Money laundering

Rules regarding money laundering

Preventive measures against money laundering and the funding of terrorism.

 

Danish Anti-Money Laundering Act

A new act concerning money laundering and combating terrorism went into effect on 26 June 2017.

The new Danish Anti-Money Laundering Act contains no rules regarding risk assessment or risk management. With the new law, the applicable regulatory process is changed from being primarily rule-based to being more risk-based. Each enterprise must focus on its efforts targeting the actual areas of risk. It is thus up to each enterprise to identify and manage risks, so that enterprises prioritise their resources in areas where there is an increased risk of money laundering or the funding of terrorism. The enterprises must then identify and assess the risks posed to them, put in place procedures to counter such risks and individually assess whether a given customer relationship can be categorised as a limited, normal or increased risk.

The Danish Anti-Money Laundering Act represents an implementation of the latest international standards from the Financial Action Task Force and portions of the 4th Anti-Money Laundering Directive.

Purpose

The overall purpose of the Act is to prevent the misuse of Danish enterprises and the Danish financial system to launder money and fund terror. Persons or enterprises intending to launder money or fund terrorism are thus aware that the persons and enterprises covered by the Danish Anti-Money Laundering Act are subject to a notification obligation in the event of any suspicion that cannot be dispelled.

Under the Danish Anti-Money Laundering act, lawyers and law firms are required to:

  • know the identities of their clients, and thus obtain and store their ID information
  • be aware of the activities of their clients
  • notify the Danish Bar and Law Society or the State Prosecutor for Serious Economic and International Crime (SØIK) in the event that money laundering or the funding of terrorism is suspected

In addition, lawyers and law firms must formulate internal rules regarding client identification, reporting, internal controls, risk assessment, training and instruction programmes for employees, etc.

Internal rules

These rules apply to all employees of Moltke-Leth.

A significant portion of the legal counsel provided by Moltke-Leth Advokater is subject to the Danish Anti-Money Laundering Act.

All employees must consequently comply with the procedures described in these rules in all relevant client relationships cited in Item 5.

The internal rules are provided upon being hired by Moltke-Leth. The rules constitute a part of the employee’s terms and conditions of employment, and should be kept together with the employee’s employment contract. The employee must sign to confirm their having read the rules and their willingness to comply with them.

Definitions of money laundering and the funding of terrorism. The following is understood in connection with money laundering according to the Danish Anti-Money Laundering Act:

  • to unjustifiably receive, obtain or change shares in a financial gain achieved through a criminal violation of the law
  • to unjustifiably conceal, store, transport, aid in the sale of or in some other way subsequently work to secure the financial gain from a criminal violation of the law, or
  • to attempt to effect or collaborate in such dispositions

The following is understood in connection with the funding of terrorism according to the Danish Anti-Money Laundering Act as defined in § 114b of the Danish Penal Code as it pertains to actions covered by § 114.

The funding of terrorism can occur based on lawfully generated assets.

The Act’s area of application

The Act is applicable when enterprises or persons provide assistance in the planning or execution of transactions for clients in connection with:

  1. the sale and purchase of real estate or enterprises,
  2. the administration of clients’ money, securities or other assets,
  3. the opening or administration of bank, savings or securities accounts,
  4. the provision of necessary capital for the establishment, operation or management of enterprises,
  5. the establishment, operation or management of enterprises, or
  6. other business consulting.

The Act is further applicable when the lawyer makes, on his client’s behalf and account, a financial transaction or a transaction involving real estate.

Criminal cases and civil cases fall outside the scope of the Act, unless the assistance also includes legal counsel.

Client identification

The employee must ensure that the following information is present in connection with each and every establishment of a client relationship and the setting up of each and every case.

The employee must make a copy of the identification information, which must be stored for the case. No advice may be provided to the client and no transactions made for the client until the identification requirements have been fulfilled.

General identification requirements:

  • The client’s name and CPR or CVR no. For clients who have no CPR or CVR no., another registration number must be obtained that identifies the client in the same way as a CPR or CVR no.

Documentation types:

  • Documentation must, as a starting point, occur via the provision of a copy of a passport or driving licence (physical persons), or by obtaining an updated transcript from the Danish Business Authority (companies).
  • For foreign companies, a transcript must be obtained from the relevant authorities in the country in question, or similar documentation.
  • If the lawyer knows the client especially well, it is possible to provide a declaration in the case to the effect that the lawyer knows the client personally. This will entail that the money-laundering control can be carried out per the simplified procedure.
  • The information obtained must be stored for at least five years, cf. details in Section 7 below.

