Portugal is one of the countries in Europe that works to prevent money laundering. Facing some risks due to its geographical location, Portugal aims to fight financial crimes with the AML compliance policies effectively. The Portuguese government continues to take precautions for this, being aware of the risks posed by money laundering. The government, which has been struggling with narcotic crimes for a long time, believes that it must stop the financial resources of crime organizations while continuing this struggle.
The History of AML in Portugal
Since its entrance into the Financial Action Task Force (FATF) in 1991, Portugal has made improvements to its AML compliance policies and regulations over the years.
Financial Intelligence Unit (FIU), Portugal’s major unit against money laundering and tax crimes, was established in 2002. The unit operates independently under the umbrella of the Portuguese Judicial Police. As a police unit, FIU deals with executive matters and does not regulate financial matters.
The first concrete step against money laundering in Portugal was taken in 2004 with the enactment of Law No. 11/2004. The law has drawn out the specific requirements to follow up with FATF’s and the European Union’s (EU) AML compliance regulations.
In FATF’s 2017 evaluation, Portugal was cited to be compliant with 12 and largely compliant with 22 of the 40 FATF Recommendations. This compliance measure puts Portugal out of FATF’s list of AML-deficient countries.
The Financial Regulator of Portugal
Banco de Portugal acts as the central bank and the financial regulator of Portugal. It is the authority responsible for taking AML/CTF measures in Portugal. The bank regulates and publishes measures to be taken by financial institutions, which also include regulations to prevent money laundering and the financing of terrorism. These regulations are designed to be compatible with the FATF and the EU laws and regulations.
AML Landscape of the Country
In 2017, Portugal took measures to enhance its AML legislation. These new laws are used to reduce the allowable limits for cash transactions, establish a national record of recipients for financial transactions, and obligate attorneys to report any suspected instances of money laundering to the authorities.
Toward the conclusion of 2017, Portugal introduced legislative proposals aimed at easing bank confidentiality and granting tax inspectors access to information about bank accounts suspected of involvement in money laundering activities.
Portugal was classified as a Jurisdiction of Primary Interest in the 2018 International Narcotics Control Strategy Report (INCSR) by the US Department of State. The report's summary from that time stated that Portugal established AML laws and enforcement mechanisms that adhere to global standards.
The Effects of Organized Crime on the AML Requirements
Portugal has put in place regulations for AML that encompass a wide range of sectors, including both financial institutions and non-financial businesses. When it comes to customer identification and due diligence, the entities are mandated to identify clients and conduct due diligence for business relationships or transactions exceeding specific thresholds, such as transactions over €15,000 or virtual asset activities exceeding €1,000. For situations deemed high-risk, including transactions linked to high-risk third countries or politically exposed persons, an elevated level of due diligence is necessary.
Instances of suspicious transactions are required to be reported to both the Central Department of Criminal Investigation and Prosecution and the FIU. Maintaining correspondence relationships with shell banks or institutions facilitating shell bank accounts is prohibited for financial institutions. Information that proves beneficial ownership is documented within a Central Register and entities are obligated to formulate compliance programs, which include risk assessment, policies, training, and internal controls.
Non-Compliance Penalties in Portugal
In Portugal, imprisonment can be as long as 12 years, although it is always restricted to the most severe penalty that applies to the underlying offenses.
If the perpetrator commits the crime on a regular basis, the penalty can be increased by a third.
For legal entities, the prison sentence is converted into a fine. A 10-day fine corresponds to a month of imprisonment, and each day's fine falls within the range of €100 to €10,000. Within this framework, the court determines the appropriate penalty based on the financial situation of the convicted entity and its employee-related expenses.
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