imprisonment), it is not included in the list of misdemeanors which constitute one of the material elements of the criminal association.

184. The offense of FT as defined by Article 278d of the StGB adequately covers the material elements set out in Article 2, paragraphs 1, a and b and paragraph 5, a of the ICSFT, but it does not cover in all instances the direction and organization of others and the contribution to a group of persons acting with a common purpose (as required by Article 2, paragraphs 5, b and c, when organization/direction is solely for FT and when the group of persons has only FT as a common purpose).

185. The offense of FT is also not entirely consistent with SR.II. in the sense that it does not fully cover the financing of terrorist organizations and the financing of the individual terrorist regardless of whether that financing is for criminal activities, legal activities or general support. The provision/collection of funds for a terrorist organization or for the individual terrorist would not amount to a criminal offense unless it can be established that the perpetrator knew (also by the broader standard of the dolus eventualis, which is applicable in the case of FT, as discussed later) that the funds are intended to be used or will be used for the commission of a terrorist act as defined by Article 278d.

186. In the case of financing of a terrorist association, the authorities are of the opinion that Article 278b, paragraph 2, in combination with Article 278, paragraph 3, provides ground for the criminalization of financing the terrorist organization per se, regardless of whether that financing is for committing terrorist acts, criminal activities, legal activities or general support. Article 278b, paragraph 2 criminalizes the participation in the terrorist association as a member, and for the definition of “member” it refers to Article 278, paragraph 2. Indeed this provision criminalizes in broad terms as “member participation in a criminal association” whoever participates in the association’s activities “by providing assets or in another way with the knowledge that he/she promotes thereby the association or its criminal acts.” The authorities maintain that the mere provision of funds or other assets with the aim of promoting the association or its acts would be sufficient to constitute the offense of “participation as a member” in the association, and to apply the relevant punishment. They state that, mutatis mutandis, this can also be applied to the provision/collection of funds for a terrorist association, even in the case of a single act of provision/collection. However, the exception of criminality set forth in paragraph 3 of Article 278c would constitute an impediment to pursue the financing of a terrorist association (or the individual terrorist) in the sense indicated by the authorities (participation as a member), because if the acts are committed for one of the purposes indicated in these provisions, they are not deemed as terrorist acts and, consequentially, an association established for these purposes would not be considered a terrorist association.

187. The financing of the individual terrorist regardless of whether that financing is for committing terrorist acts, criminal activities, legal activities or general support can only trigger criminal responsibility if it can be proved that the financier was at least aware that the funds were meant to be used or intended to be used for the commission of a terrorist act (including if the knowledge is in the form of dolus eventualis: the authorities indicated the example in which the financier accepted the possibility that the person could be part of a dormant terrorist cell, in which case this would suffice to trigger the criminal responsibility for FT).

Predicate Offense for Money Laundering (c. II.2)

188. The FT is a predicate offense to ML, as Article 165 of the StGB (“Money Laundering”) explicitly cross-references to Article 278d (“Financing of Terrorism”).

Jurisdiction for Terrorist Financing Offense (c. II.3)

189. FT offenses apply regardless of whether the person alleged to have committed the offense(s) is in the same country or a different country than the one in which the terrorist(s)/terrorist organization(s) is located or the terrorist act(s) occurred/will occur. As mentioned earlier, a case which is currently in a pre-trial phase involves the collection and provision of funds through an organization in a third country that is experiencing a conflict.

190. The FT offense applies if the provision or collection of assets takes place in Austria, irrespective of the place where the terrorist act is, or is planned to be committed. If the FT offense itself was committed abroad, according to Article 64, paragraph 1(10), Austria may have jurisdiction only if: (i) the perpetrator was Austrian at the time of the offense or he/she has gained the Austrian citizenship afterwards and is still in its possession at the time of the institution of criminal proceedings; or (ii) the perpetrator was a foreigner at the time of the offense, but is in Austria at the time of prosecution and cannot be extradited.

The Mental Element of the FT Offense (applying c. 2.2 in R.2)

191. The criterion is met.

Liability of Legal Persons (applying c. 2.3 & c. 2.4 in R.2)

192. The criterion is met.

Sanctions for FT (applying c. 2.5 in R.2)

193. The penalty that the FT offense carries is a prison term ranging from six months to five years, but the sentence imposed must not exceed the penalty provided for the financed offense and the offender will be punished to a more severe penalty if the FT is subject to a more severe penalty under another provision. The authorities explained, regarding the principle of penalty equation with the financed offense or its total consumption by a more severe penalty, that this derives from the accessory nature of the FT offense, which would normally be regarded as an act of aiding and abetting and thus would, under general criminal law principles, carry exactly the same penalty as the main offense. However this may create an issue with respect to the specificity of the financed offense (considering that, according to the international standard, there should not be a specific linkage between the financing and a specific terrorist act).

194. Legal persons can also be held criminally responsible for FT. Article 4 of the VbVG provides for a maximum fine of 100 daily rates for the offense of FT. Therefore, the maximum fine for FT for legal persons and entities is—as it is for ML—EUR 1,000,000.

195. The sanctions for natural persons appear to be too low, both in their minimum and their maximum, and therefore are not effective, nor proportionate or dissuasive.

Implementation and Effectiveness

196. The statistics available only show the number of investigations on FT cases. The authorities informed the assessors that between 2003 and 2006, 18 criminal cases related to FT were registered, but none of them led to an indictment (see breakdown below). In 16 cases, the proceedings were dismissed by the public prosecutors. In 2007, four FT cases were registered (two criminal investigation by public prosecutors and two preliminary investigations by investigative judge). Three of them have been terminated, one case is still pending. The authorities also reported that there was no conviction for FT between 2004 and 2007.

197. In 2003, four criminal cases related to FT were registered: criminal investigations were conducted by public prosecutors in three cases and a preliminary investigation was conducted by an investigative judge in the fourth. In 2004, five FT cases were registered: criminal investigations were conducted by public prosecutors in four cases and a preliminary investigation was conducted by an investigative judge in the fourth case. In 2005, three criminal investigations were led by public prosecutors. In 2006, six criminal investigations were conducted by public prosecutors and two preliminary investigations were led by investigative judges.

198. On March 12, 2008, a court sentenced a couple in Austria on the basis of charges of membership in a terrorist association (Al-Qaeda), threatening the Austrian Government, as well as attempted coercion for producing video promoting Al-Qaeda. The Supreme Court annulled the verdict on procedural grounds and remitted it to the court for re-examination.

199. The authorities deem the risk of FT in Austria low, compared with other European jurisdictions; the existence of 18 criminal investigations since 2003 show attentiveness to the risk that FT may pose.

2.2.2 Recommendations and Comments

200. The authorities should:

2.2.3 Compliance with Special Recommendation II

article image
article image

2.3 Confiscation, freezing and seizing of proceeds of crime (R.3)

2.3.1 Description and Analysis

Legal Framework

201. The Austrian criminal law provides for two possibilities to confiscate property that has been laundered or which constitutes proceeds of any ML, FT or other predicate offense: confiscation of profits (“Abschöpfung der Bereicherung”, Article 20 of the StGB) and forfeiture (“Verfall”, Article 20b of the StGB).

202. In addition, a third possibility is offered for the removal of instrumentalities used in and intended for use in the commission of any ML, FT or other predicate offense. For these, Article 26 of the StGB (confiscation, “Einziehung”) provides the confiscation of “objects which have been used or have been intended to be used to commit an offense or have been produced by this offense” if this is necessary to counteract the commitment of offenses.

203. Confiscation of profits applies to economic benefits derived from any criminal offense, whereas forfeiture to property being at the disposal of a criminal organization (Section 278a) or a terrorist group (Section 278b), or property that has been provided or collected as a means for financing of terrorism (Section 278d). In the latter case, property can be forfeited, even if it derives from an offense where Austrian jurisdiction does not apply, if the offense is punishable under the law of the State where it was committed. According to Article 65a of the StGB confiscation and forfeiture “apply to all property items in Austria.”

204. The decision of confiscation or forfeiture can be made either as part of the main criminal trial (if any) or separately (Sections 443, 445 and 445a of the StPO: in the case in which there is no conviction but sufficient grounds for an offense, the prosecutor can initiate another proceeding for confiscation or forfeiture).

Confiscation of Property related to ML, FT or other predicate offenses including property of corresponding value (c. 3.1) and Confiscation of Property Derived from Proceeds of Crime (c. 3.1.1 applying c. 3.1)

205. As mentioned above, in the Austrian criminal law “confiscation of profits” and “forfeiture” are provided in regard to property that has been laundered or which constitutes proceeds of ML, FT and other predicate offense. These measures apply to property that is derived directly or indirectly from proceeds of crime, including income, profits or other benefits from proceeds of crime, regardless of whether the property is held or owned by a third party. “Confiscation of profits” is value-based, so it also applies to property of corresponding value. For instrumentalities used in and intended for use in the commission of ML, FT or other predicate offense, “confiscation” will apply as set out by Article 26 of the StGB.

Confiscation of Profits (Article 20 of the StGB)

206. Confiscation of profits applies to a person who has committed an offense (including misdemeanors) and has obtained economic benefit from it, or has received economic benefit for committing an offense. The language used by the provision requires an illegal act only in objective terms, as a result of which the punishability of the offender is irrelevant for the confiscation of profits. The Austrian regime of confiscation of proceeds is value-based, so the person subject to confiscation under Article 20 will be issued a court order to pay an amount of money equivalent to the illegal profits gained. If the extent of the profits cannot be established at all, or cannot be established without disproportionate expenditure, the court may fix the sum of money to be confiscated according to its conviction.

207. Furthermore, under Article 20 the court may confiscate property that cannot be directly linked to a specified offense, based on a rebuttable legal presumption that benefits a defendant holds derive from other, non-identifiable offenses. This partially reverses the burden of proof. In this case there is no need for the prosecutor to prove that the money is the proceeds of a specific offense. This applies with regard to:

208. Under Article 20, paragraph 4, the value-based confiscation regime also covers third persons that benefit illegally and directly from an offense committed by another person, or from the economic benefit given for the commission of such an offense, as such persons may also be ordered to pay an amount of money equivalent to these profits. This applies mutatis mutandis to legal persons and partnerships that have gained profits. If the person who has gained illegal profits has died, or if the legal person or partnership has ceased to exist, the profits are to be confiscated from the legal successor insofar as they were still existent at the moment of transmission of rights (paragraph 5).

Forfeiture (Article 20b of the StGB)

209. Criminal forfeiture applies in two cases, namely when:

210. The forfeiture provision at Section 20b is aimed specifically at forfeiting property at the disposal of criminal organizations or terrorist groups (defined in Articles 278a and 278b). Such forfeiture does not require prior conviction, but the existence of a “criminal organization” or of a “terrorist group” has to be established and proved. This type of forfeiture has been very rarely applied, because, as indicated by the authorities, of the difficulty to prove the elements of a “criminal organization.” According to Article 278a, “criminal organization” is defined as an “association of a considerable number of persons, intended to last a longer period of time and similar to an enterprise.” The elements that constitute this crime include (as in the case of criminal association) any activity done in relation to the organization regardless of whether or not the action in and of itself is a crime. However, in the case of “criminal organization” the several conditions set out in Article 278a must exist simultaneously in order to fulfill the elements of the crime: the criminal organization has to be designed to exist for a longer period of time (indefinitely or at least for several weeks; the case law says at least about three months); the union has to be constructed “similarly to an enterprise”, which implies division of labor (for example into planning and implementation), hierarchical structure (that some have the authority to give directives and that others have to follow directives) and a specific existing infrastructure (for example organizational capabilities). The “considerable number of persons” has been defined in case law as meaning ten persons or more.

211. Forfeiture can also be applied to property “abandoned” in Austria and derived from an extraterritorial offense over which Austria has no jurisdiction but is punishable under the law of jurisdiction where it was committed. Authorities explained that this provision also covers the case in which the property is indirectly held by the criminal organization or terrorist association (as in the case of a straw-man); the main requirement is to prove that the property (which can be any type of property) is at “the disposal” of the criminal organization/terrorist association.

Confiscation (Article 26 of StGB)

212. According to this provision, which deals with instrumentalities, “Objects which have been used or have been intended to be used by the perpetrator to commit an offense or have been produced by this offense shall be confiscated, if the confiscation seems to be required by the special condition of the objects to counteract the commitment of offenses.” This provision allows for the confiscation of instrumentalities that are “objects”, not money which is subject to confiscation under Article 20 or forfeiture if it is at the disposal of the criminal organization/terrorist group. Confiscation of instrumentalities is also possible in the absence or a conviction or if the person cannot be subject to prosecution, as explicitly stated by Article 26, paragraph 3.

213. There are several exclusions from confiscation, confiscation of profits and forfeiture:

Provisional Measures to Prevent Dealing in Property subject to Confiscation (c. 3.2)

214. Provisional measures are provided for in Articles 109-115 of the StPO. These are “Seizure” (Sicherstellung, Article 110 of the StPO) and “Sequestration” (Beschlagnahme, Article 115 of the StPO). In addition to these measures, the A-FIU has the authority to block ongoing or to postpone imminent transactions that are reasonably suspected of serving the purpose of ML or FT, under various laws.

Seizure

215. According to Article 109-110 of the StPO, seizure consists of a temporary constitution of authority to dispose on objects, the prohibition to surrender objects or other assets to third parties and the prohibition to sell or pledge such objects and values, if these objects or assets are required for evidentiary purposes, or for securing civil claims, confiscation of profits (Article 20 of the StGB), forfeiture (Article 20b of the StGB), confiscation (Article 26 of the StGB) or any other order relating to property rights provided for in the law. Seizure is ordered by the office of the public prosecution and is executed by the criminal police (Article 110, paragraph 2). In certain instances (Article 110, paragraph 3)15, the criminal police is entitled to seize objects at its own discretion, but has to report to the office of public prosecution immediately and at the latest within 14 days from the seizure (Article 113, paragraph 2).

Sequestration

216. According to Articles 109 and 115 of the StPO, sequestration consists of a decision of the court to constitute or continue a seizure order, and in the prohibition, also ordered by a court, “to alienate, encumber or pledge real estates or rights listed in a public register” (Article 109, paragraph 2b). The sequestration is admitted if the objects seized presumably are required as evidence in a subsequent proceeding, are subject to civil law claims or will be needed to ensure a judicial decision on the confiscation of proceeds of crime, on forfeiture, on confiscation, or on any other order relating to property rights provided for in the law whose execution would otherwise be endangered or made considerably more difficult. Upon request of the office of public prosecution the court has to decide “immediately” about the sequestration.

217. Since Austria’s confiscation system is value-based and the purpose of the provisional measures is to safeguard any eventual value-based confiscation order, the seizure and sequestration can apply to legal, as well as illegal, property; in the case where seizure/sequestration are ordered to secure a judicial decision on the confiscation of proceeds of crime or forfeiture, an amount of money that will cover the presumable confiscation of proceeds of crime or the presumable forfeiture will have to be determined (Article 115, paragraph 5).

218. It has to be noted that, according to Article 110, paragraphs 4 and 115, paragraph 3 the seizure and the sequestration of objects for reasons of evidence is not admitted and in any case has to be terminated if the affected person requests it, “if and as soon as the aim of the evidence can be met with picture, sound or other recordings or with copies of written documents or data processed automation-aided and if there is no reason to assume that the seized objects themselves or the original versions of the information seized will have to be inspected during the court proceeding.”

A-FIU’s Power to Stop Transactions (Preliminary Injunction “Anordnung”)

219. In addition to seizure and the sequestration, another provisional measure available in the Austrian system is the power of the A-FIU to block an ongoing or postpone the execution of an imminent transaction reasonably suspected of serving ML or FT. This power is set forth in Article 41, paragraph 3 of the BWG, Article 98f, paragraph 3 of the VAG and Articles 6 &12, paragraph 4 of the WAG (similar provisions are contained in the legal acts for the remaining financial sector and the DNFBPs). According to these provisions, financial institutions and DNFBPs are obliged to inform the authorities without delay about transactions suspected of ML/FT. In such cases, the further execution of the transaction has to be stopped unless there is a risk that a delay in the transaction would complicate or obstruct investigations (Article 41, paragraph 1 of the BWG, Article 98f, paragraph 1 of the VAG, Articles 6 and 12, paragraph 4 of the WAG). The transaction can only be executed at the end of the following business day, unless otherwise instructed by the A-FIU.

220. If the A-FIU deems it appropriate, it can order the financial institution/DNFBPs not to execute the transaction. In this case, the A-FIU has to notify the client and the prosecutor forthwith upon taking such a measure. The notification of the client must contain the information that he/she, or any other thereby affected individual/entity, is entitled to file a complaint with the Independent Administrative Court for violation of his/her rights. The A-FIU will have to lift the order as soon as the reasons for blocking or postponing the transaction no longer exist, or when the prosecutor rules that the preconditions for confiscation, as defined in Article 109, no. 2 and 115, paragraph 1, no. 3 of the StPO no longer exist (these are the conditions for applying sequestration). Otherwise such a blocking or postponing order taken by the A-FIU expires 6 months after being issued or when a court imposes sequestration pursuant to Article 109, no. 2, and 115, paragraph 1, no. 3, of the StPO (Article 41, paragraph 3a of the BWG, Article 98f, paragraph 4 of the VAG and Articles 6 and 12, paragraph 4 of the WAG; see also Chapter 3.6, crit. 13.1).

Ex Parte Application for Provisional Measures (c. 3.3)

221. Seizure and Sequestration are applied ex-parte, with an order by the office of the public prosecution or by the criminal police in the circumstances set out in Article 110, paragraph 3, in the case of seizure. Sequestration has to be requested to the court by the office of the public prosecution “immediately.” No prior notice is required.

Identification and Tracing of Property subject to Confiscation (c. 3.4)

222. It should be noted that Austrian criminal procedural law is based on the principle of legality, which makes it mandatory for law enforcement agencies to start an investigation if there is suspicion that a criminal offense has been committed (Article 34, paragraph 1, Article 36 and 99-100 of the StPO). This principle also applies to the identification and tracing of property that is subject to confiscation or suspected of being the proceeds of crime or used for FT. In such cases, the criminal police may take the necessary provisional measures (seizure) in order to secure the property, and prosecutors may make applications to the court for sequestration.

