Loredana Marlen DUMITRU

Measures to acquaint the client imposed on gambling organizers according to Law 129/2019 for the prevention and combating of money laundering and terrorist financing and the Rules from January 22, 2020 for the application of law 129/2019

by Loredana Dumitru, Junior lawyer, C.A. LUCA Mihai Catalin

As it is already known, with the entry into force of Law 129/2019 for the prevention and combating of money laundering and terrorist financing, new normative trajectories with significant impact on the economic operators under the regulation were drawn, especially regarding the obligations of regulated reporting regarding certain transactions and transactions carried out by customers, customer awareness measures to be applied and in concrete determination of how to implement them in the absence of sectoral regulations for the specific categories of economic operators to whom the regulation is addressed.
Regarding the gambling organizers (as reporting entities within the meaning of the AML Law), given the specificity of the activity carried out and the multitude of legal operations that govern this field, we consider it appropriate to carry out an analysis of the provisions of the AML Law, especially regarding the reporting obligations and the obligations of implementing the measures to know the regulated clients in charge of them, all the more so since the date of February 3, 2020, the Norms of application of the provisions of Law no. 129/2019 for preventing and combating money laundering and terrorist financing (hereinafter referred to as “Norms”).
Given the large number of obligations regulated by AML legislation for gambling organizers whose infringement leads to the application of sanctions that may include including suspension or loss of licenses or licenses to operate gambling, we will continue to see to what extent the ambiguous provisions of the AML Law regarding gambling organizers are elucidated by the implementing provisions.
Thus, we will begin by turning our attention to what, in the context of the AML Legislation, means gambling services – any service that involves a stake with monetary value in gambling, including those with the ability element, such as would be the lotteries, casino games, poker games and bets, provided in a physical office or by any means at a distance, by electronic means or by any other type of technologies that facilitate the communication and at the individual request of the recipient of the services.
The conclusion to be drawn from the interpretation of this definition is that both the Law and the Norms impose obligations both on the operators who conduct landbased gambling activities (on site) and on those who organize the gambling activity in the online environment (at a distance), BY FOLLOW-UP: all categories of gambling operators.
In the following, we will point out, starting from the latter, the practical difficulties involved in applying the provisions of the AML to the different categories of gambling organizers with emphasis, as I said, on the measures of customer knowledge and on reporting obligations.
Thus, gambling organizers, as reporting entities, have the obligation to apply a series of customer awareness measures (hereinafter referred to as “KYC measures”). These knowledge measures are of three types, namely: standard measures, simplified measures and additional measures.
According to the Methodological Norms, the three types of customer awareness measures will be applied by gambling operators in a manner appropriate to the risk involved, based on their own risk assessment system for money laundering and terrorist financing, according to internal rules for knowing the client.
As an example, the risk is foreseen in the Norms as being of three types: “low”; “medium”; “high”. As you can see, there is a correlation between the levels of risk and the number of types of customer awareness measures.
The gambling organizers, according to art. 13 paragraph (2) of the AML Law, they have the obligation to apply the STANDARD MEASURES TO KNOW THE CUSTOMER:
– at the time of collecting the winnings;
– when buying or exchanging chips;
– when carrying out transactions whose minimum value represents the equivalent in lei of at least 2,000 Euro, through a single operation – this latter condition being attached to the first two, depending on when it intervenes.
Even if the derogatory character, as an exception to this rule, was resolved in a previous article, in our opinion the regulation still raises question marks regarding the scope of the operations that can be subject to such measures.
Thus, although the obligation to apply the standard measures of customer knowledge in the case of the purchase or exchange of chips whose minimum value represents the equivalent in lei of minimum 2,000 euros seems to apply only to casino gambling activities, it is not excluded that, for the unit of reason, in a broader acceptance of the legislator, in this category should be included including the collection of stakes for traditional gambling.
However, considering the initial version of the draft law, according to which art. 13 paragraph (2) it had the following content: The gambling providers have the obligation to apply standard measures to know the client when collecting the winnings, when placing a bet, when buying or exchanging chips, or in all cases, when they are made. transactions whose minimum value represents the equivalent in lei of EUR 2000, regardless of whether the transaction is carried out through a single operation or several operations that seem to have a connection with each other, we consider that the legislator’s intention was to exclude the collection operations stakes in the sphere of operations that are the subject of standard customer awareness measures.
Standard customer awareness measures should enable the gambling organizer in:
– Identification of the client and verification of his identity based on the documents, data or information obtained from credible and independent sources (identity card, passport, residence permit – documents that lead to the knowledge of all the civil status data provided in the identity documents provided by law);
– Assessing the purpose and nature of the business relationship and, if necessary, obtaining additional information about them;
– Conducting continuous monitoring of the business relationship, including by examining the transactions concluded throughout the respective relationship.
The collection of personal data for persons who record winnings representing the equivalent in lei of at least EUR 2,000 in a single operation brings to the gambling operators the obligation to legitimize the identity card for the client who registers a profit of at least EUR 2,000.

