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What fundamental changes did the amendment to the AML Act bring, effective from January 15, 2025?

On January 15, 2025, Act No. 387/2024 Coll. came into effect, amending Act No. 297/2008 Coll.

on the protection against the legalization of proceeds from criminal activity and on the protection against terrorist financing and amending certain acts, as amended, and amending certain acts of November 27, 2024.

The aforementioned Act primarily amended and supplemented Act No. 297/2008 Coll. on the protection against the legalization of proceeds from criminal activity and on the protection against terrorist financing and on amendments to certain acts (hereinafter also referred to as the “AML Act”), but also affected many other legal regulations, such as Act No. 372/1990 Coll. on misdemeanors, Act No. 455/1991 Coll. on Trade Licensing (Trade Licensing Act), Act No. 78/1992 Coll. on Tax Advisors and the Slovak Chamber of Tax Advisors, Act No. 171/1993 Coll. z. on the Police Force, Act No. 202/1995 Z. z. Foreign Exchange Act, Act No. 199/2004 Z. z. Customs Act, Act No. 129/2010 Z. z. on consumer loans and other loans and credits for consumers, and others – however, these laws were supplemented and amended mainly in connection with changes in the AML Act.

The amendment to the AML Act was drafted by the Ministry of the Interior of the Slovak Republic in cooperation with the Ministry of Finance of the Slovak Republic, the Ministry of Justice of the Slovak Republic and the National Bank of Slovakia, and its main objective was primarily to implement Regulation (EU) (EU) 2023/1113 of the European Parliament and of the Council of 31 May 2023 on information accompanying transfers of funds and certain crypto assets and amending Directive 2005/60/EC. May 2023 on information accompanying transfers of funds and certain crypto assets and amending Directive (EU) 2015/849 (hereinafter referred to as “Regulation (EU) 2023/1113”).

What were the main objectives of the amendment to the AML Act from the perspective of European legislation and Moneyval?

In addition to the above-mentioned main objective, the amendment to the AML Act also aimed to eliminate the shortcomings in Slovak legislation identified by the European Commission in order to comply with the requirements for the correct and complete transposition of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 and repealing Directive 2005/60/EC. May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No. 648/2012and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC, and in accordance with Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing and Directives 2009/138/EC and 2013/36/EU. Following the identification of shortcomings, this amendment also aimed to address the shortcomings identified in the Report of the 5th of the mutual evaluation of the Slovak Republic by the Council of Europe's Committee of Experts on the Evaluation of Measures against Money Laundering and the Financing of Terrorism (hereinafter referred to as the “Moneyval Committee”).

In the explanatory memorandum to the amendment to the AML Act, the submitter itself stated that failure to remedy the shortcomings identified by the Moneyval Committee could result in the application of the ICRG (International Country Risk Guide) sanction regime against the Slovak Republic, with the possible subsequent inclusion of the Slovak Republic on the so-called gray list. According to the submitter, inclusion of a country on the grey list means, in addition to the negative impact on the country's reputation, serious consequences in the form of increased controls by international institutions, difficulties in carrying out cross-border transactions, and a reduced ability to attract foreign investment.

What key changes and obligations did the 2025 amendment to the AML Act bring?

For the purposes of this article, we briefly outline the key changes introduced by the amendment to the AML Act and their significance:

1. classification of cryptoasset service providers as financial institutions and replacement of existing virtual currency exchange service providers and virtual currency wallet service providers

1. new legal terms “cryptoassets” “transfer of cryptoassets” “high-risk country” - introduction of a new legal term “crypto-asset”, which replaces the existing term “virtual currency” (with reference to Article 3(14) of Regulation (EU) 2023/1113)

1. many changes in the scope and content of the obligations of the obliged entity when identifying a legal person, as well as in basic and simplified customer due diligence – e.g. in addition to the client's registered office address, the obligation to ascertain the address of its actual place of business, if it differs from the address of its registered office, or for verified persons if they have a representative not only on the basis of a power of attorney (as a result of a shortcoming identified by the Moneyval Committee in relation to FATF Recommendation No. 10.4, according to which there must be a legal requirement to verify that persons acting on behalf of another person are authorized to do so, even in cases other than power of attorney)