223. Credit and domestic financial institutions according to Article 1, paragraph 2 of the BWG (as well as DNFBPs) are required, upon request, to provide the A-FIU “with all information which the authority (that is the A-FIU) deems necessary in order to prevent or pursue cases of ML or FT” (e.g., Article 41, paragraph 2 of the BWG). In such case the A-FIU can request the information without the need of a court order.

224. However, this does not apply to other law enforcement agencies investigating ML or FT, or in those situations where the financial institution or DNFBP has refused to comply with the A-FIU’s request and the A-FIU must seek an order to compel the production of, or search persons and premises for, the documents. Up to now there was only one case known regarding the refusal of answering a request by the A-FIU, which was deferred by the reporting entity to the Independent Administrative Tribunal (Unabhängiger Verwaltungssenat, UVS). The UVS decided that the request by the BKA was legal and the information was subsequently transmitted to the BKA.

225. Specific provisions exist to empower the police and the A-FIU to access to information on bank accounts and bank operations. In such cases, for financial institutions, Article 116 of the StPO on “information on bank accounts and bank operations” will apply.

226. This provision requires that the disclosure of information on bank accounts and bank operation is admitted “if it seems necessary to ascertain a criminal offense or a misdemeanor under the jurisdiction of the regional courts (that includes ML) and sets the principle of “judicial admission” for access to the information” (including for the search of the credit and domestic financial institutions according to Article 1, paragraph 2 of the BWG). This means that the office of the public prosecution must demand a court order and admission of the disclosure (or search).

227. The fact that in the above mentioned instances a court order is required to request (for law enforcement agencies) or to access/compel the information (for law enforcement agencies and the A-FIU) would not be an issue per se, except that the conditions for admitting the order are quite restrictive. The prosecutor must show on the basis of specific circumstances that the business relation of a person with the credit or financial institution is actually “connected to committing a criminal act” and that “either the holder of the account himself/herself is suspected of having committed the act or it is presumed that a person suspected of having committed the act will operate or has operated a transaction via the account”, or that “the business relation will be used for the transaction of a financial benefit that was gained through criminal acts or gained for them (Article 20 StGB) or is subject to the disposition of a criminal organization or terrorist group or is provided or collected as a means of financing terrorism (Article 20b StGB).

228. According to paragraph 4 of Article 116, the order and admission of the disclosure of information have to contain:

229. Specifically, the court has to consider the issue of proportionality, that is, whether the disclosure and expected results are justifiably proportionate to the presumed infringement upon the rights of disinterested third parties and whether there could be also a reasonable chance of achieving the same result by taking less intrusive measures.

230. In the case of DNFBPs protected by professional privilege (lawyers and notaries) the conditions set forth in Article 9(4) RAO and 37(4) NO), discussed under the DNFBPs section, will apply. The very broad notion of “legal advice” (also discussed in that section) may substantially limit the right of law enforcement agencies to obtain information.

Protection of Bona Fide Third Parties (c. 3.5)

231. Specific provisions exist for the protection of bona fide third parties and, in any event, the State is ultimately responsible under the Public Liability Act for any decision taken by public authorities that violates private individuals’ rights. Articles 20c and 26 of the StPO provide for abstention from forfeiture and confiscation if the property concerned is legitimately claimed by a person who has not participated in the offense or in the criminal organization or in the terrorist association (Article 20c) or for “objects” which are legitimately claimed by a person who has not participated in the offense, in which case they will only be confiscated if “the person concerned does not guarantee that the objects will not be used to commit the offense” (Article 26, paragraph 2). In the case of the A-FIU’s power to freeze a transaction, the customer or “another party concerned” has the right to file a complaint with the Independent Administrative Tribunal or a complaint under Article 67 of the AVG.

Power to Void Actions (c. 3.6)

232. Adequate provisions exist also for voiding contracts that aim to frustrate claims resulting from the operation of AML/CFT laws.

233. Concerning the possibility of voiding contracts that aim to frustrate seizure, confiscation or forfeiture orders, the authorities pointed to Article 879 of the Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB), which states as a general rule that contracts which violate existing (statutory) laws or which are contra bonos mores are null and void. This applies, for example, if the conclusion of the contract itself constitutes a criminal offense or if the contract was concluded with the intention to hinder the State’s ability to recover legitimate financial claims. In addition to and irrespective of any such nullity, any act (like the conclusion of contracts or the transfer of assets) of a debtor that prevents any of his/her creditors from satisfying their legitimate claims may be contested under insolvency law and creditor’s avoidance of transfers law.

Additional Elements (Rec 3)—Provision for a) Confiscation of assets from organizations principally criminal in nature; b) Civil forfeiture; and, c) Confiscation of Property which Reverses Burden of Proof (c. 3.7)

234. The Austrian confiscation regime does not authorize civil (in rem) forfeiture, but provides for the forfeiture of property belonging to organizations that are found to be primarily criminal in nature (Article 20b of the StGB, in regard to property that is at the disposal of a criminal organization or a terrorist association).

235. Confiscation of such “membership benefits”—in principle—does not require a prior conviction for membership in a criminal organization or terrorist group, and the confiscation procedure is based on the partial reversal of the burden of proof in that the person subject to it has to show that the alleged benefits did not derive from his/her membership in a criminal organization or terrorist group. Legally, this provision operates on the basis of a legal presumption that any property within the possession of a person convicted to belong to a criminal organization or terrorist group does originate from such membership, but he/she can rebut it by making plausible to the court that his/her property came from a legitimate source.

Effectiveness

236. While the legal framework for the confiscation regime is robust in that it provides for a wide range of confiscation, seizure and provisional measures with regard to property laundered, proceeds from and instrumentalities used in and intended for use in ML and FT or other predicate offenses, and property of corresponding value, issues can be raised about its effectiveness.

237. Some of these issues stem from the restrictive conditions envisaged in certain instances, such as in the case of forfeiture of property at the disposal of the criminal organizations (for the difficulties to prove all elements constituting a criminal organization) or for the conditions for law enforcement to have access to information from financial institutions/DNFBPs (with the exception of A-FIU when investigating ML) or to compel documents held by these institutions. A particular concern is that, in practice, it seems that forfeiture of property at the disposal of the criminal organization or the terrorist group has not yet been applied (no specific figures were provided by the authorities in regard to this measure).

238. Although neither confiscation of profits or instrumentalities nor forfeiture require a criminal conviction, the authorities indicated that confiscation without conviction is rare in practice.

239. It is difficult also to ascertain the value of property which was subject to final confiscation in the statistics provided by the authorities (for the period 2004-2006), as the amounts indicated include also property subject provisional measures (which are not final measures). But even looking at these overall figures (which may be lower in reality if referred to confiscation only), there is a considerable gap when these amounts are compared to the statistics provided in regard to the interim injunctions applied by the A-FIU.

240. The following table shows the number of cases and the amount of property seized according to the former provision of Article 144a of the StPO (which provided for provisional measures), confiscated or forfeited according to Section 20 and Article 20b of the StGB during the time period 2003-2006 (no statistics are available for 2007).

Statistical Table 14.

ML Offenses

(Article 165 StGB)

article image
Statistical Table 15.

Interim injunctions by court order applied for by the A-FIU

article image
article image

2.3.2 Recommendations and Comments

241. The authorities should:

2.3.3 Compliance with Recommendation 3

article image

2.4 Freezing of funds used for terrorist financing (SR.III)

2.4.1 Description and Analysis Legal Framework

242. In Austria, measures to freeze funds or other assets of terrorists, those who finance terrorism and terrorist organizations in accordance to the United Nations Security Council Resolutions (UNSCR) relating to the prevention and suppression of the financing of terrorist acts, are mainly implemented by means of directly applicable European Council Regulations (no. 881/2002 of May 27, 2002 and 2580/2001 of December 27, 2001, for UNSCRs 1267 and 1373, respectively). These Regulations are applicable for non EU-based entities or non EU residents or citizens listed as terrorists (hereinafter referred to as EU-externals). In addition to these Regulations, the EU adopted two Council Common Positions, No. 2001/930/CFSP and No. 2001/931/CFSP on the fight against terrorism, which are applicable also to persons, groups and entities based or residents within the EU (hereinafter referred to as EU-internals), but their implementation required subsequent enactment of either binding EU Regulations or national legislation. The “Official Announcements” of the OeNB, issued pursuant to the DevG (Federal Law Gazette I No. 123/2003) serve this purpose, to a limited degree, in Austria.

243. The freezing power referred to therein are therefore exercised, depending on the persons concerned, either through this directly applicable EU legislation or, to a certain extent, through the above mentioned legally binding: “Official Announcements” of the OeNB. In addition and regardless the freezing obligation pursuant to the UNSCRs, if a founded suspicion arises that funds belong to terrorists or terrorist organizations, prosecutors also have a duty to institute criminal proceedings and apply for appropriate measures at court (provisional injunctions to freeze property, such as seizure or sequestration).

244. On September 3, 2008, the European Court of Justice issued a judgment in the Kadi and Al Barakaat International Foundation cases (C-402/05 P and C-415/05 P) that annulled the 2002 EU Council regulation that implements UNSCR 1267 and successor resolutions insofar as the regulation concerned the appellants. However, the Court in essence left the EU regulation in place for up to three months to permit the European Commission to remedy the violations found by the Court16.

245. The MoFA is the designated institution that collects and provides information to the UN Sanctions Committee on assets frozen in compliance with the relevant UN Resolutions.

246. Regarding the procedures for submitting national proposals in EU or UN-listing procedures, so far no proposal for a EU-or UN-listing has been put forward by Austria.

247. There are currently no funds frozen in Austria pursuant to UNSCRs 1267 and 1373 nor transactions were ever prohibited pursuant to the OeNB regulations based on Article 4 DevG. No violations of the freezing obligations have been recorded so far (therefore, no sanctions have been issued).

248. The 1267 list has currently one listing concerning a limited liability company formerly incorporated in Austria (Youssef M. Nada & Co. Gesellschaft M.B.H.). This company was dissolved on October 22, 2001, prior to the listing (which is dated November 2001) and subsequently deleted from the Commercial Register on November 14, 2003. The BVT reports that the accounts of the company were cleared before the listing took place in 2001, so no funds could be found after the listing.

249. There was only one case concerning the freezing of funds pursuant to UNSCR 1267. The account, on which USD 4,083.87 were deposited, had been inactive since February 19, 1987. On March 4, 2002 the bank concerned supplied additional information reporting that the account holder died on January 3, 1987. Thus, the account was apparently frozen by mistake.

250. Finally, the authorities indicated that a freezing action in regard to a flat was undertaken pursuant to (EC Regulation 881/2001, therefore based on a 1267 listing) against a Himmat Ali Ghaleb (discussed later on).

Freezing Assets under S/Res/1267 (c. III.1) and Freezing Assets under S/Res/1373 (c. III.2)

251. Austria’s framework for implementation of the financing of terrorism aspects of UNSCR 1267 and subsequent resolutions on the sanctions regime against Al-Qaeda/Taliban is through EC Regulation 881/2002. The implementation of UNSCR 1373 is through EC Regulation 2580/2001. These regulations are applicable in the case of EU externals only. For EU internals, the authorities consider that implementation of the relevant UNSCRs is through Official Announcement issued by the OeNB, pursuant to the Exchange of Control Act.

252. According to general European law principles, EU regulations are directly applicable in European national systems (EU member countries, as Austria), without the need of transposing these regulations into domestic legislation. As such, EC regulations 881/2001 and 2580/2001 serve as statutory law in Austria.

253. Under EC regulation 881/2001, all funds other financial assets and economic resources belonging to, or owned or held by a natural or legal person, group or entity designated by the Sanctions Committee and listed in the annex of the regulation shall be frozen. Annex I is regularly and promptly updated by the Commission every time a change is made to the UN list by the Sanctions Committee.17

254. The United Nations Security Council has indicated that the freezing orders be made within three working days after the date on which the UN determination has been made. A specific, accelerated procedure is followed to that end in the EU, which begins as soon as the European Commission is informed of a new determination and results in the publication of Regulations approved by the European Commission, which enter into force, with direct applicability across the EU, on the day of their publication. The European Commission does not give prior notice to the individuals and entities it designates, as this would undermine the effectiveness of the asset freezing. This has been upheld by the EU’s Court of First Instance.

255. Regulation EC no. 2580/2001 (based on Common Positions 2001/930/CFSP and 2001/931/CFSP) established a freezing mechanism applicable against a designated list of persons/entities that are non EU-based entities or non EU residents or citizens (“EU externals”). Article 2 of this regulation contains the obligation to freeze funds, other financial assets and economic resources belonging to, or owned or held by, a natural or legal person, group or entity that is designated and listed (EU-externals), as well as the prohibition of making available to these persons/entities any funds, other financial assets and economic resources.

256. The list of persons, groups and entities to which this Regulation applies is established, reviewed and amended by decision of the Council, acting by unanimity. When determining if a person, group or entity should be targeted by freezing measures, the Council has to follow certain criteria stipulated in Articles 1(4), (5) and (6) of Common Position 2001/931/CFSP (Article 2). The Council decision is replaced every time the Council amends it. The current list of targeted persons can be found in Council Decision 2007/868/EC. The Council does not give prior notice to the persons it designates, as this would undermine the effectiveness of the asset freezing.

257. Financial institutions, other relevant institutions and authorities are required to directly implement Regulations 881/2001 and 2580/2001 by freezing the assets without delay of the designated persons and entities without prior notice. Upon freezing, financial institutions and others must notify the OeNB that they have frozen funds. In accordance with the EU regulations, OeNB is then to report this information to the Commission.

258. While the definition of “funds or other assets” contained in the EC Regulations is consistent with the same notion in SR.III, the direct applicability in Austria of these EU regulations presents some difficulties in regard to the freezing of other assets than funds held by financial institutions, such as real estate, businesses or undertakings, companies and vehicles. For these assets, in the Austrian legal framework, the freezing is practically applicable (and only to a limited extent) principally to the case of transactions that require registration (such in the case of immovable property, where the MoJ has issued instructions to the courts that maintain registers of immovable goods not to register transactions for goods that belong to listed individuals or companies). Therefore, the freezing measures as practically applicable in the Austrian framework are not in line with the broad terms envisaged by the interpretative note of SR.III, that define freeze as “prohibit the transfer, conversion, disposition or movement of funds or other assets on the basis of, and for the duration of the validity of, an action initiated by a competent authority or a court under a freezing mechanism.” Moreover these freezing mechanisms do not allow a freezing “without delay” (in the sense required by SRIII).

259. The situation is particularly problematic for assets other than funds, as these assets may remain in the disposition of the listed persons, unless the act of disposition requires a transaction or contract that is subject to registration (and in Austria, in practice, this only applies to immovable goods, where specific MoJ decisions exist). In the case of immovable goods (such as real estate) the assessors were told that these goods are frozen only to the extent that any contract constituting rights on these assets which is subject to court registration will not be granted such registration (registration is a condition to transfer the right of property over an immovable good; the MoJ has issued specific instructions to the courts in this regard). For any other right that is not subject to court registration (such as a lease, for example), the authorities maintain that the contract will be considered null and void under Article 879 of the AGBG.

260. It has to be noted that in an Austrian court case concerning an immovable good owned by a person listed under EC Regulation 881/2002, the court established there is no obligation for the courts that maintain registers of immovable property to annotate on the register that the immovable good is subject to freezing under the relevant EU regulations. In the absence of an obligation to annotate the freezing (as it would be the case for provisional measures or for confiscation), the information on a good subject to freezing is seriously hindered.

261. Although, as in the case of immovable goods, the freezing would technically stem from the direct applicability of the EC Regulations it is not clear how the freezing obligation is implemented in practice in the case of other economic resources, such as companies or businesses and undertakings or vehicles held by listed persons. With regard to companies, the authorities indicated that when the sale of shares is subject to registration in the register of companies (as in the case of limited liability companies, for example) the register could deny such registration, by analogy with the registration of immovable goods in the relevant register. However, there is no case law or authority-issued instructions to confirm that this would be possible/required.

262. In regard to the implementation of UNSCR 1373 concerning persons, groups and entities based or residents within the European Union (EU-internals) which meet the criteria set forth by Article 1, c of the Resolution, these are excluded from the directly applicable requirements for the freezing of assets envisaged by the EC Regulation 2580, as noted earlier. These persons are listed in an Annex to the Common Position 2001/931/CFSP, which does not set directly applicable requirements in a EU country. This Common Position only requires EC countries to subject these persons to increased police and judicial cooperation between the Member States. Common Position 2001/930/CFSP, which also does not set directly applicable requirements in a EU country, requires EC countries to adopt freezing measures for funds and other financial assets or economic resources related to EU internals.

263. The authorities consider that the legal mechanism to address freezing obligations in the case of EU internals for the implementation of UNSCR 1373 in Austria is via Official Announcements of the OeNB setting regulations which can be issued pursuant to Article 3 of the DevG, in order to restrict capital movements under certain conditions, such as for complying with international legal obligations or for the protection of the legal interests of Austria.

264. The last regulation18 was adopted by the OeNB on 25 September 2008 in order to incorporate Common Position 2007/871/CFSP into domestic law.

265. However, these regulations do not constitute freezing mechanisms in the terms required by UNSCR 1373 and SR.III. as their scope is more limited. The requirements envisaged by the OeNB regulations are only applicable to the list of transactions described by Article 4 of the DevG these are transactions undertaken by or affecting rights of non residents, or involving foreign property owned by a resident or otherwise involving foreign means of payments, foreign currency or foreign securities.

266. While the banks met by the assessors were aware of the limitations set forth by the DevG for non-resident transactions they seemed not aware that the purpose of these provisions was the “freezing” terrorists’ assets. The nonbanking financial institutions met by the assessors seemed unaware of the existence of such “freezing” obligations.

Freezing Actions Taken by Other Countries (c. III.3)

267. For the lists of persons and entities designated for freezing purposes through the EU regulations, Austria can freeze funds in accordance with UNSCRs 1267 and 1373 directly through the EU regulation mechanisms (with the limits described in the case of other assets than funds). For EU internals covered and designated by Common Position 2001/931 but not Regulation 2580/2001) Austria relies (with the limitations described earlier) on the Official Announcements issued by the OeNB.