In particular with regard to enterprises:

  • The ownership and control structure must be established, and the true owners of the enterprise, e.g. persons who either directly or via multiple holdings own more than 25% of the enterprise, must be identified, as must those who exercise control over the management of a company in some other manner. This means that if there are four owners who each hold 25%, none of them needs to be identified. In such instances the registered day-to-day management is viewed as the true owner, and must be identified using the same procedures.
  • If the person making contact is acting on behalf of another, ID information must also be obtained for the person making contact and for the client (and their true owner(s), and it must also be established that the person acting on behalf of another is authorised to do so.

If the client is a physical person, the client must, along with the request for the submission of money laundering documentation, also be informed of the rules that apply to personal data management with a view to preventing money laundering and the funding of terrorism, cf. the Danish Anti-Money Laundering Act § 16, 1st Section.

Storage of identification information etc.

The identification information must be stored for at least five years following the cessation of the client relationship. Documents and registrations regarding transactions must be stored for five years, as reckoned from the execution of the transaction.

Data regarding physical persons must be deleted once five years have elapsed from the conclusion of the case for which the data were obtained. Such deletions pertain to all copies of the data, regardless of whether they exist in physical or digital form.

The data may not be used for any purpose other than the fulfilment of the obligations of the Law Practice under the law.

Due diligence and obligation to inform about General due diligence:                                                                             

The employees must be alert to activities that, based on their nature, could have ties to money laundering or the funding of terrorism. The employees must be particularly alert to complex and unusually large transactions or transaction patterns that are unusual in relation to the client, including, for example, transactions that are unusually large in relation to the client’s finances.

The Danish Financial Supervisory Authority has issued an executive order concerning countries and territories in which there is a particular risk of money laundering and the funding of terror (Executive Order no. 1347/2010).

Concrete suspicion:

A suspicion of money laundering can be based on the following circumstances, e.g. the following “indicators”:

  • The client wishes to make payment of purchase sums or other sums included in an agreement or transaction in cash to be delivered to the offices of Moltke-Leth Advokater.
  • The client is unwilling to furnish normal and sufficient information in connection with the establishment of the client relationship, including when opening a client account, or the client provides false information.
  • The client seeks to deposit cash to a client account in several increments, wherein each individual sum is not noteworthy, but the total of the payments is substantial.
  • Any and all substantial transactions in cash or securities in which the buyer or seller is unknown, or where the amount, nature or frequency of the transaction seems unusual
  • The client is not acting on their own behalf, or is unwilling to provide information as to the true owner or source of the assets.
  • Large or unusual transactions that have no apparent financial or clear legal purpose.
  • Sudden payment of a major debt.
  • Atypical payment path or furnishing of security.
  • Notable over/underbilling (e.g. in connection with cooperation with the purchaser of an asset who subsequently makes a laundered profit).
  • Conspicuous payments of penalties/damages in connection with breach of contract.
  • Transactions with tax shelter countries or countries from which it may be difficult to obtain control information.
  • Atypical in-kind contributions in connection with the founding of companies or capital expansions.

The employee’s obligation to act:

If an employee suspects or has knowledge of factors that could give rise to a suspicion that a transaction has or has had ties to money laundering or the funding of terrorism, said employee must notify the supervising partner.

The supervising partner’s obligation to act:

Once the supervising partner has, through an employee or by some other means, come to suspect that a transaction has or has had ties to money laundering or the funding of terrorism, said partner must investigate the circumstances in detail.

If the suspicion of money laundering cannot be dispelled following such an investigation, the supervising partner must notify the Danish Bar and Law Society or SØIK immediately.

Exemptions from the obligation to inform:

The Act exempts lawyers from reporting information received from or obtained regarding a client if the lawyer is establishing the legal status of the client in question or defending or representing said client in a legal proceeding, a case before the National Tax Tribunal or a case before a court of arbitration. This shall apply regardless of whether the information is received before, during or after the legal proceeding or in connection with the establishment of the client’s legal status.

Monitoring:

Moltke-Leth will monitor to ensure that the employees of Moltke-Leth comply with the present set of rules whenever there is occasion to do so.

Liability

Violations of the provisions of the Danish Anti-Money Laundering Act are punishable by fines, which may be imposed on the Law Practice itself. The penalty may rise to imprisonment for up to six months in connection with particularly gross or extensive and continuous violations.

Questions and contact addresses

Questions concerning a concrete transaction are to be directed to Henrik Holmblad, Lawyer or in his absence, Vibeke Samuelsen, Lawyer.

Reporting of a concrete case is handled by Henrik Holmblad, Lawyer

Reports may be made to:

The Danish Bar and Law Society, tel. +45 33 96 97 98, e-mail: samfund@advokatsamfundet.dk or

The Money Laundering Secretariat under the State Prosecutor for Serious Economic and International Crime (SØIK), Kampmannsgade 1, DK-1604 Copenhagen V, tel.: +45 72 68 90 00; reports are submitted via https://hvidvask.politi.dk/landin.aspx, e-mail: fiu@politi.dk