From a practical perspective, for the online games the mission of compliance is to be expected to be relatively simple, since the registration of the player account itself involves prior checks on the player’s identity, the continuous monitoring of the business relationship being justified by the risks involved conducting the activity of remote gambling, by electronic means, in the absence of direct contact with the client.
However, once we step into the realm of traditional gambling, applying standard customer knowledge measures involves not-so-easy-to-identify solutions.
Thus, we appreciate that traditional gambling organizers will have to find solutions that require customers to submit a copy of the identity document upon exceeding the ceiling, or to provide specialized locations with devices for copying them physically or digitally allows the collection and storage of customer identification data.
For situations where the operator is not able to apply the measures to know the client, the client must not open the account, initiate or continue the business relationship or carry out the occasional transaction and must draw up a suspicious transaction report in relation to that client, whenever there are grounds for suspicion, a report to be transmitted to the Office.
In case the amount is not known at the time of accepting the transaction, the operator will apply the standard measures to know the client when he is informed about the value of the transaction and when he has established that the applicable minimum limit has been reached.
Another important mention is that customer awareness measures will not only be applied to new customers, but depending on the possible risks that may arise, the measures also apply to existing customers.
Regarding the SIMPLIFIED MEASURES FOR CUSTOMER KNOWLEDGE, according to art. 16 of the law 129/2019, gambling organizers, may, as an exception, also call for a simplified procedure, but only if this procedure is appropriate to the risk of money laundering and associated terrorist financing.
Prior to applying simplified customer awareness measures, reporting entities have the obligation to ensure that the business relationship or occasional transaction presents a low degree of risk, determined at least based on the following risk factors: customer risk factors; risk factors for products, services, transactions or distribution channels; geographical risk factors.
The methodological norms, at art. 18 paragraph (2), provide, as an example, the simplified customer knowledge measures that can be applied by the reporting entity. These consist of a simplified procedure, as indicated by the name of the procedure, in which less information can be requested from the client, the checks can be performed with a lower frequency than for the other two types of KYC measures, such as and other measures whereby low-risk customer monitoring will be lower in frequency than standard and additional measures.
Thus, even if the dissociated level of risk regarding money laundering is not achieved at the legislative level for each type of game, with no objective exceptions allowed, the gambling organizers have the option, after assessing the risk factors involved, to apply simplified customer awareness measures, which, by the contrary interpretation of the incidental provisions governing the other KYC measures, can be applied, for example, to situations where the value of the profit is lower than the equivalent in lei of 2000 Euro / situations in which the client is a citizen of the EU / EEA etc.
Even in the context of a low level of risk in terms of money laundering, operators are still required to carry out, in all cases, adequate, documented and formalized monitoring of transactions and business relationships to enable the detection of unusual or suspicious transactions.
In addition to standard customer awareness measures, gambling organizers apply ADDITIONAL CUSTOMER KNOWLEDGE MEASURES in all situations which, by their nature, may present an increased risk of money laundering or terrorist financing.
This measure comes as an antithesis to simplified customer awareness measures. Thus, if in the case of the simplified procedure, the identified risk had to be low, in the case of additional measures, the risk should be increased.
According to art. 17 of the AML Law provide as an example the situations that represent an increased risk of money laundering, namely: in the case of transactions or business relations, as the case may be, which involves persons from countries that do not apply or insufficiently apply the international standards of AML and CFT, or which are internationally known as non-cooperating countries; in the case of transactions or business relationships with PEP or with customers whose real beneficiaries are PEP, including for a period of at least 12 months from the date on which the person no longer holds an important public office; In the case of natural persons established in third countries identified by the European Commission as high risk third countries.
Thus, if in the case of simplified measures, the procedure allowed to reduce the number of information that had to be requested from the client and the frequency of the checks, in case of additional measures, the procedure is more rigorous, giving the possibility of the gambling operators to request an increased number of information with regarding the client (eg regarding the occupation, the source of income of the client, etc. – such as: state of payment, declaration of wealth, tax returns, certificate of heir, etc./ other information available in public databases), to carry out further research on the client (eg Internet searches using independent and open sources), as well as the possibility of adopting a series of measures that can help the organizers to establish the real reason for the transactions (eg increased supervision, permanent relationship of the relationship). business; approval at a higher level of hierarchy of the beginning and continuation of the business / efe relationship accounting for the occasional transaction) (art. 18 paragraph (3) of the Norms).