268. For persons and entities who do not appear on any EU list, but for which Austria receives a direct freezing request from other jurisdictions, as well as circumstances where a freeze is necessary because of other information that indicates a possibility of financing of terrorism (e.g., information received through a STR), Austria has a judicial-based mechanism for seizure and confiscation of terrorist funds and, in addition, the power of the A-FIU to block an ongoing or postpone the execution of an imminent transaction reasonably suspected of serving ML or FT. Austria can also use, under the conditions and for the cases set forth in the DevG (described below) the freezing mechanisms envisaged by such law.

269. With respect to the obligation to act without delay, Austrian law provides for such actions to take place in exigent circumstances without a court order (in the case of seizure, which can be applied in first instance by the prosecutor or by the police). The authorities indicated that usually a request from a foreign authority to freeze assets, either with the mutual legal assistance channels or through the A-FIU can be taken swiftly (precedents were pointed out to the assessors). A 24-hour hot-line is established within the MoI for the adoption of urgent measures. However, since these are criminal procedure-related freezing, the prosecutor will need to have some evidence to substantiate the suspicions in order to maintain the assets frozen with a sequestration order by court. As noted earlier, confiscation or forfeiture is possible in principle without a conviction, but court-admissible evidence should be given to prove that property is at the disposal of a terrorist group or which has been provided or collected as a means of financing terrorism; also the court will have to establish a “terrorist group” offense, according to Article 278b (with the limitations illustrated in the case of the exemption provided by Article 278c, paragraph 3).

Extension of c. III.1-III.3 to funds or assets controlled by designated persons (c. III.4)

270. As previously mentioned, the assets subject to freezing are defined in very broad terms by the EU Regulations (for they include funds, other financial assets and economic resources); these assets are those “belonging to, or owned or held by” the designated persons/entities, “however acquired.” The language covers funds or other assets that are either directly or indirectly owned or controlled. While the EU Regulations are not explicit on the point of joint ownership, (rather implicitly recognizing that joint ownership is a form of ownership), the EU Best Practice of November 29, 2005 for the effective implementation of restrictive measures, which Austrian authorities are prepared to follow, provides that “funds and economic resources jointly owned by a designated person or entity and a non-designated one are in practice covered in their entirety. The nondesignated person or entity may subsequently request an authorization to use such funds and economic resources, which may include severing the joint ownership so that person’s share can be unfrozen.” More in general the Best Practice clarifies that “Holding or controlling should be construed as comprising all situations where, without having a title of ownership, a designated person or entity is able lawfully to dispose of or transfer funds or economic resources he, she or it does not own, without any need for prior approval by the legal owner.”

Communication to the Financial Sector (c. III.5)

271. The Council and the European Commission make their regulations and decisions public through the Official Journal of the European Union, which can be accessed by anyone on the website of the European Union. The authorities consider that publication in the official journal is sufficient notification to all for whom the legislation creates obligations and rights. For the same reason authorities consider that publication in the Official Gazette of the regulations of the OeNB and on it its website constitutes sufficient notification to the financial sector. Some of the financial institutions which have correspondent relationships with the United States stated that they also receive the OFAC lists. These, as well as other lists, are supplied directly by external data providers.

272. The Austrian authorities indicated that they provide sanctions-related information to the relevant institutions. This dissemination also includes information on changes concerning foreign “national terrorist lists” for example, the OFAC list provided by the diplomatic representations of third countries forwarded to the MoFA or MoF. However, the financial institutions interviewed by the missions did not seem particularly clear to indicate which lists came or went or whose responsibility is was to send them.

Guidance to Financial Institutions (c. III.6)

273. With respect to communication and guidance, Austria relies in large part on the EU regulations itself to guide financial institutions and others, since the EU regulations have direct applicability to all EU entities and persons including those in Austria and there is a related obligation of Austria’s citizens and residents to know and act in accordance with the law.

274. The authorities indicated that the MoF, the OeNB or the WKO also provide detailed sanctions-related information either on individual request (by telephone or in writing) or due to recent developments of high importance. However, when meeting with the private sector, the assessors were informed of difficulties is ascertaining the accuracy of false hits, in the absence of an official provider of information on the listed names.

275. In particular, although law enforcement officials check listed names against various databases, it does not appear there is a routine check of property ownership registers (for instance companies register) to determine whether a named individual or organization holds property in Austria and action taken to encumber property. The MoJ has issued guidance to the courts that maintain immovable goods registers not to grant registration to real estate transactions if one of the parties is in the EU lists.

De-Listing Requests and Unfreezing Funds of De-Listed Persons (c. III.7)

276. Relevant European regulations do not provide for a national autonomous decision regarding de-listing and unfreezing as a whole. Requests for de-listing have to be directed through the Federal Ministry for European and International Affairs (MoFA) and its representative in the relevant UN/EU body to the UN Sanctions Committee or the European Commission whichever is concerned.

277. Requests for de-listing from the list of persons and entities comprised by the UN sanctions against Al-Qaeda and the Taliban (the UN list) and the list of persons and entities comprised by the restrictive measures in EU Common Position 931/2001/CFSP (the EU list, which in Austria is implemented through Regulations) are to be directed to the OeNB as the designated competent authority.

278. Delisting matters may also be pursued before the Austrian and EU courts. In the case of refusal of a request of delisting, the applicant can decide to have the matter presented to a national Austrian court or to the European Court of Justice. If the challenge is to the legality of a designation under the regulations, the European Court of Justice can hear the complaint if made within two months after the designation. If the legality of a designation is lodged before a Austrian court, the court can present this question as a prejudicial question to the European Court of Justice.

279. Unfreezing in the case of mistaken identity may take place in the Austrian system in accordance with the EU Best Practices paper (“Effective Implementation of Financial Restrictive Measures targeting Terrorist Persons, Groups or Entities”), that is, a person may have his case considered by the OeNB which serves as the Austrian competent authority. The same procedure can be pursued following the AVG or by filing a case before an Austrian court.

280. Designations under the Regulations adopted by the OeNB pursuant to the Exchange of Control Act may be challenged under the AVG.

Unfreezing Procedures of Funds of Persons Inadvertently Affected by Freezing Mechanism (c. III.8)

281. The usual protections under Austrian law to the rights of bona fide third parties are applicable in the case of freezing under the EU lists or a seizure otherwise ordered in the Austrian system. Specifically, there is access to the courts in Austria to challenge aspects of a freeze that adversely affects a person or entity. The court could in turn seek the advice of the European Court of Justice. In addition, if the freeze is imposed through Regulation 881/2002 or 2580/2001, persons or entities may institute proceedings before the European Court of Justice which is invested with authority to review the legality of such freezes. EC regulation 881/2002 at Article 6 also protects the good faith actions of freezing entities except when a freeze is due to negligence.

282. A person or entity who was erroneously listed by a regulation of the OeNB or a person whose funds were wrongly frozen by a financial institution may also seek damages in accordance with the Austrian law of damages and - where applicable - the Public Liability Act (Amtshaftungsgesetz, AHG).

Access to frozen funds for expenses and other purposes (c. III.9)

283. UNSCR 1267 as amended by UNSCR 1452 is implemented in the EU through a new Article 2a in EC Regulation 881/2002—directly applicable in Austria. This provision authorizes access to funds that are frozen for basic expenses, certain fees or for extraordinary expenses. The OeNB is the designated competent authority to receive requests from affected persons for exemptions. If so, the request is also notified to the Al-Qaeda/Taliban sanctions Committee which, within, 48 hours may object to the exemption. The OeNB must also promptly notify the person that made the request, and any other person, body or entity known to be directly concerned, in writing, whether the request has been granted or not. If the request is granted the OeNB has also to inform other Member States.

284. A procedure is also envisioned in Articles 5 and 6 of EC Regulation 2580/2001 which relates to designations emanating from UNSCR 1373. Under Article 5 the OeNB as the designated competent authority may grant a specific authorization to unfreeze funds for essential human needs under such conditions as it deems appropriate. Article 6 establishes a broader power for competent authorities of EU Member States to grant specific authorizations—with the view to protect the interest of the Community and the interest of its citizens and residents—after consultations with the other Member States, the Council and the Commission of the EU.

Review of Freezing Decisions (c. III.10)

285. As mentioned earlier, the freezing mechanisms envisaged by the relevant EC regulations can be challenged at the European Court of Justice by any natural or legal person that is directly and individually affected by it under the general principle established by Article 230 of the Treaty establishing the European Community. Under this general principle any natural or legal person may institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former.

286. A number of appeals against freezing orders based on Council Regulations (EC) no. 2580/2001 and 881/2002 are currently pending in the European Court of Justice. The appeals focus on claims that the human rights of the designated individuals, groups and entities were not respected. As regards Council Regulation (EC) no. 2580/2001, the Court of First Instance held in three judgments in 2006 and 2007 (T-228/02, People’s Mujahedin of Iran (OMPI), T-47/03, Sison, T-327/03, Stichting Al Aqsa) that the Council had to provide a statement of reasons to the designated individuals, groups and entities concerned, so as to allow them to make their views known on it and to allow the court to conduct a review. These judgments are final. The Court of First Instance upheld this line of argument on 3 April 2008 in the cases T-229/02 and T-253/04, Kurdistan Workers’ Party (PKK) and Kongra-Gel, which concern Council decisions made in 2002 and 2004.

287. On September 3, 2008, the European Court of Justice issued a judgment in the Kadi and Al Barakaat International Foundation cases (C-402/05 P and C-415/05 P) that annulled the 2002 EU Council regulation that implements UNSCR 1267 and successor resolutions insofar as the regulation concerned the appellants. However, the Court in essence left the EU regulation in place for up to three months to permit the European Commission to remedy the violations found by the Court. The Court found violations of fundamental human rights, specifically, the right of defense and the right to an effective legal remedy.

288. In cases where EU internals are designated by regulation of the OeNB the general principles of Austrian administrative law will apply, in particular Article 26 to 29 of the Administrative Court Act 1985 (Verwaltungsgerichtshofgesetz, VwGG).

Freezing, Seizing and Confiscation in Other Circumstances (applying c. 3.1-3.4 and 3.6 in R.3, c. III.11)

289. See analysis under paragraphs above.

Protection of Rights of Third Parties (c. III.12)

290. The rights of bona fide third parties affected by a freezing under the EU lists, OeNB designations or a seizure otherwise ordered in the Austrian system are protected by the relevant EC-Regulation as well as by the general principles of Austrian law.

291. If the freeze is imposed through Regulation 881/2002 or 2580/2001, the bona fide third party may institute proceedings before the European Court of Justice which is invested with authority to review the legality of such freezes. EC regulation 881/2002 at Article 6 also protects the good faith actions of freezing entities except when a freeze is due to negligence. There is access to the courts in Austria to challenge aspects of a freeze that adversely affects a person or entity: if the freeze (in the sense explained above) has been undertaken pursuant to the OeNB regulation the bona fide third party can also challenge it general principles of Austrian administrative law. Additionally, it also is a principle of the Austrian law of damages, that a person generally can only be held liable when it acted at least with negligence (see Article 1295 et seq. ABGB).

292. Finally, Articles 20c and 26, paragraph 2 StGB provide the legal basis for abstention from forfeiture and confiscation, if the property concerned is legitimately claimed by a person not having participated in the offense or in the criminal organization and are for this consistent with the standards provided in Article 8 of the Terrorist Financing Convention.

Enforcing the Obligations under SR.III. (c. III.13)

293. Authorities are of the opinion that compliance with the relevant legislation is being generally monitored on a regular basis in the financial supervisory process, conducted by the FMA for the overall sector, the OeNB for the banks, and by external auditors, as part of their annual review. The authorities indicated that, the assessment of FT is an integrated part of the examination procedure of the OeNB and that the examination methodology includes procedures to verify if the bank is in compliance with all provisions with respect to FT.

294. Assessors could not confirm that compliance to the obligations under SR.III. are routinely monitored, and are of the view that further steps should be undertaken, especially in regard to the implementation of the DevG.

295. There is authority to impose sanctions for non compliance of the freezing obligations. The DevG stipulates that non-compliance with regulations of the European Community or relevant Austrian Federal Government Regulations concerning the freezing of funds is an offense punishable with a fine up to EUR 30,000 or a term of imprisonment of up to one year. Furthermore, the conclusion of a transaction which constitutes an offense of this Act is null and void. No sanctions have been issued so far for non compliance to this provision.

Additional Element (SR.III)—Implementation of Measures in Best Practices Paper for SR.III. (c. III.14)

296. The authorities indicated that they have implemented the best practice paper for SR.III. by way of the EU and domestic legislation described earlier in this section and that they fully cooperate with foreign jurisdictions.

Additional Element (SR.III)—Implementation of Procedures to Access Frozen Funds (c. III.15)

297. See discussion under criterion III.9

2.4.2 Recommendations and Comments

298. The authorities should:

2.4.3 Compliance with Special Recommendation III

article image
article image

2.5 The Financial Intelligence Unit and its Functions (R.26)

2.5.1 Description and Analysis

Legal Framework

299. The Austrian laws and regulations do not explicitly provide for the establishment of a Financial Intelligence Unit (FIU), but each of the ten laws and regulations covering the subjected entities refer to an authority that is competent for the reception of STRs in the case of ML or FT. The description of the competent authority varies for each reporting entity. The authority is the Federal Ministry of Interior for banks, insurance companies, investment companies, securities institutions, and most of the DNFBPs, with the exception of notaries and lawyers who have to report to the Federal office of criminal investigation (BKA), and accountants who have to report to the ML unit of the BKA. Despite these slight differences, the common understanding amongst the authorities and reporting entities, and actual practice, is that the STRs have to be reported to the Austrian Financial Investigation Unit (A-FIU) in the BKA. This is supported by the BKA website, the FMA circulars for financial institutions and the OENK guidance for notaries, and explanatory notes of some relevant laws. The A-FIU both receives all STRs and conducts criminal investigations on ML cases. The same law enforcement officers perform both tasks.

300. If information received by the A-FIU meets the requirements of an STR as defined in the laws, the A-FIU has to open an investigation. Pursuant to Article 1, paragraph 2 StPO “criminal proceedings start, as soon as police or public prosecution initiate investigations again a known or unknown person in order to clarify the suspicion of a criminal act.” The requirement to report a transaction when the financial institution suspects or has reasonable grounds to suspect that it serves the purpose of ML or FT falls into the scope of Article 1, paragraph 2 StPO. Consequently, the role of the A-FIU, regarding information it receives from reporting entities, is limited to establish that the information it receives qualifies as an STR. In 2007, out of the 1,085 information recorded as “STRs” in the A-FIU statistics, 197 cases were related to 419 letters or phishing emails, which did not meet the definition of an STR.

301. When the A-FIU receives STRs related to FT, it has to forward them to the BVT which is the competent authority for FT. As they both are law enforcement units, the A-FIU and the BVT need the opening of a case to exercise their powers (request of information from reporting entities, from other administrations, international cooperation, freezing of assets, special investigative techniques). Consequently, there is technically no dissemination of information by the A-FIU but investigations are conducted by the A-FIU or forwarded to another competent authority.

302. Pursuant to Article 49, paragraphs 1 and 3 StPO, the suspect/defendant has the right, to be informed about the nature of the suspicion raised against him (Article 50 StPO) and to have access to files (Articles 51-53 StPO). The right to access files also includes the right to inspect exhibits, as far as this is possible without disadvantage for the investigation. Pursuant to Article 100, paragraph 3 StPO, the BKA report to the Prosecutor’s Office shall include “the names of the persons who filed the criminal complaint, names of the victims and, if applicable, other informants.” Under Austrian criminal law, when the preliminary proceedings ends or the case is final, the suspect/defendant is authorized to view all files related to the investigation (Article 194 StPO). This includes the STR with the name of the reporting entity. The right of the suspect/defendant to view all files related to the investigation can be restricted or certain data can be made anonymous, when there is danger for the personal security of an involved participant. But the right to access files may be limited only until the conclusion of the preliminary proceedings and is inadmissible if the suspect is in detention. (Article 51, paragraphs 2 and 3 StPO).

303. Following complaints by credit and domestic financial institutions, as their employees often felt exposed to potential threats or hostile action because they fear that their identity may become disclosed, a joint action plan by the authorities (MoF, A-FIU, MoJ, FMA, BVT and Federal Chancellery) and the financial sector (represented by the WKO) was agreed early November 2008. It contains measures to promote the protection of reporting entities and their employees (awareness raising campaigns both among the law enforcement authorities, public prosecutors, judges and the private sector; ordinances by the MoJ and the Federal Chancellery, anonymity of STRs, information on protective mechanisms contained in the StPO etc). Accordingly, a MoJ ordinance of November 11, 2008 gives guidelines regarding the protection of employees or reporting credit and domestic financial institutions.

Establishment of FIU as National Centre (c. 26.1)

304. In order to determine to what extent all the three core FIU-functions (reception, analysis and dissemination) are within the A-FIU’s responsibility and how effectively they are implemented, it is worth analyzing in detail how these three functions are carried out in the Austrian system.

305. The obligation to report STRs is mentioned in each of the ten laws and regulations organizing the AML/CFT framework for the financial and non-financial institutions, but the authority competent to receive those STRs is slightly different depending on each law and regulation, as this appears in the following table.

Statistical Table 16.

Reporting Entities

article image
article image

306. According to the laws, all financial institutions and most of the DNFBPs have to report to the authority under the Article 6 of the Security Police Act (Sicherheitspolizeigesetz, SPG) which is the MoI. It is constituted of the General headquarters for public security and the Federal Office of Criminal Investigation (BKA), the latter being organized according to a specific law, the BKA-G. Pursuant to Article 4(2) of the BKA-G, the BKA is competent to investigate ML in relation to the BWG, the BörseG and the WAG. The BKA-G entered into force in 2002, and as of that time only these laws contained ML and FT provisions. Concerning the FT, the BVT is the competent authority inside the Ministry of Interior. This is why, according to a letter from the BKA to the BVT, FT-related STRs are automatically forwarded to the BVT.

307. The organizational chart of the BKA shows a unit responsible for ML in the Department 3 (Investigations, Organized Crime and General Crime) which counts six sections, including one dedicated to Economic and Financial Investigations. One of its five units is the bureau 3.4.2, specialized on money laundering, also known as the A-FIU (Austrian Financial Investigation Unit). A similar unit was named EDOK until 2002, when the function of receiving STRs was absorbed by the BKA.