1. Proper transposition of European legislation (in particular directives) – elimination of shortcomings in the transposition of the directives mentioned above, which were identified in the assessments by the Moneyval Committee and the European Commission

1. restriction, control and declaration of cash - amendment of the obligation to declare cash when transporting it across the border of the Slovak Republic, in particular in relation to reducing the risk of financing illegal activities such as trafficking in human beings, drugs, weapons or terrorism

1. increase in fines and penalties for breaches of legal obligations – in line with the recommendations of the Moneyval Committee, the amendment to the AML Act also concerns the increase in fines and penalties for non-compliance with obligations in the area of money laundering and terrorist financing as an effective tool to ensure compliance with legislation and increase the motivation of of entities to comply with the rules

1. new requirements for responsible persons within the meaning of the AML Act, the need to assess the correctness of the self-assessment programs of obliged entities

How did the amendment to the AML Act affect the registration of beneficial owners in the RPVS?

Although the amendment to the AML Act did not directly amend Act No. 315/2016 Coll. on the Register of Public Sector Partners and on Amendments to Certain Acts (hereinafter also referred to as the “RPVS Act”), its impact on its application is significant. This Act expressly refers to the definition of the ultimate beneficiary according to a “special regulation,” which is the AML Act, specifically Section 6a.

According to Section 4 of the RPVS Act, a list of final beneficiaries of a public sector partner is also entered in the register, including their name, surname, permanent address, date of birth, nationality, and whether they are a public official performing a function in the Slovak Republic.

Although the RPVS Act itself has not been updated by the amendment, the extension and clarification of the definition of KUV in the AML Act has a direct impact on the assessment of who and in what cases needs to be entered in the register as the ultimate beneficiary. This applies to both public sector partners and authorized persons who make the entries and are responsible for their accuracy.

In practice, this means that even without an amendment to the RPVS Act, it may be necessary in some cases to:

• supplement or amend the entry of ultimate beneficial owners in the register,

• to change the internal procedures of the authorized person for their identification and verification,

• to analyze more complex or foreign ownership structures more thoroughly.

What new features and criteria does the amendment introduce for the identification of the ultimate beneficiary?

The definition of the ultimate beneficiary in Section 6a of the AML Act consists

1. a general clause, according to which the ultimate beneficial owner is any natural person who actually controls or exercises control over a legal entity, a natural person who is an entrepreneur, or an association of assets, and any natural person for whose benefit these entities carry out their activities or business (this part of the definition remains unchanged)

1. from the illustrative list of persons who could be identified as ultimate beneficiaries in view of the so-called general clause for individual legal forms or groups of legal forms

Originally, the AML Act only provided examples of criteria for legal entities (Section 6a(1)(a)), natural persons who are entrepreneurs (Section 6a(1)(b)) and associations of assets (Section 6a(1)(c)). The amendment clarified the criteria for associations of assets and at the same time expanded the range of entities, while precisely defining which persons would meet the defining criteria specifically for:

1. so-called foreign trust funds

1. for public trading companies and limited partnerships, and

1. for a legal entity that has a silent partner on the basis of a silent partnership agreement.

How does the amendment to the AML Act clarify the determination of the ultimate beneficiary of asset pools?

Within the meaning of the amendment to the AML Act, the ultimate beneficiary of an asset pool is a natural person who:

1. is the founder or establisher of the asset pool, if the founder or establisher is a legal entity, a natural person pursuant to Section 6a(1)(a) of the AML Act,

1. has the right to appoint, otherwise establish or dismiss the statutory body, management body, supervisory body or control body of the asset pool or a member thereof, or is a member of a body that has the right to appoint, otherwise establish or dismiss these bodies or a member thereof,

1. is a statutory body, management body, supervisory body, control body or member of these bodies,

1. is the recipient of at least 25% of the funds provided by the asset association, if the future recipients of these funds have been determined; if the future recipients are determined according to characteristics, these characteristics shall be specified, and the final beneficiaries shall become the beneficiaries at the moment of their identification or designation, and if the future recipients of the assets of the asset association have not been designated, the final beneficiaries shall be deemed to be the group of persons who derive significant benefits from the establishment or operation of the asset association,

1. is appointed to represent and protect the interests of the recipients of the asset association.