From a practical point of view, regarding the application of these measures, the difficulties are represented by the identification of the occasional transactions and of the transactions in which PEP (public exposed persons) are involved, all the more so as, according to the Law, both the clients included in this category, as well as their family members, are in a high risk category in terms of money laundering, and especially if it is taken into account that, in this case, the additional measures of knowing the customers apply at the latest at the time of payment.
Regarding the PENALTIES FOR THE INFRINGEMENT OF KYC MEASURES, according to the AML Law the breach of the obligations stipulated above constitutes a contravention, if it was not committed in such conditions as to constitute a crime, and in the case of legal persons the limits of the fine are increased by 10% of the total revenues related to the fiscal period completed, prior to the date of the preparation of the report of finding and sanctioning the contravention, and the sanctions and measures can be applied including the members of the governing body and other natural persons who are responsible for violating the law.
In addition to the pecuniary sanctions that can be applied, Law 129/2019 also provides for a series of complementary measures, applicable in case of breach of the obligations regarding the application of KYC measures, which may consist in: confiscating the goods destined, used or resulting from the contravention; withdrawal of the license or notice for certain operations for a period of one month to 6 months or definitively; annulment of the opinion, agreement or authorization to exercise an activity; withdrawal of the license or notice for certain operations for a period of one month to 6 months or definitively; and so on.
Thus, as we can see, in case of breach of the obligations regarding the measures of knowledge of the client the sanctions can lead to the suspension or even the cancellation of the license or authorization to operate the gambling.
Regarding the other aspect of our exposure, regarding the REPORTING OBLIGATIONS incumbent on the gambling organizers, we make it clear that they, according to the AML legislation, are of two types, namely:
– Obligation to report suspicious transactions (regulated in article 6 of the Law).
– Obligation to report transactions that do not have suspicion indicators – this category includes cash transactions, in lei or foreign currency, whose minimum limit represents the equivalent in lei of 10,000 euros, whether the transaction represents a single operation or is fragmented into several transactions smaller than the equivalent in lei of 15,000 euros, which have common elements such as: the parties of the transactions, the nature or category in which the transactions are involved and the amounts involved (regulated in the content of article 7 of the Law).
Regarding the identification of suspicious transactions, even if the law provides for situations that may raise suspicions and justify sending a suspicious transaction report to ONPCSB, in practice, the concrete identification of these situations is difficult, especially since the suspicious transaction is not it is associated neither to the limit of 10,000 Euros related to the transactions that do not present indicators of suspicion nor to the sum of 2,000 Euros to the gain, associated to the application of the standard measures of knowledge of the client.
Thus, any transaction, regardless of the amount, can be the subject of a suspicious transaction report, if the operator, according to the situations specified by law and through its procedures, identifies and categorizes it as such.
In the same vein, art. 22 of the Norms provides, with regard to transactions that do not represent suspicion indicators, to the reporting entities, the obligation to submit reports on these transactions within 3 days from the date of their completion, respectively the moment of the last operation.
Therefore, considering that the reporting obligation applies even in the case of fragmented transactions, we consider that the analyzed provision presents an increased risk for traditional gambling organizers, since it imposes (implicitly) on their obligation to record all transactions players (placing stakes or collecting winnings) to determine when the minimum reporting value is reached. In this case, it appears necessary to implement a procedure by which the organizer monitors the transactions of each client, and when his transactions exceed the minimum threshold provided by law, the operators will prepare the report and notify it within the aforementioned term.
In conclusion, given the analyzed ones, we consider that many of the practical problems of the application of the AML Law are still under question, the methodological norms recently entered into force not forgetting most of the difficult situations created among the gambling operators. We are still looking forward to the sectoral regulations in this area and we hope to develop clear sectoral rules, edited with the observation of the specificity of each category of gambling organizers.

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