308. Despite the slight differences in the legal framework, it is commonly understood by the reporting entities that all STRs have to be sent to the A-FIU, and this appears to be the actual practice. This is supported by the BKA website, the FMA circulars for financial institutions, the OENK guidance for notaries, and explanatory notes of some of the relevant laws. Consequently, the A-FIU acts as a national center for receiving STRs and other reports concerning suspected ML, and STRs concerning FT activities. Suspicious transaction reports are usually transmitted by email, fax, post or courier to the A-FIU. The A-FIU also receives reports based on the suspicion of a violation of the obligation to disclose fiduciary relationships pursuant to Article 40, paragraph 2 of the BWG. It also receives reports related to withdrawal requests on savings deposit with a balance of at least EUR 15 000 when the identity of the customer has not being ascertained.19 Based on Article 4(2) of the BKA-G, local police services are also required to inform the A-FIU about ongoing cases of ML. Finally, on the basis of the constitutional principle of cooperation between administrative authorities (Article 22 B-VG), the BKA is also the recipient of ML-related information from other administrations. There is no specific guidance or written directive regarding the application of this principle in relation to the work of the A-FIU, but the authorities consider that such guidance would be superfluous, as this principle is commonly understood and actual practice throughout the Austrian administration.

309. In 2007, the A-FIU received 2,247 information, including 1,599 reports from the professions subjected to reporting obligations. Out of those reports, 460 came from other law enforcement units, 514 were mandatory reports in relation to savings accounts and 1,085 were recorded as “STRs”, even if 197 cases were related to 419 letters or phishing emails, which did not meet the definition of an STR. The reports are received by an officer on duty in charge of the reception of the STRs. This function of officer on duty changes on a daily basis. Outside business hours, STRs are received by the SPOC (Single Point Of Contact) of the BKA.

310. With the exception of FT-related STRs from the reporting entities, the A-FIU is not responsible for receiving other FT-related information from other administrations, as the BVT is sole responsible for investigating FT. The distinction concerning the authority in charge of receiving information related to ML, on the one hand, and FT, on the other hand is evident in Article 17c (2) of the Customs Law (Zollrechts-Durchführungsgesetz, ZollR-DG), which, in connection with the performance of the control of cash brought in to/out of Austria, states that the customs authorities must pass the data to the competent authority, these being the A-FIU for ML and the Federal Agency for State Protection and Counter Terrorism (BVT) for FT, to the extent that this is necessary to perform their statutory tasks. In case the A-FIU receives FT-related information, it is forwarded to the BVT.

311. Concerning the analysis function of an FIU, the A-FIU being a law enforcement unit, it investigates complaints or STRs received under the scope of its competence and has to systematically start criminal proceedings in order to clarify the suspicion of a criminal act (Article 1, paragraph 2 of the StPO). Consequently, an investigation is open for each information received from a reporting entity when it meets the requirements of an STR (e.g., not one of the 419 letters or phishing emails). Consequently, the A-FIU has no analytical function. Indeed, a police investigation (Article 16 of the SPG) or a criminal investigation (Article 100 of the StPO) will be open based on the specificity of the report (e.g., a STR on a transaction that serves the purpose of ML or FT), and not on the evaluation of its utility or relevance.

312. As the A-FIU does not conduct analysis, it has also no dissemination function. After reception of information that meets the requirement of an STR, the first step is the opening of an investigation by the A-FIU and then the investigation is performed either by the BKA or the local police authorities for ML, and the BVT for FT, according to their respective responsibilities. As law enforcement authorities, they are all empowered to conduct investigative actions, such as surveillance, interrogations, wire-tapping, search of premises or issuing warrants of arrest.

313. Pursuant to Article 4(2) of the BKA-G, the BKA competence is “the fight against ML in relation to the BWG, BörseG and WAG”, and the BKA will consequently be in charge of investigations of ML-related STRs received on the basis of these laws. The circular allocating the functions inside the BKA makes clear that the A-FIU is the unit in charge concerning the information received by the BKA pursuant to section 41 of the BWG. The ML-related STRs based on the VAG, the GSpG and the GewO could theoretically be received and investigated by any police service, including, but not limited to, the BKA. Concerning the ML investigations that are on its single competence, the BKA is authorized to entrust local police services with investigations at any time.

314. As the BKA is not competent for FT, the cases regarding FT-related STRs are directly forwarded by the A-FIU to the BVT for investigation. This is made clear in the 16 June 2003 letter 10002/756-II/BK/3.42/03 from the BKA to the BVT which says that “Notification of suspicion of terrorist financing or of membership in a terrorist organization remains the direct responsibility of the BVT because of its original competence for such matters.” At the BVT’s request, the BKA can provide support to the investigation. The same circular requests the BVT to immediately inform the BKA (Money Laundering Notification Office, SPOC) if the grounds upon which an order has been issued cease to exist, as this is necessary in order to comply with the legal obligations for revoking an order.

315. The following table summarizes the responsibilities for receiving, analyzing and disseminating disclosures of STR and other relevant information concerning suspected ML or FT activities in Austria.

Statistical Table 17.

FIU Functions

article image
Guidelines to Financial Institutions on Reporting STR (c. 26.2)

316. The A-FIU provides a specific reporting form for STRs which can be downloaded from the website of the Ministry of Interior (www.bmi.gv.at). This website also includes information on the procedures that have to be followed when reporting. The reporting entities have to check a box on the STR form to indicate if the suspicion is based on ML or FT. Upon the reception of the STR, an investigation will be opened by the A-FIU and if the FT box has been checked, the case will be automatically forwarded to the BVT. This is recognized by both agencies as an extremely quick and efficient process that enables the BVT to be in a position to take adequate measures. The A-FIU can also be contacted by reporting entities in order to receive guidance regarding reporting on a case by case basis. During business hours, the contact is through the unit 3.4.2 (A-FIU) and outside office hours, the reporting entities can contact the SPOC of the BKA. The reporting entities clearly identify the A-FIU as the unit to be contacted in case of a need for guidance regarding the manner and procedures of reporting. The A-FIU estimates being contacted more than 10 times a day by reporting entities concerning their reporting requirements. The reporting entities met by the assessors are fully aware of this possibility.

317. Additionally, the A-FIU provides information on reporting manners and procedures in informative meetings with reporting entities, either directly or organized by the reporting entities, the WKO, and the FMA.

Access to Information on Timely Basis by the FIU (c. 26.3)

318. Upon the reception of information by the A-FIU, no analytical function is performed on reports that meet the definition of a STR. A case is open and an investigation is started and conducted by the competent authority, either the BKA (including the A-FIU), the BVT or the local police with the powers set forth by the SPG and the StPO. FT investigations are always lead by the BVT itself or one of the LVTs. Local police authorities are consulted alternatively but they never lead FT investigations.

Additional Information from Reporting Parties (c. 26.4)

319. As investigations start immediately after the reception of STRs that meet legal requirements, all additional information is requested by the police authority in charge of the investigation, as part of the investigative process.

320. Once the investigation is open, the BKA is authorized to request directly all available and necessary information for ML and FT investigations from lawyers, notaries and accountants (see RAO, NO, WT-ARL and BiBu-ARL specify that it is the A-FIU) if released from the duty of secrecy by the client or if a judicial order is issued by the public prosecutor. Concerning casinos, gaming secrecy does not apply if released by the client or in the case of proceedings before civil courts and in connection with a criminal procedure subject to the StPO (Article 51 (2) GSpG). Concerning banks, insurance, investment and securities institutions, and other DNFBPs (see BWG, VAG, WAG, BörseG, and GewO), the relevant laws devolve the power to request information to the Federal Ministry of Interior, meaning that any department of the ministry, including the BVT is theoretically empowered to directly access financial information in the case of suspicion of ML or FT, based on its competence, without a court order. In practice, this power is exercised by the A-FIU. The authorities consider that the BVT would need a court order to request financial information from a reporting entity.

321. When related to a suspicion of ML or FT, the requested information is not subject to banking secrecy provisions. Persons and entities are obliged to provide the requested information to the relevant police authority. If the person or entity concerned refuses to provide information, sanctions may be imposed in accordance to Article 93, paragraph 2 StPO or a search warrant may be issued in accordance to Article 116, paragraph 6 StPO in order to enforce the obligation to disclose such information. Up to now there was only one case known regarding the refusal of answering a request, which was deferred by the reporting entity to the Independent Administrative Tribunal (Unabhängiger Verwaltungssenat, UVS). The UVS decided that the request by the BKA was legal and the information was subsequently transmitted to the BKA. In 2004 the BKA conducted 44 requests, 24 in 2005, 23 in 2006 and 105 in 2007, all towards banks. Even if police services other than the BKA could access financial information in case of a suspicion of ML or FT (except for lawyers, notaries and accountants), in practice all demands are centralized by the unit 3.4.2. of the BKA. As it is known as the A-FIU, it offers an identified point of contact for every financial and non-financial profession. In practice, the A-FIU acts as a single point of contact for requesting additional information from the reporting entities during ML and FT investigations.

Dissemination of Information (c. 26.5)

322. As mentioned earlier there is no dissemination function, as the reception of an STR on a transaction that serves the purpose of ML or FT, amounts to the beginning of a police or judicial investigation. When the reporting entities indicate that the STR is related to FT, the report is immediately forwarded to the BVT. In other cases the A-FIU decides, depending on its competence and on territorial competence of the local police if it continues the investigation or forwards it to another unit in the BKA or to a local police authority.

Statistical Table 18.

Authorities competent for investigating STRs

article image

323. It must be noted that each competent authority can request another police authority to provide support to the investigation. Following their investigations, the BKA, the Federal Police or the BVT have to systematically inform the Prosecutor’s Office.

Operational Independence (c. 26.6)

324. The unit 3.4.2 (A-FIU) that receives STRs is part of the BKA, which in turn is subordinated to the MoI. The BKA has its own budget but there is no specific budget line for the staff and operations related to the reception of STRs.

325. Concerning the rules of nomination and the obligation to report, the A-FIU staff in charge of receiving and investigating STRs is subject to the general rules of the Austrian police. Inside unit 3.4.2, there is no distinction of responsibilities between staff in charge of the FIU function (receiving the STRs, including providing guidance to reporting parties) and staff in charge of the police or criminal investigations for money laundering. Indeed, each staff member performs tasks across the scope of competence of the unit 3.4.2.

Protection of Information Held by the FIU (c. 26.7)

326. The A-FIU maintains separate archives and its own file management, which access is protected. Only staff members of the A-FIU have access to the locked archives. The information received by the A-FIU is recorded in the general database of the BKA. But, access to information in this database is restricted and different access rights are provided. In general, except for the staff of the A-FIU, a positive request will be linked to a number and the information that a file is possessed by the A-FIU. But some of the high ranking officials of the BKA are provided with full access rights to the database.

327. Examples of STRs sent to the A-FIU that have leaked in the press or to suspected persons during an investigation have been mentioned by reporting entities. Reporting entities mentioned cases were the local police had disclosed an STR to suspected persons in order to justify an ongoing investigation. According to the authorities, information that leaked to the press were forwarded by the suspect’s lawyers and other involved persons in the cases.

Publication of Periodic Reports (c. 26.8)

328. Since 2004 the A-FIU publishes annual reports that are presented in a press conference. These annual reports can be retrieved from the website of the MoI (http://www.bmi.gv.at/publikationen/). These reports describe detected and new trends and typologies, as well as information on the legal framework. They also include statistics regarding, among others, the number of STRs and breakdown by reporting entities, the number of anonymous savings account related reports, the cooperation with other countries, the predicate offenses concerning the STRs that are not related to self-laundering, the number of criminal charges for ML and the number of convictions. It should be noted that these reports are mainly oriented toward the ML-related activities and do not address explicitly FT.

329. The BVT has included a section on terrorism financing in its annual report, which is available on the website of the MoI. In the report for 2008, three pages were dedicated to FT, including an overview of trends and statistics.

Membership of Egmont Group (c. 26.9)

330. Austria is a founding member of the Egmont Group (1995) and regularly attends its meetings. It was first represented by EDOK and is represented by the A-FIU of the BKA since 2004.

Egmont Principles of Exchange of Information among FIUs (c. 26.10)

331. As a member of the Egmont Group, the A-FIU applies the Egmont Principles of Exchange of Information among FIUs which were adopted in The Hague on June 13, 2001. In 2007, the A-FIU sent/received information on 383 cases via the Egmont secure website. Additional information on international cooperation is provided under the analysis for R.40.

Adequacy of Resources to FIU (c. 30.1)

332. It is difficult to assess the adequacy of resources of the FIU functions of the Money Laundering Unit within the BKA because those functions are fully merged with the investigative functions. The latter is the main activity of the unit as the A-FIU is the only team dedicated to investigate ML in Austria. The staff of the A-FIU consists of the head, one secretary and three teams (total of 10 detectives21). The current resources concerning the investigation of ML cases have to be assessed regarding R.27.

333. In the absence of analysis, the reception of STRs is not the most costly function, especially in Austria where the level of STRs is relatively low, and there is no automated electronic transfer of data from the reporting entities. Reports may be sent by email but are not automatically integrated in the A-FIU database. The fact that the Money Laundering Unit performs both some FIU functions and investigations, put a constraint on resources and do not enable the unit to raise awareness on ML/FT typologies to reporting entities. Indeed, the staff of the A-FIU is in charge of the reception of STRs, ML investigations and some investigations on the predicate offenses.

Integrity of FIU Authorities (c. 30.2)

334. Regarding confidentiality, Article 20, paragraph 3 of the B-VG obliges all police officers and civil servants to professional secrecy. A breach of this principle can result in disciplinary measures, such as fines and dismissal. No specific provision applies concerning the dealing of information contained in STRs.

335. The current staffing of the Money Laundering Unit is made of law enforcement officers that have been trained to be detectives. They possess specialized knowledge to investigate white collar crime, mutual legal assistance, investigative methods, and computer handling. They are law enforcement officers, trained in search of premises, arrests, wire-tapping, international legal assistance and execution of letters rogatory, interrogations or surveillance methods. These appear to be appropriate skills to conduct police and criminal investigations.

Training for FIU Staff (c. 30.3)

336. It is possible for staff members of the Money Laundering Unit of the BKA to attend “refresher courses” regularly offered by the training agency of the police forces/MoI. The authorities consider that experience has shown that “training on the job” proves to be successful. Training courses can also be attended at the Vienna University of Economics and Business Administration. Additionally, the unit participates in international projects and seminars (Interpol, Europol, Egmont Group, Council of Europe, EUROJUST, FATF-Typologies workshops). Moreover, the unit participates actively in exchange programs with FIUs and law enforcement authorities in neighboring countries (Liechtenstein, Switzerland, Hungary and Slovakia). These training appear adequate and relevant for law enforcement officers.

Statistics (applying R.32 to FIU)

337. The Austrian authorities maintain comprehensive statistics on suspicious transactions reports and other reports, received and disseminated.

Statistical Table 19.

STRs Received by the A-FIU22

article image

338. The following tables show a breakdown by type of financial institution, DNFBP, or other business or person making STRs, for both ML and FT:

Statistical Table 20.

ML-Related STRs

article image

339. It has to be noted that the statistics of the A-FIU envisage STRs in a broad sense as it also includes exchange of information from other administrations that are not STRs by the standard definition.

Statistical Table 21.

FT-Related STRs

article image

340. Concerning statistics on the breakdown of STRs analyzed and disseminated, every STR on a transaction that serves the purpose of ML or FT is investigated.

STRs resulting in investigation, prosecution or convictions for ML, FT or an underlying predicate offense (Additional element - c.32.3)

341. Every STR on a transaction that serves the purpose of ML or FT has to be investigated by the A-FIU, the BVT, or the local police services. According to the StPO, every investigation case has to be submitted to the Prosecutor’s Office.

342. It has to be mentioned that in the course of investigations, it is very often determined that the suspect is the primary offender (“self-launderer”) and has to be charged for the “predicate offense”, such as fraud, drug-related crimes, embezzlement, human trafficking, criminal organization, etc. In some STRs, the suspect turns out to be the victim of fraud, which leads to charges against real offenders. Cases submitted by the police to the prosecutor include therefore cases concerning the predicate offense itself. There is no information concerning the number of STRs resulting in convictions.

Statistical Table 22.

Cases submitted to the Prosecutor

article image

2.5.2 Recommendations and Comments

343. The authorities should:

2.5.3 Compliance with Recommendation 26

article image

2.6 Law enforcement, prosecution and other competent authorities—the framework for the investigation and prosecution of offenses, and for confiscation and freezing (R. 27 & 28)

2.6.1 Description and Analysis

Legal Framework

344. The legal framework is mainly constituted by the Criminal Code (StGB), the Code of Criminal Procedure (StPO) and by the Federal Act on the Organization of Security Administration and the Exercise of Security Police Services (Security Police Act, SPG, enacted in 1991 and amended in 2005).

345. Austrian law enforcement authorities have the responsibility and authority to ensure that ML and FT offenses are properly investigated. This responsibility is derived from Article 34, paragraph 1 of the StPO that requires that prosecutors prosecute ex officio all criminal acts which get to their knowledge and are not prosecuted only on demand of the victim or other interested parties (so called “Offizialprinzip”). ML and FT are therefore prosecuted mandatorily. This principle also implies that prosecutors must take all measures that are necessary to initiate criminal investigations. The Federal Criminal Police has general authority to conduct investigations on crimes and offenses set forth in the StGB, including for ML. In the case of ML the criminal investigations relating to the banking, investment and securities sectors are, stricto sensu, in the legal responsibility of the BKA where the A-FIU is located; in fact, pursuant to Article 4(2) of the BKA-G, the BKA is indicated as the competent authority to investigate ML in relation to the BWG, the BörseG and the WAG. However, according to the internal distribution of the workload within the BKA the A-FIU would be the authority in charge of ML investigations.

346. If financing of terrorism appears to be involved, the competent authority for criminal investigation is the Federal Agency for State Protection and Counter Terrorism (BVT).

Designation of Authorities ML/FT Investigations (c. 27.1)

347. The office of the public prosecutor has a general responsibility to prosecute all criminal acts, including ML and FT. This responsibility stems from the principle that requires prosecutors to prosecute ex officio all criminal acts which get to their knowledge. While the law does not specifically provide for the establishment of special sections in charge of financial crimes and organized crime within the public prosecutor’s office, the larger public prosecutor’s offices in the country have established groups of prosecutors who are only dealing with cases of organized crime and financial crimes (10 such prosecutors operate in Vienna).