In this case, the amendment to the AML Act clarified that if future beneficiaries are determined according to characteristics, the characteristics must be specified and the specific natural persons become the ultimate beneficiaries only at the moment of their identification or designation. According to the amendment to the AML Act, a natural person appointed to represent and protect the interests of the beneficiaries of the asset pool is also considered to be the ultimate beneficiary.

The proposal removes a shortcoming in relation to FATF Recommendation No. 10.11 (a), which requires that the ultimate beneficiaries of an asset pool also include beneficiaries identified by class, who become beneficiaries upon identification or designation, and which requires that in the case of asset pools, the beneficial owners also include a so-called protector, i.e. a person appointed to represent and protect the interests of the beneficiaries of the asset pool.

How is the beneficial owner determined in the case of a foreign trust?

Since the obligation to register in the register of public sector partners may arise for any legal entity, which may also have a legal form not regulated by Slovak legislation, it often happens that the authorized person and also the public sector partner in the process of registration in the register of public sector partners had to identify the ultimate beneficiary also for an entity which is a so-called trust fund or trust established under the legal system of another country.

Despite information that the Ministry of Justice of the Slovak Republic is preparing legislation regulating trust funds, it is not yet possible under Slovak legislation to establish or establish a trust, even though some legal regulations use this term (the term trust fund is currently used in Act No. 359/2015 Z. z. on the automatic exchange of financial account information for tax purposes and amending certain laws, and in Act No. 507/2023 Z. z. on the tax adjustment to ensure a minimum level of taxation of multinational groups of companies and large domestic groups and amending Act No. 563/2009 Z. z. on tax administration (tax code) and on amendments and supplements to certain laws, as amended).

However, in professional circles, also in view of practical application, the implementation of such a legal form is communicated and considered necessary. The Czech legal system recognizes this legal form, and Slovak entities often establish trust funds under Czech law, given the similarity of the legal systems and the Czech language.

A trust fund is a set of assets, such as shares in a family business, which is set aside for a specific purpose and managed by a third party (trustee) for the benefit of a predetermined person (beneficiary). A trust fund allows the owner of the property to determine how their property will be managed in the future, thereby preserving the unity of the property and preventing its division, while also ensuring that such property will not be subject to inheritance. The rules for the disposal of assets in a trust fund are defined in the trust fund's statutes, which are binding on the trust fund administrator, who is obliged to dispose of the assets exclusively in accordance with the trust fund's statutes. The statutes may therefore clearly define who, how and in what proportion will participate in the family business and enjoy the benefits arising therefrom (https://www.legalfirm.sk/sk/stranky/clanok/zvereneck%C3%A9-fondy-porovnanie-pr%C3%A1vne-poriadky).

Within the meaning of the amendment to the AML Act, the ultimate beneficiary of a trust fund established under the law of another country or a similar legal structure established under the law of another country is also considered to be a natural person who is

1. the founder of a foreign trust fund,

1. the administrator of a foreign trust fund,

1. the person supervising the management of a foreign trust fund, if designated,

1. the recipient of funds from a foreign trust fund, if the future recipient of the funds has not yet been designated, the group of persons who have a significant benefit from the establishment or operation of a foreign trust fund,

1. exercises effective control over the assets entrusted to the foreign trust fund through direct or indirect ownership or other means and is not listed in points 1 to 4

According to the translator, the reason for the proposed amendment was a criticism by the European Commission regarding the transposition of Directive 2015/849, as amended, and also shortcomings identified in the 5th round of mutual evaluation by the Moneyval Committee, according to which it is necessary to identify the ultimate beneficial owner even in the case of a so-called trust fund, and according to the opinion of the European Commission, it is also necessary to respond to “cross-border situations,” i.e. situations where a trust fund is established under the law of another country - the proposed amendment transposes Article 3(6)(b) of Directive 2015/849, as amended.