348. For criminal investigations concerning ML and FT the responsibility is spread among the BKA, in which the A-FIU is established, the BVT and, ultimately, the Federal Criminal Police as a whole.

349. Stricto sensu, pursuant to Article 4, paragraph 2 of the BKA-G, the BKA has legal responsibility for criminal investigations of ML in relation to the BWG, the BörseG and the WAG, therefore with regard to the banking, securities and investment sectors. The A-FIU established within the BKA has the responsibility, nation-wide, to receive the STRs related to ML/FT that are filed by the whole range of reporting entities. The A-FIU also receives information on suspicious cases of ML that may come to the attention of other authorities (such as the Customs authorities). In these cases a criminal investigation is open. Criminal investigations on ML can then be undertaken by the A-FIU itself, “delegated” to local Federal Police (on the areas in which the BKA is legally responsible for investigating ML, mentioned above) or undertaken by the Local Federal Criminal Police territorially competent. If in STR or in the other ML-related information received, there are sufficient elements to indicate a particular predicate offense, the case is passed by the A-FIU to the competent law enforcement authority, either within the BKA itself or to the Federal Criminal Police. The BKA and the Federal Police report to the public prosecutor’s office.

350. The BKA is organized in 6 departments; department 3 (where the A-FIU is located) has the responsibility of investigations on “Organized Crime and general Crime.” There are 6 divisions in this Department: Organized Crime; Capital Crimes and sexual Offenses; Property Offenses; Economic and financial Investigations; Drug-Related Crime; and a central service for Combating Traffic in Human Beings and Illegal Immigration. The A-FIU is a sub-division of the Economic and Financial Investigations Division. Other subdivisions are responsible for fraud and counterfeiting; “white collar” crimes; environmental crimes; a subdivision is specifically dedicated to asset forfeiture (providing upon request assistance also to the financial investigators in the states’ headquarters of the federal Police). The A-FIU’s ML investigations are divided into three major areas: ML through the use of offshore; ML through frauds and ML related/associated to former Member States of the Union of Soviet Socialist Republics.

351. The BVT is a law enforcement authority, established within the MoI, Directorate General II for Public Security, legally responsible for investigation on cases related to FT, either originated from an STR (which is received by the A-FIU and forwarded to the BVT) or otherwise. Law enforcement authorities that come across a suspected case of FT must forward it to the BVT (this is the case, for example, when Customs authorities detect a suspicious cross-border transportation of cash which it is deemed to be related to FT, according to Article 17c, paragraph 2 of the Customs Code). The BVT has also 9 regional departments and reports to the public prosecutor’s office.

Ability to Postpone / Waive Arrest of Suspects or Seizure of Property (c. 27.2)

352. According to Article 99, paragraph 4 of the StPO the police has the authority to postpone investigations and the adoption of coercive measures if:

Additional Element—Ability to Use Special Investigative Techniques (c. 27.3)

353. The following special investigative techniques are permitted by the StPO or the SPG:

354. These techniques can be undertaken by the Criminal Police at their discretion or with the authorization of the public prosecutor’s office.

Additional Element—Use of Special Investigative Techniques for ML/FT Techniques (c. 27.4)

355. Special investigative techniques are mostly used in investigations into organized crime and terrorist crimes. The A-FIU pointed out the frequent use of interception of communications and surveillance of target persons during its investigations of ML cases.

Additional Element—Specialized Investigation Groups & Conducting Multi-National Cooperative Investigations (c. 27.5)

356. While the law does not specifically provide for the establishment of special sections in charge of financial crimes and organized crime within the public prosecutor’s office, the larger public prosecutor’s offices in the country have established groups of prosecutors who are only dealing with cases of organized crime and financial crimes. The authorities estimate that out of 300 prosecutors operating in Austria approximately 10 percent is specialized in ML and financial crime investigations. The BKA has a specialized division in charge of economic and financial investigation, in the context of which A-FIU is located as well as a division specifically in charge of tracing proceeds of crime for assets forfeiture. The BVT uses regularly financial investigations with the purpose of understanding the structure of the terrorist groups.

357. Cooperation in investigation, including in the use of special investigative techniques, is possible, at EU level, within joint investigative teams among law enforcement authorities of EU Member States.

Additional Elements—Review of ML & FT Trends by Law Enforcement Authorities (c. 27.6)

358. Regular information exchange takes place between relevant staff of the MoJ, Public Prosecutor’s Office, courts and the MoI (A-FIU and BVT). There are also regular meetings with the authorities involved in supervision and/or AML/CFT policy for financial institutions (MoF, OeNB, FMA).

Ability to Compel Production of and Searches for Documents and Information (c. 28.1)

359. According to the authorities, the A-FIU is the only law enforcement agency entitled to request directly all available and necessary information from persons and entities subject to reporting obligations without the need of a court order. But concerning banks, insurance, investment and securities institutions, and other DNFBPs (see BWG, VAG, WAG, BörseG, GSpG and GewO), this power is devolved to the MoI, meaning that the BVT is theoretically empowered to access directly financial information in the case of suspicion of FT without a court order.

360. Person and entities are obliged to disclose information to the A-FIU, as the information requested in the case of suspected ML/FT is not subject to banking/professional secrecy provisions.

361. Other law enforcement agencies investigating ML or FT, and the A-FIU need a court order when they have to compel the production of or search persons and premises for documents held by financial institutions/persons (with a “judicial admission” procedure, discussed later on).

362. Law enforcement agencies other than the A-FIU must be authorized with judicial admission in the circumstances set forth by Article 116 of the StPO to request information on bank accounts and bank operations This provision requires that the disclosure of information on bank accounts and bank operation is admitted “if it seems necessary to ascertain a criminal offense or a misdemeanor under the jurisdiction of the regional courts (that includes ML) and sets the principle of “judicial admission” for access to the information, which means that the office of the public prosecution must demand a court order and admission of the disclosure.

363. The conditions for admitting the order are quite restrictive. The prosecutor must show on the basis of other evidence (“ascertained facts”) that the business relation of a person with the credit or financial institution is actually “connected to committing a criminal act” and that “either the holder of the account himself/herself is suspected of having committed the act or it is presumed that a person suspected of having committed the act will operate or has operated a transaction via the account”, or that “the business relation will be used for the transaction of a financial benefit that was gained through criminal acts or gained for them (Article 20 StGB) or is subject to the disposition of a criminal organization or terrorist group or is provided or collected as a means of financing terrorism (Article 20b StGB).

364. According to paragraph 4 of Article 116, the order and admission of the disclosure of information have to contain:

365. Specifically, the court has to consider the issue of proportionality, that is,, whether the disclosure and expected results are justifiably proportionate to the presumed infringement upon the rights of disinterested third parties and whether there could be also a reasonable chance of achieving the same result by taking less intrusive measures.

366. In the case of DNFBPs protected by professional privilege (lawyers and notaries), the conditions set forth in Article 9(4) RAO and 37(4) NO), discussed under the DNFBPs section, will apply. The very broad notion of “legal advice” (also discussed in that section) may substantially limit the right of law enforcement agencies to obtain information.

367. The search of credit and domestic financial institutions according to Article 1, paragraph 2 of the BWG (as well as the search on persons that are protected by professional secrecy, and the search of their premises) always requires a judicial admission.

368. Seizure and sequestration of documents (including transactions records, identification data obtained through the CDD process, account files) can be obtained under the circumstances set forth by Articles 110 and 115 of the StPO: therefore only if these objects required for evidentiary purposes, or for securing civil right claims, confiscation of profits (Article 20 of the StGB), forfeiture (Article 20b of the StGB), confiscation (Article 26 of the StGB) or any other order relating to property rights provided for in the law. They are not admitted if the purpose is only ascertaining the commitment of a crime. They are ordered by the public prosecutor’s office or by the court. Sequestration of business correspondence falls under the circumstances set forth by these two provisions, unless in the case of closed correspondence that has not yet reached the recipient, in which case the more restrictive conditions established by Article 135 (sequestration of letters, which regulates the case of opening and retaining the telegrams, letters or other mail sent by or destined for “the accused”, which is only admissible for clarifying an intentional criminal act punished with a prison sentence exceeding one year and if the accused is imprisoned for such an act or if his production or arrest has been ordered regarding that act) would apply.

Power to Take Witnesses’ Statement (c. 28.2)

369. The competent authorities (office of the public prosecutor and the courts) have the powers to take witnesses’ statements for use in investigations and prosecutions (Articles 151-166 StPO). These provisions apply generally and are also available in ML or FT investigations and prosecutions.

370. Measures to protect witnesses which may be at risk in the circumstances of a criminal procedure include provisions to hear witnesses without their identity being disclosed, allowing pre-trial records of cross-examination of witnesses, conducting questioning by means of telecasting if a witness is unable to appear in court without exposing him/herself to a serious threat and conducting closed court hearings. The application of such measures is decided by the public prosecutor and/or the court (Articles 161 and 165 StPO).

Adequacy of Resources to Law Enforcement and Other AML/CFT Investigative or Prosecutorial Agencies (c. 30.1) and Integrity of Competent Authorities (c. 30.2)
Prosecutorial Agencies

371. The offices of public prosecution are autonomous agencies of the judicial administration which are separate from the courts. They safeguard the interests of the state in the adjudication of law. Among their most important tasks is to lead the preliminary investigation and to represent the public prosecution in penal proceedings. The Public Prosecution Act governs these tasks. In contrast to judges, public prosecutors are bound by the instructions of their superiors. Instructions from higher authorities concerning actions in a specific proceeding must be justified and issued to the public prosecutors in writing and becomes part of the file. At first-instance courts their responsibilities are vested in the public prosecutor, at the court of appeal in the senior public prosecutor and at the Supreme Court in the general procurator. The offices of senior public prosecutors and the General Procurator’s Office are each only subordinate to the MoJ. A general procurator does not have any authority to issue instructions to senior public prosecutors or public prosecutors. At present, there are about 300 public prosecutors in Austria.

372. Only judges or former judges, who continue to meet the requirements for being appointed as professional judges, may become public prosecutors. Just as the established posts for judges, the established posts for public prosecutors are also advertised publicly to applicants. The Federal President appoints public prosecutors upon proposal by the staff commission. However, for most established public prosecutor posts the President has delegated the right of appointment to the Federal Minister of Justice.

373. If a public prosecutor is found guilty of violating the professional and ethical obligations, he/she is responsible to a disciplinary commission set up with the MoJ. The sanctions which this commission may impose also include termination of the employment relationship. In addition, public prosecutors also have a penal-law liability. In terms of civil law, public prosecutors may only be held responsible by the state, similarly to judges, and not by the parties involved in a case, who may only bring an action against the state for official liability.

Criminal Police

374. As of December 1, 2008, the Police has a current staff of 26,984 policemen and 5,407 administrative staff. A recent report of the Audit Agency stated that the Police may not be staffed enough, a view which is shared by the Police. The Police is otherwise adequately structured and funded, and provided with sufficient and technical and other resources to fully perform their functions. Staff is required to maintain high professional standards, including confidentiality.

375. The number of officials working for the BVT could not be disclosed to the assessors for reasons of confidentiality; however the officials met by the assessors stated that the number of officials employed is sufficient, and that the agency is adequately funded, and provided with sufficient technical and other resources to fulfill its functions.

Training for Competent Authorities (c. 30.3)

376. Training is provided to administrative, investigative, prosecutorial, and judicial authorities. Training is provided to the judicial authorities in the frame of the annual further training program, organized by the MoJ. Especially concerning the topics ML and FT there have been held several training programs (authorities indicated that two to three seminars are organized every year by the MoJ concerning financial crimes); some of them in cooperation with other institutions, such as the MoI. Judges and public prosecutors are offered to partake in those trainings. An extensive training specifically on ML and FT was last organized in 2006 (Ottenstein). This one-week training course was attended by about 55 judges and public prosecutors.

377. Since 1998, the MoJ also encourages judges and public prosecutors to participate in international trainings dealing with combating ML and FT. A number of judges and public prosecutors attended those trainings (e.g., the conferences of EUROJUST on terrorism in 2004 and 2005 in The Hague).

378. The training department of the BKA organizes special training courses in regular intervals for police services on ML but also on predicate offenses such as human trafficking, narcotics trafficking, etc. The A-FIU is very active in providing training for the private sector as well as for other authorities. Upon request of local police services, specific training seminars are held by the A-FIU. The total number of training and awareness raising seminars offered to various target groups is listed in the A-FIU’s annual reports.

379. BVT employees working in the CFT area have access to further training opportunities on the national and international level. BVT aims at participating in as many international trainings and workshops as possible. In this context, the workshops organized by EUROPOL, Interpol, foreign partners, such as for example, the training courses of the German Federal Criminal Police Office and those organized by the intelligence can be mentioned.

380. The acquired experiences and information are then spread on by BVT to the LVTs in the framework of regular meetings, to ensure that also the investigators in the federal states are permanently provided with up-to-date knowledge and information.

Additional Element (Rec 30) - Special Training for Judges (c. 30.4)

381. See reference to training for judges under criterion 30.3.

2.6.2 Recommendations and Comments

382. The authorities should soften the requirements for law enforcement authorities to obtain access to information held by financial institutions and by lawyers and notaries (for example, for financial institutions by envisaging also the access to such information for the purpose of ascertaining a crime or by allowing the police to obtain such information with ex post judicial authority’s intervention, in the cases of serious crime; for lawyers and notaries by revisiting the notion of “legal advice”).

2.6.3 Compliance with Recommendations 27 & 28

article image

2.7 Cross Border Declaration or Disclosure (SR.IX)

2.7.1 Description and Analysis23

Legal Framework

383. Austria applies EC Regulation 1889/2005 on controls of cash entering or leaving the community (EC cash control regulation) to cross-border transportation of currency and bearer negotiable instruments at its borders with non-EU countries, that is, Switzerland and Liechtenstein. The EC Regulation is directly applicable in Austria as an EU member. For EU-internal borders (i.e., borders with Germany, Hungary, Italy and Slovakia) Austria applies the Customs Law (ZollR-DG), with the notable exception of the borders with Jungholz and Mittelberg: both Jungholz and Mittelberg are Austrian enclaves in the territory of Germany which have been historically exempted from the application of the Austria ZollR-DG and which, as the authorities explained, are subject to German customs law, by international treaty.

384. The EC Regulation establishes an obligation to declare cash of a value of EUR 10,000 or more when entering or leaving the EU space. The ZollR-DG subjects to customs supervision cash and cash-equivalent means of payments which are brought in the “area of application” of the law (that is Austria with the exception of the above mentioned enclaves). In this case the ZollR-DG establishes an obligation to disclose upon request of the Customs authorities cash or equivalent of a value of EUR 10,000 or more. This obligation was introduced in 2004 and 2006.

Mechanisms to Monitor Cross-border Physical Transportation of Currency (c. IX.1)

385. Austria relies on a declaration system for cross-border transportation of cash of a value of EUR 10,000 or more at its non-EU borders. The obligation is established by Article 3 of EC Regulation No. 1889/2005 and is consistent with SR.IX. Article 2 defines cash as including currency and bearer negotiable instruments including monetary instruments in bearer form (such as travelers cheques), negotiable instruments that are either in bearer form, endorsed without restriction, made out to a fictitious payee, or otherwise in such a form that title thereto passes upon delivery as well as incomplete instruments (such as promissory notes and money orders) signed but with the payee’s name omitted. In this case, Article 17b, paragraph 3 of the ZollR-DG clarifies that the declaration must be rendered verbally but the declaring person has also the option to submit the declaration in written form.

386. In addition to the declaration system, Article 17b of the ZollR-DG, paragraph 1, subjects to customs supervision cash and cash-equivalent means of payments which are brought “into, through or out the area of application” of the ZollR-DG, and (paragraph 2) establishes an obligation to disclose upon request of the Customs authorities cash or cash-equivalent means of payments of a value of EUR 10,000 or more. “Cash-equivalent means of payments” are defined (by paragraph 1 of Article 17b) in the same terms as in the EU Regulation but, in addition, they also include “gold and other precious metals.” The disclosure system is applicable for the cross-border transportation of cash and other bearer negotiable instruments at the EU-borders, with the noted exceptions of Jungholz and Mittelberg, where no obligation to declare or to disclose exists in the terms required by SR.IX. This can pose a risk of ML and FT, given the number of bank accounts existing in these areas, which is significantly disproportionate to the number of residents (the issue is discussed later in more details).

387. The authorities explained that in order to detect cash couriers they employ a risk-based approach at Vienna airport (in the case of incoming/outgoing flights to areas considered at risk) or random checks; they employ a targeted risk-based approach at the borders, but only as part of anti-smuggling operations (especially for cigarette-smuggling).

Statistical Table 23.

Statistics Cash Control Austria

article image
article image
Request Information on Origin and Use of Currency (c. IX.2)

388. Article 17b of the ZollR-DG - which is applicable in all cases of cross-border transportation of cash, regardless the “type” of border - establishes a general obligation to provide, upon request of the Customs authorities, “information on the origin, the beneficiary and the intended use of the cash.” This obligation sets a general authority for Customs officials to request such information in the case set forth by paragraph 2 (which sets forth the “disclosure” obligation) and, as the authorities explained, also in the case of “declarations” (which are regulated by paragraph 3 of Article 17b) including in the case of a false declaration or in the case of a failure to declare.

Restraint of Currency (c. IX.3)

389. Article 17c of the ZollR-DG states that when “certain facts give rise to the assumption that cash or equivalent means of payment are introduced for the purpose of ML or FT, the Customs authorities are authorized in case of danger to seize the cash or means of payments.” In such cases, the Customs authority has to report immediately to the public prosecutor’s office, which has to determine whether the conditions sets forth by Article 115 of the StPO are met to apply a sequestration (discussed earlier). If they are not met the seizure has to be terminated without delay. Otherwise the provisional measure remains in place for up to six months (unless the court orders the seizure to be terminated). There are no statistics available on the cases/amounts of seizure of cash, but it looks like the provisional measure has been rarely applied. The authorities indicated a recent case in which USD 600,000 were found in the luggage of an individual and seized on the grounds of ML, but the seizure was dismissed by the public prosecutor’s office.

Retention of Information of Currency and Identification Data by Authorities when appropriate (c. IX.4)

390. Customs authorities have legal authority to collect, process and use the personal data gathered from the declaration/disclosure requirements (Article 17c, paragraph 2 ZollR-DG). However there is no central database where all the data gathered through this process is stored or can be queried. All declarations are stored in hard copies at the customs offices to which the declarations were made. The data collected are summed up and reported quarterly in electronic form to the MoF (who forwards this information to the EC), but these data only regard the number of declarations broken down per border points where the declaration was made, with the overall amount of money involved. Currently no analysis is carried out on these data for developing intelligence for AML/CFT, nor is it possible to target a person as cash courier based on how frequently he/she had declared/disclosed. The authorities are planning to set up a computerized database with the view of using the information collected under the declaration/disclosure process for building up intelligence for AML/CFT.

Access of Information to FIU (c. IX.5)

391. Although there is an obligation for the Customs authorities to pass the data gathered from or otherwise relevant to the A-FIU and the BVT “to the extent that this is necessary to perform their statutory tasks” (Article 17c, paragraph 2 ZollR-DG) this information is not currently made available to the A-FIU, except when Customs suspect ML. Austria therefore implements a system whereby the A-FIU is notified about suspicious cross border transportation incidents that gives rise to a suspicion of ML or FT: this has occurred only once in 2007 and five times in 2008 (for ML only). In the case of suspicions of FT, the information is passed on to the BVT. No cases were reported to the BVT.

Domestic Cooperation between Customs, Immigration and Related Authorities (c. IX.6)

392. Although a coordination mechanism is not formally established, Customs authorities undertake regular meetings between the MoF (Division for Enforcement of Taxes and Customs) and the BKA to discuss and coordinate on matters of common interests or linked to tax or customs fraud and organized crime. Additionally, informal information exchange takes place on a case-by case basis in urgent matters. The Customs authorities have access, through the investigation branch of the Customs Office, to the contact point within the MoI and to the criminal record database.

International Cooperation between Competent Authorities relating to Cross-border Physical Transportation of Currency (c. IX.7)

393. Articles 6 &7 of EC Regulation No. 1889/2005 set the basis for the exchange of information with third countries. Article 6 is applicable for the exchange of information between EU member States, and it states that when there are indications that the sums of cash are related to any illegal activities associated with the movement of cash and in the case of ML the information gathered through the declaration process may be transmitted to competent authorities in other member states. Article 7 deals with exchange of information with non EU member States upon certain conditions. As a member of the EU Austria also applies the EC Regulation 515/97 on mutual assistance in customs matters applies.

394. Austrian Customs have signed bilateral agreements for cooperation with 20 countries within the EU and with 50 countries outside the EU. These agreements require ratification by parliament (which occurred in all these cases).

395. Austrian Customs take part in the EC-Cash Control Committee. The points discussed include exchange of information about best practices on procedures and use of declaration forms as well as the discussion of concrete cases and lessons learned.

Sanctions for Making False Declarations / Disclosures (applying c. 17.1-17.4 in R.17, c. IX.8)

396. Sanctions for non compliance with the obligations to declare or to truthfully disclose set forth by the ZollR-DG are laid down in Article 48b of the Fiscal Penal Code (Finanzstrafgesetz, FinStrG). The penalty is up to EUR 50,000 (intent) or up to EUR 5,000 (negligence) and is in compliance with the requirements set forth by Recommendation 17. The sanction is a criminal sanction applied by the Customs authorities in the context of an administrative penal procedure.

397. The authorities indicated that six offenses were committed by intent and two by negligence in 2008; in all cases monetary fines have been imposed, though it was not possible to have concrete information on the amount of these fines as this information is not maintained in the Fiscal Penal Register (which does not contain data on the concrete cases).

398. The sanctions are also applicable in the case of legal persons (Article 28a FinStrG in connection with provisions of the VbVG) if :

  • the duty to declare information refers to the legal person or;

  • the infringement of this duty was done in favor of the legal person; and

  • either the person with a leading position (decision maker) or other persons of the management themselves failed to declare or disclose the relevant information or they did not take care to ensure that this duty was complied with by the employees of the legal person.

Sanctions for Cross-border Physical Transportation of Currency for Purposes of ML or FT (applying c. 17.1-17.4 in R. 17, c. IX.9)

399. Persons who are carrying out a physical cross-border transportation of currency or bearer negotiable instruments that are related to FT or ML can be held responsible under Article 165 StGB (because the ML provisions also contemplate the case of concealment and disguise of the proceeds, as well as possession) and Article 278d StGB respectively.

Confiscation of Currency Related to ML/FT (applying c. 3.1-3.6 in R.3, c. IX.10)

400. As previously mentioned, Article 17c of the ZollR-DG states that when “certain facts give rise to the assumption that cash or equivalent means of payment are introduced for the purpose of ML or FT, the Customs authorities are authorized in case of danger to seize the cash or means of payments.” In such cases the Customs authorities have to report immediately to the public prosecutor’s office, which can either dismiss or apply a sequestration in the conditions envisaged by Article 115 of the StPO (discussed earlier).

401. Confiscation of profits (Article 20 StGB) or forfeiture (Article 20b StGB) can be applied, if it can be proved that the money or bearer negotiable instruments are at the disposal of a criminal organization or a terrorist group, or they have been provided or collected as a mean for financing terrorism.

Confiscation of Currency Pursuant to UNSCRs (applying c. III.1-III.10 in SR.III, c. IX.11)

402. The seizure regime set forth by Article 17c of the ZollR-DG can be also applied in the case of FT. See also the discussion under paragraphs.

Notification of Foreign Agency of Unusual Movement of Precious Metal and Stones (c. IX.12)

403. The obligation to disclose upon request of the customs authorities applies also in the case of gold and other metals. The conditions for the exchange of information with third countries are laid out in the EC regulation No. 1889/2005 and in the various bilateral agreements signed by the Austrian Customs with their foreign counterparts. The authorities referred to a recent case involving a shipment of platinum from Switzerland to Austria, in which they cooperated with the Swiss authorities (although the Austrian authorities believe that the case is related to VAT fraud rather than to ML).

Safeguards for Proper Use of Information (c. IX.13)

404. The information gathered through the declaration/disclosures procedures described above is subject to the Law on data protection (Datenschutzgesetz, DSG), which provides confidentiality requirements and the obligation to use the information gathered only for the purposes set forth by the law. This implies that data and information acquired from declarations is only used in the circumstances allowed for by Article 17c, paragraph 2 ZollR-DG.

Additional Element—Implementation of SR.IX. Best Practices (c. IX.15)

405. See earlier Paragraphs in this section on the implementation of the SR.IX. best practices and on the legal requirements. Authorities informed the assessors that the Police have canine units and that Customs are equipped with X-ray, scanners and endoscopes. At the beginning of 2009 the Austrian Customs authorities will start a project to train customs dogs to facilitate cash detection since the results of the use of canine units of other Austrian agencies in this regard are encouraging. Procedures are in place to detect cash couriers; according to the authorities. Risk- and intelligence-based controls reflecting passenger and destination profiles are used at Vienna airport, including information provided by the airports or gathered by direct access to the data bases of the airlines.

406. Procedures are in place for inspections, which are conducted by at least two persons. Technical equipment including photo documentation is standard of the Austrian Customs as well as secure handling, storage and accounting systems. To detect counterfeit currency the police has run seminars for customs officers. Guidelines for cooperation with judicial authorities are in place for a very long time, since the customs officers serve as judicial officers in case of penal investigations. In cases of ML or FT the competent police units (A-FIU and BVT) are consulted immediately in any case that has so far arisen.

Additional Element—Computerization of Database and Accessible to Competent Authorities (c. IX.15)

407. See discussion under Paragraph 351. The authorities informed that after the evaluation team declarations and detections electronically. The next step in progress is to get authorization for registration of this data bank in the Data Bank Register by the Data Protection Commission, which can be expected by December 2008. The request for registration specifically entails the provision of information to the A-FIU and the BVT. A pending issue is the development of the technical modalities for giving the A-FIU and the BVT access to the database.

Effectiveness

408. Although the legal framework is largely in line with SR.IX. (with the exception of the municipalities Jungholz and Mittelberg, which are not in line with the requirements of SR.IX) the system is relatively recent, so no techniques/strategies (outside the more traditional controls aimed at detecting illegal smuggling of cigarettes or drug trafficking) have been yet developed to target and tackle cash couriers. There is not yet a systematic use of the information gathered through the declaration/disclosure system to build up intelligence for AML/CFT purposes. The lack of a computerized database restrains the chances to target cash couriers. Only recently the Customs started to report to the A-FIU cases in which they suspect grounds of ML, but the number of reports is extremely low (in relation to the figures of declaration/disclosures which were provided, discussed later on).

409. From the statistics provided by the authorities on the figures of the declarations/disclosures it appears that the majority of the controls are done at the externals EU-borders, so it can be questioned the effectiveness of the controls with the EU-borders. As previously mentioned, the authorities explained that at these borders the controls are not aimed at targeting cash couriers per se, but are only part of the controls routinely done in the actions against cigarette-smuggling or drug trafficking.

410. Also the volumes of declared cash are rather high, and it is interesting to note that in most cases the declarations are rendered on behalf of legal persons.

411. It also appears that the very few instances in which a seizure has been applied or a suspicious ML case was reported to the A-FIU were related to a failure to declare/disclose (rather than to cases in which the cash was declared and the authorities doubted about the legitimate origin of the cash). From the analysis of the statistics provided, the assessors have the impression that as long as the cash is declared the Customs authorities are content that a declaration was made and/or that sufficient explanations are provided for the purpose/on the origin (for example a case was described in which an individual goes regularly to a country that may pose a risk of ML, bringing each time cash amounting to EUR 800,000-1,000,000; the reason which was provided is that this person has a company in that country and prefers to avoid the banking system). This impression seems also confirmed by the fact that very few penalties have been applied since the introduction of these requirements.

412. As mentioned above, the borders with the municipalities of Jungholz and Mittelberg are completely free from any control under the requirements of SR.IX. The exemptions for these municipalities are of particular concern, not only because they are not in line with the requirements set forth by SR.IX, but because of the risk of ML, acknowledged by the authorities, associated to the transportation of cash from Germany into the 2 enclaves. Anecdotal evidence indicates that in Jungholz alone there are more than 15,000 bank accounts for a population of 300 inhabitants and that in the valley of Kleinwalsertal (where Mittelberg is located), there are several branches of banks for a population of 5,000 inhabitants, one of which claims to be the largest branch in Austria. The FMA indicated that the banking assets of one large credit institution are equivalent to EUR 1 billion.

2.7.2 Recommendations and Comments24

413. The authorities should:

  • Subject to disclosure or declaration obligations the transportation of cash or other bearer negotiable instruments into/out of the municipalities of Jungholz and Mittelberg;

  • Develop a computerized database for the storage of the information gathered through the declaration/disclosure process which should be used to build up intelligence to target cash couriers and to fight against ML/FT;

  • Assess the risk and develop a strategy for containing the ML/FT risk associated to the transportation of cash or other bearer negotiable instruments into/out the municipalities of Jungholz and Mittelberg;

  • Enhance cooperation between the customs and the A-FIU and develop a system to enhance the reporting of cases of cross-border transportation to the A-FIU.

2.7.3 Compliance with Special Recommendation IX

article image

3. Preventive Measure—Financial Institutions

414. Customer due diligence (CDD) and record keeping requirements have been in place in Austria for several years. As an EU Member State, Austria was required to implement the Third EU ML Directive (Directive 2005/60/EC) and the implementing Directive (Directive 2006/70/EC) into its national legislation by 15 December 2007. New AML/CFT provisions were issued to this effect in 2007 and came into force on January 1 2008. They require financial institutions to adopt preventive measures adjusted to risks, and they provide for variable levels of CDD, depending on the risk of money laundering and terrorist financing, in more circumstances than was previously the case in Austria.27 They also strengthened the previous identification requirements, added identification requirements with regard to the beneficial owners, and introduced new requirements to monitor transactions and relationships with politically exposed persons (PEPs) and cross-border correspondent banks.

3.1 Risk of Money Laundering or Terrorist Financing

415. As mentioned above, the transposition of the EU provisions into the domestic framework entailed the introduction of a risk-based approach. Financial institutions are required to conduct a risk-analysis of their business, using suitable criteria, and to take appropriate risk-based measures to ascertain customer information and conduct ongoing monitoring. In certain instances, applying the risk-based approach is framed by legal requirements, either particularizing criteria of risk, or allowing simplified CDD for low risk customers or transactions. CDD obligations are reduced for credit or financial institutions according to Article 1, paragraph 2 of the BWG, and under restricted conditions, fiduciary accounts held by attorneys at law or notaries, from EU Member States or third countries imposing equivalent AML/CFT measures and supervision. Enhanced due diligence is required from financial institutions on a risk-sensitive basis as a general practice, and is specifically required for situations the law considers as exhibiting higher level of ML/FT risks (non-face-to-face, cross-border correspondent banking, PEPs). The risk-based approach is modeled on the one set out in the EU Directive. It is not the result of a specific risk assessment of the Austrian financial sector. However, the characteristics of the Austrian legal framework, such as the possibility to issue shares in bearer form, and of the Austrian financial sector, such as a significant private banking industry, point to an elevated vulnerability to abuse for ML and FT purposes which is not mitigated by enhanced due diligence measures.

416. The assessment has been conducted on the basis of the legislation in force at the date of the onsite visit in September 2008 and immediately thereafter. It therefore covers the new AML/CFT legal framework which came into force on January 1 2008. Several of the FMA’s operational circulars are still pending, and should be completed in the forthcoming months.

3.2 Customer Due Diligence, Including Enhanced or Reduced Measures (R.5 To 8)

3.2.1 Description and Analysis

Legal Framework

417. All persons and entities who conduct as a business in Austria one or more of the financial activities listed in the FATF Glossary are subject to AML/CFT measures. The Austrian AML/CFT measures applicable to the financial sector are all set out in primary legislation, more precisely in the sector-specific laws: provisions for credit and domestic financial institutions are set out in the Banking Act (Bankenwesengesetz, BWG), provisions for the insurance companies in the Insurance Supervision Act (Versicherungsaufsichtsgesetz, VAG), and provisions for the securities firms in the Securities Supervision Act (Wertpapieraufsichtsgesetz, WAG). All three laws were recently amended to reflect the provisions of the Third EU ML Directive, with, as mentioned above, the new provisions coming into force in January 1 2008.

418. The supervisor for the financial sector, the Financial Market Authority (FMA), issued a number of Circulars (Rundschreiben), such as the Circular on Identification and Verification of Identity, which provide additional information on, as well as the FMA’s interpretation of the AML/CFT measures set forth in the laws, mainly the BWG. The purpose of the Circulars is not to impose further measures but to clarify the legal requirements. While they are not binding and not enforceable as such, non-compliance with the Circular could entail a level of non-compliance with the legal provisions and non-compliance which would be sanctioned on the basis of the law.

419. The BWG applies to all “credit institutions” and “financial institutions according to Article 1, paragraph 2 of the BWG”:

420. Credits institutions are institutions that are authorized by the FMA to carry out “banking transactions” under the Austrian laws. The definition of “banking transactions” is broad and covers not only the usual type of banking activities, but also further activities such as money exchange. More specifically, are considered banking transactions under the BWG any of the following activities carried out for commercial purposes:

  • 1. The acceptance of funds from other parties for the purpose of administration or as deposits (deposit business);

  • 2. The provision of non-cash payment transactions, clearing services and current-account services for other parties (current account business);

  • 3. The conclusion of money-lending agreements and the extension of monetary loans (lending business);

  • 4. The purchase of cheques and bills of exchange, and in particular the discounting of bills of exchange (discounting business);

  • 5. The safekeeping and administration of securities for other parties (custody business);

  • 6. The issuance and administration of payment instruments such as credit cards and traveler’s cheques;

  • 7. Trading for one’s own account or on behalf of others in:

    • a) Foreign means of payment (foreign exchange and foreign currency business);

    • b) Money-market instruments;

    • c) Financial futures contracts, including equivalent instruments settled in cash as well as call and put options on the instruments listed in lit. a and d to f, including equivalent instruments settled in cash (futures and options business);

    • d) Interest-rate futures contracts, forward rate agreements (FRAs), interest-rate and currency swaps as well as equity swaps;

    • e) Transferable securities (securities business);

    • f) Derivative instruments based on lit. b to e; unless these instruments are traded for private assets;

  • 7a. Trading in financial instruments pursuant to Article 1, paragraph 1, no. 6, lit. e-g and j of the WAG for the credit institution’s own account or on behalf of others, except in the case of trading conducted by persons pursuant to Article 2, paragraph 1, nos. 11 and 13 of the WAG;

  • 8. The assumption of suretyships, guarantees and other forms of liability for other parties where the obligation assumed is monetary in nature (guarantee business);

  • 9. The issuance of mortgage bonds, municipal bonds and covered bank bonds as well as the investment of proceeds from such instruments in accordance with the applicable legal provisions (securities underwriting business);

  • 10. The issuance of other fixed-income securities for the purpose of investing the proceeds in other banking transactions (miscellaneous securities underwriting business);

  • 11. Participation in underwriting third-party issues of one or more of the instruments listed under no. 7 lit. b to f as well as related services (third-party securities underwriting business);

  • 12. The acceptance of building savings deposits and the extension of building loans in accordance with the Building Society Act (Bausparkassengesetz, BSpG) (building savings and loan business);

  • 13. The management of investment funds in accordance with the Investment Fund Act 1993 (Investmentfondsgesetz, InvFG) (investment fund business);

  • 13a. The management of real estate investment funds in accordance with the Real Estate Investment Fund Act (Immobilien-Investmentfondsgesetz, ImmoInvFG), (real estate investment fund business);

  • 14. The establishment or management of participation funds in accordance with the Participation Fund Act (Beteiligungsfondsgesetz) (participation fund business);

  • 15. The business of financing through the acquisition and resale of equity shares (capital financing business);

  • 16. The purchase of trade receivables, assumption of the risk of non-payment associated with such receivables - with the exception of credit insurance - and the related collection of trade receivables (factoring business);

  • 17. The conduct of money brokering transactions on the interbank market;

  • 18. The brokering of transactions as specified in

    • a) No. 1, except for transactions conducted by contract insurance undertakings;

    • b) No. 3, except for the brokering of mortgage loans and personal loans by real estate agents, personal loan and mortgage loan brokers, and investment advisors;

    • c) No. 7 lit. a where this applies to foreign exchange transactions;

    • d) No. 8.