Who is the beneficial owner in a public limited company and a limited partnership?

Within the meaning of the amendment to the AML Act, the ultimate beneficial owner of a public trading company and a limited partnership is a natural person who

1. is a partner,

1. directly or indirectly through ownership or in any other way controls a partner who is a legal entity.

According to the submitter, the amendment is based on the peer review of the Slovak Republic by the OECD Global Forum on Transparency and Exchange of Information (hereinafter referred to as the “GF”) and the recommendations in the area of exchange of tax information upon request which emerged from the review (the document is available on the website: https://www.oecd.org/slovakia/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-slovak-republic-2020-second-round-960316d9-en.htm)htm) - in order to eliminate the identified shortcomings and align with global standards, the Slovak Republic was specifically recommended to ensure that, in relation to partnerships, which in the Slovak Republic include public commercial companies and limited partnerships, information on the beneficial owners is available with regard to their form and organizational structure. According to the GF's reasoning, general provisions on the definition of UBO for commercial companies are not sufficient, but more specific legislation is needed to ensure that, in the case of these companies, partners who are natural persons are always considered UBOs. If the partners are legal entities, it is necessary to identify the natural persons behind these legal entities in accordance with the rules for determining beneficial owners.

Is a silent partner considered a beneficial owner?

The amendment to the AML Act clarified that a natural person who is a silent partner of a legal entity is considered the ultimate beneficial owner if they are entitled to at least 25% of the economic benefits of that legal entity's business.

In our legal opinion, this provision only specified or excluded one of the defining characteristics for determining KUV listed in Section 6a(1) of the AML Act, namely the right to economic benefits of a legal entity. separated one of the defining characteristics for determining the UBO specified in Section 6a(1) of the AML Act, which is the right to economic benefits of a legal entity, and determined the scope of this right, i.e. at least 25% of the right to economic benefits.

The GF's recommendations also called for specific treatment of KUV for silent partners on the basis of a silent partnership agreement with regard to the economic benefit they may derive from investing in a commercial company. The submitter also proposed this addition because the GF considers the interpretation of the provisions of Act No. 297/2008 Coll. in the guidelines of the Financial Reporting Unit, which are non-binding, to be insufficient.

Is it necessary to change the data in the register of public sector partners after the amendment to the AML Act?

We assume, given the effective date of the amendment to the AML Act on January 15, 2025, that authorized persons have already verified the identification of the ultimate beneficial owner of a public sector partner as of December 31, 2024, in accordance with the amendment to the AML Act.2025, that authorized persons have already verified the identity of the ultimate beneficial owner of a public sector partner as of December 31, 2024, in accordance with the amendment to the AML Act, and that they proceed in accordance with the current legal regulations when first entering an entity in the register of public sector partners.

However, as we also believe that the amendment did not introduce any changes to the criteria for identifying a natural person as the ultimate beneficial owner, but only specified these criteria in more detail, we consider that no changes to the persons of the ultimate beneficial owners were necessary. When assessing both the original and the amended criteria, we believe that the authorized person (as well as the public sector partner) would identify the same persons as the ultimate beneficiaries, taking into account the provision of the so-called general clause, i.e. the identification of a natural person who actually controls or supervises a legal entity, a natural person – entrepreneur or an association of assets, and any natural person for whose benefit these entities carry out their activities or trade.

The amendment to the AML Act represents an important step towards strengthening the transparency of the business environment in Slovakia and harmonizing it with European and global standards. For the legal community, this means the need for a more thorough analysis of clients' ownership structures, especially in cross-border cases or less traditional legal forms. Although the amendment does not formally change the concept of KUV, it significantly affects the way it is identified in practice. Therefore, its impact should not be overlooked in the normal corporate or compliance agenda.