  • 19. The issuance of electronic money (e-money business);

  • 20. The acceptance and investment of severance payment contributions from salaried employees and self-employed persons (severance and retirement fund business);

  • 21. The purchase of foreign means of payment (e.g., notes and coins, cheques, traveler’s letters of credit and payment orders) over the counter and the sale of foreign notes and coins as well as traveler’s cheques over the counter (exchange bureau business);

  • 22. The transfer of funds, except for physical transports, by accepting money or other means of payment from the originator and paying out a corresponding amount in money or other means of payment to the beneficiary by way of non-cash transfer, communication, credit transfer or other uses of a payment or clearing system (remittance services business).

421. All “credit institutions” are supervised by the FMA (Article 69, paragraph 1 of the BWG. See write-up on Recommendation 23 for more details).

422. “Financial institution”, in the Austrian legislation, refers to an institution which is not a credit institution and which conducts one or more of the following activities for commercial purposes if they are conducted as the institution’s main activities:

  • leasing business;

  • provision of advice to undertakings on capital structure, industrial strategy and related questions, as well as advice services related to mergers and the purchase of undertakings;

  • provision of credit reporting services; and

  • the provision of safe deposit services (Article 1, paragraph 2 of the BWG).

423. With the terms “[carried out] for commercial purposes”, the BWG uses the same wording as the Value Added Tax Act (UStG). The Austrian Administrative Court (Verwaltungsgerichtshof, VwGH) ruled that the notion of “[carried out] for commercial purposes” covers all activities “that are sustainably aimed at generating earnings”, including when the activity itself does not generate earnings: it is sufficient that the activity generates earnings indirectly. This was for example the case in VwGH 21.05.2001, 2000/17/0134 where the VwGH qualified written guarantees, which the bank issued as a “free service” for its customers, as banking activities carried out for commercial purposes, because the guarantees served the purpose of intensifying existing customer relationships and were thereby aimed at generating future earning. According to the Court, there must however be an element of “sustainability” in the activity carried out. This may already be the case when (i) there is one relevant activity and (ii) it can be concluded from objective circumstances that there is the intention to repeat the activity (see e.g., VwGH 25.1.1995, 93/13/0084 ÖJZ 1996/106 F). In light of this jurisprudence, the courts have considered in some instances that an activity conducted on a single occasion was “carried out for commercial purposes” when they deemed that the intention was to establish a long-term customer relationship.

424. “Financial institutions” referred to in Article 1, paragraph 2 of the BWG are supervised not by the FMA, but by local district authorities.

Terminology

425. As mentioned above, the Austrian definition of “credit institutions” is broad and covers persons or institutions that deal with most of the financial activities listed under the FATF definition of financial institutions, while the definition of “financial institutions” is narrow and refers only to persons or entities that are not “credit institutions” and that conduct one or more of a limited list of activities mentioned in Article 1, paragraph 2 of the BWG. To avoid confusion and to ensure consistency with the terminology adopted in the standard, the present report uses the terms:

  • “credit institution”, or, where relevant, “banks” when referring to those institutions that carry out the activities listed in Article 1, paragraph 1 of the BWG;

  • “domestic financial institutions” when referring to those institutions covered by Article 1, Paragraph 2 of the BWG; and

  • “financial institutions” when referring to financial institutions in the FATF sense, that is, when referring to credit institutions, domestic financial institutions, insurance undertakings (but not insurance intermediaries) and securities firms.

426. For the purposes of this report, all AML/CFT provisions applicable to credit and/or domestic financial institutions, set forth in Articles 40, 40a- 40d and 41 of the BWG, are described under the subtitle “Credit and domestic financial institutions.”

427. The VAG applies to domestic insurance undertakings (i.e., undertakings whose head offices are situated in Austria) and foreign insurance undertakings (i.e., undertakings with head offices outside Austria) when the insurance contracts are concluded within Austria or advertised in Austria (Article 1 of the VAG). Measures intended to prevent ML/FT are set out under Article 98a-98h of the VAG. They are applicable to “insurance undertakings within the scope of the operation of the life assurance business” (Article 98a, paragraph 1 VAG) and are described in this report under the subtitle “Insurance undertakings.”

428. Insurance intermediaries are mostly self-employed persons who operate as insurance agents or brokers. For historical reasons, the insurance intermediaries are not subject to the VAG but to the Trade Act (Gewerbeordnung, GewO). One of the reasons that guided this choice was that, in view of the large number of intermediaries (18,374), the larger and decentralized organization of the trade authorities was deemed more appropriate for the conduct of supervision. The measures applicable to intermediaries are described under Recommendation 9.

429. The WAG applies to investment firms and investment services and activities companies. It does not explicitly address AML/CFT measures but makes instead, in its Articles 6 and 12, paragraph 4, a general reference to specific articles of the BWG, including its Articles 40, 40a, 40b, 40d and 41, and thus requires investment firms and investment services companies to implement the AML/CFT provisions of the BWG in the same way as credit and domestic financial institutions. All the identification requirements set out in the BWG therefore apply mutatis mutandis to the securities sector. It must be mentioned from the outset that while this cross-referencing generally applies without difficulty, there are some instances (highlighted in the relevant sections of this report) where it is neither entirely relevant nor adequate. The authorities indicated that their intention is to adjust the cross-referencing to the BWG made under Articles 6 and 12, paragraph 4 of the WAG by deleting the references to the provisions of the BWG that do not apply to securities firms. AML/CFT measures applicable to the sector are described in this report under the subtitle “Securities institutions.” The provisions of the BörseG which require the exchange operating company to report suspicious transactions are addressed under the relevant criteria in other sections of the report.

Prohibition of Anonymous Accounts (c. 5.1)
Credit and Domestic Financial Institutions

430. Anonymous accounts are prohibited in Austria both explicitly (Article 40d paragraph 2 of the BWG) and through the implementation of the identification requirements (Article 40, paragraph 1 BWG). More specifically, the BWG prohibits credit institutions and domestic financial institutions from maintaining anonymous accounts and from accepting anonymous savings deposits (“inadmissible business relationships”, Article 40d paragraph 2 of the BWG). It also sets out a series of identification requirements (described under criterion 5.2 below) that further prevent anonymous accounts as well as the opening of accounts under fictitious names. Article 40d of the BWG came into force on January 1, 2008 (Article 107, paragraph 55 of the BWG). Various levels of identification have, however, been required for much longer:

  • Mandatory identification requirements regarding non-residents were passed in 1991;

  • Mandatory identification requirements for all customers and specific identification provisions for Treuhand (identification of Treugeber and Treuhänder) were adopted in 1993;

  • Mandatory identification requirements for securities accounts were adopted in 1996; and

  • Mandatory identification requirements for savings accounts were adopted in 2000.

431. Addressing concerns raised by the FATF with respect to transparency of anonymous passbooks, the authorities enacted amendments to the BWG in 2000 which prohibit the opening of new anonymous savings deposit accounts, and subject existing anonymous savings deposit accounts to special diligence transactions. Savings deposits are funds deposited with credit institutions for the sole purpose of investment and, “as such can only be accepted against the delivery of certain documents (savings documents)” (Article 31, paragraph 1 of the BWG). They carry different denominations depending on the financial entity that issues them (Sparbuch, Sparbrief, Sparkassenbuch etc.). All withdrawals from savings deposits can only be made in cash at the counter, as funds can be transferred to -but not from- a savings deposit (Article 32, paragraph 3 of the BWG).

432. Credit and domestic financial institutions must ascertain and verify the customer’s identity:

  • before initiating savings deposit transactions; these transactions must always be considered as permanent business relationship and subject to full CDD requirements (Article 40, paragraph 1, no. 1 of the BWG);

  • before receiving any deposit or operating any withdrawal amounts to at least EUR 15,000 or an equivalent value (Article 40, paragraph 1, no. 4, and paragraph 6 of the BWG); and

  • when there are reasonable grounds to suspect terrorist financing or money laundering, or when there are doubts as to the veracity or adequacy of previously obtained identification data (Article 40, paragraph 1, nos. 3 and 5 BWG).

433. Although savings documents cannot be established under a name other than that of the customer identified, pursuant to Article 40, paragraph 1, they can be issued with “a certain designation” (Article 31, paragraph 1 of the BWG). According to the authorities, this could include for example a designation such as “wedding” in the case of a savings deposit account offered on the occasion of a wedding. The authorities also confirmed that the initial customer must nevertheless be identified in all cases.

434. Banks may open and maintain numbered accounts at the request of customers. Although the CDD rules apply to these and other customers in the same way, the identification data is only available to a limited number of persons within the bank, typically the relationship manager, the compliance officer and senior managers. Clients may also request that all banking correspondence be kept at the bank instead of being mailed to them. Some of the banks met by the assessors indicated that they held numbered accounts but none considered them as a factor of risk. Indeed, none of the included numbered accounts or the holding of banking correspondence are considered as risk criteria for the opening and monitoring of business relationships.

Insurance Undertakings

435. While the VAG does not specifically prohibit anonymous contracts or contracts under fictitious names, the identification requirements set out in its Article 98b adequately preclude anonymous contracts and contracts under fictitious names.

Securities Institutions

436. Pursuant to Articles 6 and 2, paragraph 4 of the WAG, the provisions of Articles 40, 40a, 40b, 40d and 41 are applicable to investment firms and investment services companies. The prohibition described above therefore applies, as well as the identification requirements described below.

When is CDD required (c. 5.2)
Credit and Domestic Financial Institutions

437. Pursuant to Article 40, paragraph 1 BWG, credit and domestic financial institutions are required to ascertain and verify the identity of the customer:

  • before initiating a permanent business relationship;

  • before carrying out an occasional transaction of EUR 15,000 (or an equivalent value) or more (regardless of whether the transaction is carried out in a single operation or in multiple operations between which there is an obvious connection);

  • if the institution suspects or has reasonable grounds to suspect that the customer belongs to a terrorist organization or the customer objectively participates in transactions which serve the purpose of money laundering or terrorist financing;

  • for every deposit into and every withdrawal from savings deposits if the amount deposited or withdrawn comes to at least EUR 15,000 or an equivalent value;

  • when there are doubts as to the veracity or adequacy of previously obtained customer identification data.

438. Pursuant to the EU Regulation No. 1781/2006, credit and domestic financial institutions in Austria must also identify the customer and ensure that complete originator information is included in cross-border wire transfers (see write-up under Special Recommendation VII for more details).

439. In its Circular on Identification and Verification of Identity, the FMA provides further definitions and explanation to expound on the provisions of the law: It defines “ascertaining identity” as meaning “obtaining information on the identity of the natural or legal person to be identified” and “verifying the identity” as “validating the information on identity obtained against meaningful supporting documents and information.” It also provides that “ascertaining and verifying the identity may be performed at the same time, and thus it is not always possible to clearly separate these two procedures. Information on identity must be documented. The obligation to keep information stipulated in Article 40, paragraph 3, no. 1 BWG applies in this case.”

Insurance Undertakings

440. Article 98b, paragraph 1 of the VAG provides similar requirements as those set out in Article 40, BWG, with the exception of the provisions dealing with savings account which have not been duplicated in the VAG since they are not relevant to the insurance business.

Securities Institutions

441. Article 12, paragraph 4 of the WAG requires investment companies and investment services companies to implement the provisions of Article 40, of the BWG. The securities sector is therefore subject to the provisions described above (although the provision of Article 40, paragraph 1, no. 4 of the BWG dealing with savings deposits does not apply to the securities sector).

Identification measures and verification sources (c. 5.3)
Credit and Domestic Financial Institutions

442. Credit and domestic financial institutions are required by the BWG to ascertain the identity of the customer on the basis of the personal presentation of an official photo identification document by the customer (Article 40, paragraph 1 of the BWG). Are considered to be “official photo identification documents”, documents which are issued by a government authority and which bear a non-replaceable and recognizable photograph of the head of the person in question, and which include the name, date of birth and signature of the person as well as of the authority that issued the document. In the case of foreign passport, the passport need not contain the person’s complete date of birth if this complies with the law of the country that issued the passport. If the customer is not legally competent, the identity of his or her legal representative must be sought and verified.

443. The authorities noted that official documents that do not enable a clear facial recognition of the customer (such as for example passports including photographs of veiled persons) are not deemed sufficient for identification purposes. It also expounded on these requirements in its Circular on Identification and Verification of Identity, paragraphs 24-36. Unless identification may be ascertained on the basis of other documents issued by government authorities, the credit and domestic financial institutions may not establish a business relationship or execute an occasional transaction above the legal threshold.

444. The law (Article 40, paragraph 1 in fine of the BWG) provides two exceptions to the general identification and verification requirements:

  • in case of reliance on other credit or financial institutions to carry out the identification procedures (although the ultimate responsibility for compliance with the identification requirements remains with the initial credit or financial institution); and

  • in cases where the customer itself is a credit or financial institution supervised for compliance with similar identification obligations, as described under Article 40a, paragraph 1 of the BWG.

445. Both instances are described in more detail under the simplified CDD measures below.

446. While there is no requirement in the law to maintain a copy of the identification document provided by the customer, the authorities maintain that it is common practice for credit and domestic financial institutions to include a copy of the documents in their files as a means to prove to the supervisor that they have adequately fulfilled their identification requirements.

Insurance Undertakings

447. The identification and verification requirements in the insurance sector are set out in Article 98b, paragraph 1 of the VAG in the same terms as in Article 40, paragraph 1 of the BWG. The measures described above therefore also apply to the insurance undertakings, including the exemptions (see write-up on simplified due diligence).

Securities Institutions

448. The provisions of Article 40, paragraph 1 of the BWG described above apply mutatis mutandis to the investment companies and investment service companies (Articles 6 and 12, paragraph 4 of the WAG).

Identification of Legal Persons or Other Arrangements (c. 5.4)
Credit and Domestic Financial Institutions

449. When dealing with legal persons, credit and domestic financial institutions are required by law to identify the natural person authorized to represent the legal entity (on the basis of a official photo identification document) and his or her powers to represent the legal entity (Article 40, paragraph 1 of the BWG). They must also identify the legal person itself on the basis of “meaningful supporting documentation which is available under the usual legal standards of the country in which the legal person is incorporated.” For legal persons incorporated in Austria, this would entail seeking an extract of the Commercial Register.

Insurance Undertakings

450. The wording of Article 98b of the VAG with respect to the identification of legal persons is similar to that of the BWG described above.

Securities Institutions

451. The measures described under the credit and domestic financial institutions are directly applicable to the investment firms and investment services companies (Articles 6 and 12, paragraph 4 of the WAG).

Effectiveness

452. During discussions with financial institutions from all three sectors, the assessors were told that CDD measures are applied before entering into a permanent business relationship or conducting a one-time transaction above EUR 15,000. Most institutions use a questionnaire to collect information which is filled out either by the relationship manager or by the customer. Data generally include information related to the identity, as well as the activity of the client, and excerpts from the Commercial Register. Verifications are conducted on risk basis to ensure a satisfactory level of confidence in the accuracy of information provided. Investigations aim at ensuring consistency of all data provided and collected, and involve mostly checking external databases, as well as internet, notably for nonresident customers.

453. Financial institutions consider that their exposure to ML/FT risks is very low in their domestic or EU activities, but higher with respect to their activities within the CESE and the CIS. For Austria, they take comfort from their proximity to their clients and the overall limited typologies of ML/FT, based on few cases and fewer convictions. Some institutions, mostly internationally active banks, have initiated formal assessments of their risk profile, categorized some type of business as higher risks, and defined specific verification procedures adjusted to the risk. In other financial institutions, the risk analysis of the business, required under the new legal provisions, is being implemented. All institutions draw comfort from their screening process at the inception of relationships, and choose to decline new business where information provided or collected is not fully satisfactory. While required by the BWG to consider sending a report to A-FIU in such cases (Article 40, paragraph 2d), they do not routinely file an STR on these attempted operations. Many of them mentioned contacting the A-FIU by phone. Indeed, the A-FIU informed the assessors that it received at least 50 STRs in 2008 which were filed in relation to either terminating, or declining taking up a business relationship. It is worth noting that most financial institutions seem to refer to country risk as the country of residence, or of origin, and less often to the country where the income or the wealth is generated.

Identification of Beneficial Owners (c. 5.5; 5.5.1 & 5.5.2)
Credit and Domestic Financial Institutions

454. Financial institutions are required by law to ask the customer whether he or she is acting on behalf on another person (Article 40, paragraph 2 BWG). The law also obliges the customer to comply with the request and provide the credit or financial institution with evidence of the identity of the “trustor” by the presentation of the original or a copy of the “trustor’s” official photo identification document. The FMA defined the term “trustor” in paragraph 77 of its Circular on Identification and Verification of Identity as “the natural or legal persons for whose account or on whose behalf a business relationship is established or a transaction is executed.” It also provides that “like the beneficial owner of a legal person, the trustor is the beneficiary of the banking transaction conducted on his behalf’ (paragraph 79). The customer acting on behalf of another person must also submit a written declaration stating that he or she has ascertained the identity of the “trustor” personally or through reliable sources. Are considered “reliable sources”, courts and other government authorities, notaries, attorneys at law, and other credit or financial institutions. The customer himself or herself must be identified in person. Identification of the trustee by a third party is explicitly ruled out by Article 40, paragraph 2 of the BWG. The identity must be verified in such a way that the obliged entity is satisfied that it knows who the beneficial owner is, and has an understanding of the ownership and control structure of the customer (Article 40, paragraph 2a of the BWG). The authorities confirmed that the ultimate responsibility for the identification of the “trustor” remains with the credit or financial institution and that the latter may not initiate or pursue business activities with the customer in cases where the customer did not establish adequately the identity of the person he or she is acting on behalf of.

455. In the case of special fiduciary accounts of authorized real estate administrators acting on behalf of joint ownership associations for real estate properties, the presentation of an extract of the property register is considered valid evidence of the trustor’s identity in the case of joint owners who are natural persons (Article 40, paragraph 2 in fine BWG).

456. Article 40, paragraph 2(a), no. 1 of the BWG goes further by requiring credit and domestic financial institutions to call upon the customer to reveal the identity of the customer’s beneficial owner and to take risk-based and appropriate measures to verify the identity of the beneficial owner. The BWG defines beneficial owner in comprehensive terms, as follows:

“the natural persons who ultimately own or control the customer. In particular, the term” “beneficial owner” includes the following:

  • a) in the case of corporate entities:

    • aa) the natural persons who ultimately own or control a legal entity through direct or indirect ownership or control over a sufficient percentage of the shares or voting rights in that legal entity, including ownership or control through bearer share holdings, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Community legislation or subject to equivalent international standards; a percentage of 25 percent plus one share is considered sufficient to meet this criterion;

    • bb) the natural persons who otherwise exercise control over the management of a legal entity;

  • b) in the case of legal entities such as foundations, and in the case of trusts which administer and distribute funds:

    • aa) where the future beneficiaries have already been determined, the natural persons who are the beneficiaries of 25 percent or more of the property of a trust or legal entity;

    • bb) where the individuals who benefit from the trust or legal entity have yet to be determined, the class of persons in whose main interest the trust or legal entity is set up or operates; and

    • cc) the natural persons who exercise control over 25 percent or more of the property of a trust or legal entity.”

457. While the obligation set out in Article 40, paragraph 2 BWG (identification of the “trustor”) has been in place since 1993, the provisions requiring the identification of the beneficial owner are more recent and came into force on January 1, 2008 as part of the implementation package of the Third EU ML Directive.

458. Despite the above, pursuant to Article 31, paragraph 3 of the BWG, savings deposits which amount to less than EUR 15,000 may be registered under a different designation than the customer’s name. In such a case, the party who presents the savings documents to access to the savings deposits must provide the password defined by the customer. There is no requirement for credit institutions to obtain and take reasonable measures to verify the identity of the holder of the savings documents, that is, the beneficial owner. Credit institutions that the assessors met have not implemented identification and verification procedures for those persons. There is no limitation to the number of savings deposit accounts that a customer may open under a certain designation.

Insurance Undertakings

459. Like credit and domestic financial institutions, insurance undertakings are explicitly required by the law to ask the person who intends to establish a customer relationship whether he or she is acting as a “trustee”, that is, on behalf of another person, the “trustor.” If the customer declares acting as a trustee, he or she must be identified in person by the insurance company. Identification of the trustee by a third party is explicitly ruled out. The trustee must also “furnish proof of the trustor’s identity to the insurance undertaking.” Under the provisions of the law, this may be done by presenting the original or a copy of the trustor’s official photo identification document, in the case of natural persons, or, in the case of legal persons, “by means of meaningful supporting documents which are available pursuant to the legal standard prevailing in the country of the head office of the legal person” (Article 98b, paragraphs 2 and 1 of the VAG).

460. Pursuant to Article 98b, paragraph 3 of the VAG, insurance undertakings must ask the customer to make known the identity of the beneficial owner, and take risk-based and adequate measures to verify his or her identity so that they are satisfied that they know who the beneficial owner is, “including, as regards legal persons and trusts, take risk-based and adequate measures to understand the ownership and control structure of the customer.” “Beneficial owner” is defined in line with the standard as follows (Article 98a, paragraph 2, no. 3 of the VAG). “Beneficial owner” shall mean the natural persons who ultimately own or control the customer. The term of “beneficial owner” shall include in particular:

  • a) in the case of corporate entities:

    • aa) the natural persons who ultimately own or control a legal entity through direct or indirect ownership or control over a sufficient percentage of the shares or voting rights in that legal entity, including through bearer share holdings, other than a company listed on a regulated market that is subject to disclosure requirements consistent with Community legislation or subject to equivalent international standards; a percentage of 25 percent plus one share shall be deemed sufficient to meet this criterion;

    • bb) the natural persons who otherwise exercise control over the management of a legal entity;

  • b) in the case of legal entities, such as foundations, and legal arrangements, such as trusts, which administer and distribute funds:

    • aa) where the future beneficiaries have already been determined, the natural persons who are the beneficiaries of 25 percent or more of the allocations of a trust or legal entity;

    • bb) where the individuals that benefit from the trust or legal entity have yet to be determined, the class of persons in whose main interest the trust or legal entity is set up or operates;

    • cc) the natural persons who exercise control over 25 percent or more of the property of a trust or legal entity.

Securities institutions

461. The provisions dealing with the beneficial owner described under the credit and domestic financial institutions section above are also applicable to the securities institutions (Articles 6 and 12, paragraph 4 of the WAG).

Effectiveness

462. The requirements to identify the beneficial owner, as defined in the writing for criterion 5.5 and especially in 5.5.2, are recent and came into force on January 1, 2008. Financial institutions are in the process of applying these new requirements to their existing portfolio. The most commonly used approach is to collect beneficial owner information from the customer and to conduct simple investigations (such as searches in databases or on the internet) to ensure the plausibility of data. All financial institutions interviewed also mentioned that they hold very few accounts for legal arrangements such as foundations, and that, in such circumstances, they would be able to ascertain the natural persons who are the beneficial owners, as required under the new legislation.

Information on Purpose and Nature of Business Relationship (c. 5.6)
All Financial Institutions

463. Credit and domestic financial institutions, insurance undertakings and securities institutions are all required to take risk-based and appropriate measures to obtain information on the purpose and nature of the intended business relationship (Article 40, paragraph 2a, no. 2 of the BWG; Article 98b, paragraph 3, no. 2; Articles 6 and 12, paragraph 4 of the WAG).

464. This requirement came into effect on January 1 1 2008. At the time of the assessment, financial institutions appeared to have integrated the required information into their overall assessment of the customer, without however having formally defined risk levels and related diligences.

Ongoing Due Diligence on Business Relationship (c. 5.7; 5.7.1 & 5.7.2)
All Financial Institutions

465. The BWG, VAG and WAG (by reference to the BWG) explicitly require credit and domestic financial institutions, insurance undertakings, investment firms and investment services companies “to take risk-based and adequate measures to conduct ongoing monitoring of the business relationship.” They also specify that ongoing monitoring includes scrutiny of transactions undertaken throughout the course of the relationship, and aims at ensuring that the transactions conducted are consistent with the institutions’ knowledge of the customer, the customer’s business and risk-profile, including, where necessary, the source of funds, and to ensure that the documents, data or information held are kept up to date (Article 40, paragraph 2a, no. 3 of the BWG; Article 98b, paragraph 3, no. 3 of the VAG; Articles 6 and 12, paragraph 4 of the WAG).

Effectiveness

466. These legal provisions also came into effect on January 1, 2008. They built upon previous provisions by introducing a broader obligation to monitor business relationships and by requiring to do so on a risk-adjusted basis. To satisfy these requirements, financial institutions must implement enhanced monitoring systems, using generally software available on the market. Several institutions pooled together to develop common tools through a joint IT company. Development and testing of risk matrix were underway at the time of the evaluation. More advanced multinational financial institutions also felt the need to upgrade their existing systems in line with the new obligations.

Risk—Enhanced Due Diligence for Higher Risk Customers (c. 5.8)

467. All three laws (BWG, VAG and WAG by reference to the BWG) call for enhanced due diligence in two types of circumstances: (i) situations in general “which by their nature can present a higher risk of money laundering or terrorist financing” (Article 40b, paragraph 1 of the BWG; Article 98d, paragraph 1 of the VAG, and Articles 6 and 12, paragraph 4 of the WAG); and (ii) circumstances explicitly enumerated in the laws (Article 40b, paragraph 1, nos. 1 to 3 of the BWG; Article 98d, of the VAG; Articles 6 and 12, paragraph 4 of the WAG). The specific measures that are required to be complied with in addition to the standard CDD obligations are however only listed in the second type of circumstances. It is up to the financial institutions to decide what type of additional measures are adequate in other situations that they identified as posing a higher risk. The specific circumstances where additional customer due diligence measures must be undertaken are described below:

Credit and Domestic Financial Institutions

468. Article 40b, paragraph 1, nos. 1 to 3 of the BWG classifies three types of situations as higher risk and, in each case, requires that specific additional measures be taken to compensate the increased risk:

  • non-face-to-face relationships, that is, when the customer is not physically present for identification purposes (see write up on Recommendation 8 for more details on the type of action required);

  • cross-border correspondent banking, that is, business relationship with banks established in non-EU members (see write up on Recommendation 8 for more details on the type of action required); and

  • transactions or relationships with politically exposed persons (PEPs) from any country other than Austria (see write up on Recommendation 6 for more details on the type of action required).

469. As mentioned above, there is also a general requirement to apply additional measures to situations which present a higher risk of money laundering of terrorist financing (Article 40b, paragraph 1 of the BWG). In this case however, the type of additional measures that the credit and domestic financial institutions should take has not been defined in the law or in guidance. It is therefore up to the institutions to decide what type of additional measures they deem reasonable and sufficient to mitigate the higher risk.

470. Other circumstances which are listed as examples of higher risk transactions or relationships by the Basel Committee in its CDD paper, in particular non-resident customers, private banking, customers that are personal assets holding vehicles (such as trusts for example), or customers that are companies that have nominee shareholders or shares in bearer form are not explicitly categorized as higher risk transactions or relationships in Austria. It therefore falls upon the institutions to decide in each case whether the risk is higher than the average. However, none of the credit and domestic financial institutions interviewed during the mission noted applying additional CDD measures to these cases.

Insurance Undertakings

471. In addition to the general requirement to take measures in situations that present a higher risk, the VAG lays out two types of circumstances where insurance undertakings must take additional CDD measures: non-face-to-face businesses and transactions or business relationships with PEPs. In both cases, the measures required are the same as those listed in the BWG (described in detail in the write up on Recommendations 8 and 6).

Securities Institutions

472. Articles 6 and 12, paragraph 4 of the WAG refer to the BWG—in other words, the provisions described above apply mutatis mutandis to the securities sector.

473. As mentioned above, both the BWG and the VAG establish a general obligation to apply enhanced due diligence measures to situations of higher ML/FT risk. However, integral to the development of customer monitoring is the definition of specific risk criteria resulting in enhanced diligence. At this early stage of implementation, many financial institutions refer to the limited number of higher risk criteria described in the law, essentially PEPs, non-face-to-face, conditions of payment (single premium) etc. No consideration has been given by the Austrian legislator to additional higher risk criteria such as those given as examples in the FATF methodology, although they could be relevant to the type of business conducted by Austrian financial institutions.

Risk—Application of Simplified/Reduced CDD Measures when appropriate (c. 5.9)
Credit and Domestic Financial Institutions

474. Article 40a, of the BWG appears under the heading “Simplified customer due diligence obligations.” It provides that “by way of derogation from Article 40, paragraph 1, nos. 1, 2, and 5, and paragraphs 2 and 2a [i.e., the standard CDD measures], the obligations indicated in those provisions do not apply” in a certain number of circumstances listed in the same Article. More specifically, the standard CDD obligations do not apply in cases where:

  • the customer is a credit institution or financial institution pursuant to Article 1, paragraphs 1 and 2 or pursuant to Article 3 of Directive 2005/60/EC, or a credit institution or financial institution situated in a non EU country which imposes obligations equivalent to those set forth in Directive 2005/60/EC and supervised for compliance with such obligations;

  • provided that the risk of money laundering and terrorist financing is considered low in accordance with paragraph 4 if the customer(s) is (are):

  • 1. exchange-listed companies whose securities are admitted to listing on a regulated market in one or more Member States, or exchange-listed companies from third countries which are subject to disclosure obligations pursuant to a regulation to be issued by the FMA on the basis of its power to issue regulations pursuant to Article 85, paragraph 10 Stock Exchange Act and such disclosure obligations are equivalent or comparable to those set forth in Community legislation;

  • 2. domestic authorities; or

  • 3. authorities or public bodies:

    • a) if they are entrusted with public functions pursuant to the Treaty on European Union, the Treaties on the Communities or Community secondary legislation;

    • b) the identity of which is publicly available, transparent and certain;

    • c) the activities and accounting practices of which are transparent; and

    • d) if they are accountable either to a Community institution or to the authorities of a Member State, or appropriate check and balance procedures exist ensuring control of the customer’s activity. (3) paragraph 2 also applies to:

      • 1. customers with regard to electronic money (Article 2, no. 58) where, if the device cannot be recharged, the amount stored in the device is no more than EUR 150, or where, if the data medium can be recharged—a limit of EUR 2,500 is imposed on the total amount transacted in a calendar year, except when an amount of EUR 1,000 or more is redeemed in the same calendar year by the bearer pursuant to Article 6 E-Money Act or pursuant to Article 3 of Directive 2000/46/EC;

      • 2. savings activities for classes of school pupils, subject to the condition that the cooperation of the legal representative is not required in the identification of the school pupil and that, unless Article 40, paragraphs 1, 2 or 2a is applied in its entirety,

        • a) in the case of savings deposit accounts which are opened for individual minors, identification can be performed by the school pupil himself/herself in the presence of a teacher or through a teacher as a trustee; the identification data of the school pupils can be ascertained by the credit institution on the basis of their school identification cards, copies of their school identification cards or a list containing the names, dates of birth and addresses of the pupils in question;

        • b) in the case of collective savings deposits for school classes, the identification of the minor school pupils entitled to the savings deposit can be performed by a teacher as a trustee using a list containing the names, dates of birth and addresses of the pupils in question.

475. Despite the clear wording of Article 40a, of the BWG, the authorities stated that the intention of the legislator was not to create an exemption but to introduce an option for the application of simplified due diligence. No guidance has been issued to clarify this discrepancy, but the authorities intend to address it further.

476. Article 40a, Paragraph 4 further mentions that in assessing whether the customers or products and transactions indicated in paragraphs 2 and 3 represent a low risk of money laundering or terrorist financing, credit institutions and financial institutions must pay special attention to the activities of such customers and to the types of products and transactions which may be regarded as particularly likely, by nature, to be used or misused for ML/FT purposes. If available information suggests a ML/FT risk, the credit institutions and financial institutions are prohibited from classifying the customers or products and transactions in a low-risk category and must, consequently, apply the standard CDD measures.

477. A further exception is provided in Article 40a, paragraph 5 of the BWG in the case of fiduciary accounts held by attorneys at law or notaries, from Austria or any other country, that are subject to AML/CFT requirements and supervision equivalent to those of the international standards. In these cases, evidence of the identity of each individual “trustor” need not be provided to the credit institution or financial institution if the following requirements are fulfilled:

  • 1. individual verification is infeasible due to the representation of large co-ownership communities of changing composition;

  • 2. the ‘trustee’ submits a written declaration to the credit institution stating that he/she has identified his/her clients in accordance with Article 40, paragraphs 1, 2 and 2a, nos. 1 and 2 or the requirements of Directive 2005/60/EC, that he/she has stored the corresponding documents and will present them to the credit institution upon request;

  • 3. the ‘trustee’ provides the credit institution with complete lists of the clients assigned to each fiduciary account within two months after the end of each calendar year;

  • 4. the ‘trustor’ does not have his/her place of incorporation or place of residence in a noncooperative country or territory; and

  • 5. no suspicion pursuant to Article 40, paragraph 1, no. 3 exists.

478. The second and third conditions listed above (provision by the trustee of a written declaration attesting that he or she has identified the clients and of a complete list of clients) do not apply “to clients for whom the respective individual transaction conducted or whose share of the claim on the respective trustee arising from fiduciary accounts does not amount to a total of EUR 15,000.” In other words, the law explicitly exempts these circumstances from any CDD as long as there is no suspicion of money laundering or terrorist financing and the trustor is not domiciled in a “noncooperative country.”

479. The authorities also pointed out that all “trustees” are clients of specific lawyers or notaries and thus have been identified pursuant to the lawyers’ and notaries’ CDD requirements.

480. Credit and domestic financial institutions are required to assess the level of risk of money laundering and terrorism financing before they may consider themselves exempted from applying the full CDD measures. However, no mention to the risk of ML and FT is made in the case of the first exception, that is, with respect to credit and domestic financial institutions subject to equivalent AML/CFT measures. In other words, credit and domestic financial institutions (as well as securities firms) are fully exempt of any identification requirements when dealing with a foreign credit or financial institutions regardless of the level of risk. They are also exempt from any CDD measures when dealing with fiduciary accounts under EUR 15,000 when there is no risk of ML/FT. Rather than providing for “simplified” due diligence measures, as the heading of Article 40a, suggests, the law creates blanket exemptions from the identification requirements under its paragraph 1. This approach is not in line with the FATF standard whereby minimum CDD should nevertheless be accomplished, including in circumstances where the risk of money laundering and terrorist financing is low (thus requiring a certain level of prior risk assessment in all cases). The exemptions are of concern because they create loopholes in the Austrian system that criminals may misuse.

Insurance Undertakings

481. Article 98c of the VAG contains, under the title “simplified customer due diligence”, provisions that are very similar to those set forth in the BWG. In addition to the general similarity with the BWG, the wording of the VAG addresses some aspects that are specific to the insurance sector: insurance undertakings have been added to the list of institutions that do not require identification (Article 98c, paragraph 1, nos. 1a and 1b) and a minimum threshold has been set. In addition to the circumstances described above, insurance undertakings are exempted from identifying the customer with respect to the following insurance contracts and related transactions:

  • life insurance contracts where the annual premium is no more than EUR 1,000 or the single premium is no more than EUR 2,500;

  • insurance contracts for pension schemes if there is no surrender clause and they cannot be used as collateral for a loan (Article 98c, paragraph 1, no. 2 of the VAG).

482. Like the BWG, the content of Article 98c of the VAG entails an exemption from CDD requirements rather than a simplification of standard CDD. For the reasons explained above, this is not in line with the standard.

Securities Institutions

483. The provisions applicable to the credit and domestic financial institutions apply mutatis mutandis to securities institutions (Articles 6 and 12, paragraph 4 of the WAG). The write-up pertaining to the credit and domestic financial institutions (above) therefore applies to the securities sector as well. In this case, the wording of the BWG is not entirely relevant to the securities sector and it is unclear whether the securities firms consider that the exemption for “credit institutions” set out in the BWG addresses securities institutions per analogy. The authorities confirmed however that, despite Articles 6 and 12, of the WAG, the exemptions set out in the BWG do not apply to the securities sector.

Risk—Simplification / Reduction of CDD Measures relating to overseas residents (c. 5.10)
<