Anti-Money Laundering and Counter Terrorist Financing in Montenegro

  • Prevention of Money Laundering and Terrorism Financing Act (Official Gazette of Montenegro, Nos. 33/2014, 44/2018, and 73/2019) (the “AML Act”); and 
  • Articles 28 and 29 of the Prevention of Money Laundering and Terrorism Financing Act (Official Gazette of Montenegro, Nos. 14/2007, 4/2008 and 14/2012). 

2. Are the 4th AML Directive and the 5th AML implemented in your jurisdiction?

Yes, with the adoption of the AML and CTF Act, the basic provisions of the 4th AML Directive were implemented. The legislation of Montenegro is to some extent in line with the 5th AML Directive.

3. Which is the AML/CTF supervisory authority in your jurisdiction?

The Department for Prevention of Money Laundering and Terrorism Financing (the “Financial Intelligence Unit”) is the organisational unit in the Police Administration working on the prevention of money laundering and terrorism financing, receiving, collecting, keeping, analysing and disseminating data, information, documents and results of strategic and operational analysis on suspicious transactions to the competent state authorities and foreign financial intelligence units with the aim to prevent and detect money laundering and terrorism financing. The Financial Intelligence Unit can, among others, request information from reporting entities, order the temporary freezing of a transaction and monitor the client, etc. Additionally, suspicious transactions are reported to the Financial Intelligence Unit.

Other authorities authorised to monitor compliance with the key obligations under the AML Act in certain sectors include the Central Bank of Montenegro, the Insurance agency, the National Customs Agency, the Montenegrin post and the relevant inspectorate. 

4. Who are the obliged/reporting entities in your jurisdiction? Are there any local derogations from the scope of the obliged entities as provided for in the 4th and 5th AML Directives? 

Under the AML Act, a large number of entities have this duty. These include banks, financial institutions, payment services providers, insurance and reinsurance companies and intermediaries. In this regard, the entirety of the full scope of the obliged entities is covered in Montenegro. 

The KYC requirements in the AML Act of Montenegro follow the requirements of the 4th AML Directive.

The AML Act prescribes an obligation of the reporting entities to acquire information regarding the UBO’s of their customers. The AML Act also governs the establishment, content, bases of recording and manner of keeping the register of beneficial owners of legal entities and other entities registered in Montenegro. The AML Act provides for a general obligation on all entities to disclose their UBOs to the registry. 

6. Is there any legislation in your country allowing for online/digital onboarding of customers? What are the restrictions, if any?

Yes, the legislation in various sectors, such as the banking sector, allows for the digital onboarding of customers, provided that the requirements for customer identification and customer verification under the AML Act are observed. Still, this method of onboarding of customers is still not widely used in practice, and so far only a handful of obliged entities have adopted full online onboarding of customers, while many more frequently use digital tools to make onboarding customers user friendly and save time.

7. What are the other main obligations of the reporting entities? Do the obligations of some of them go beyond those required by the 4th and 5th AML Directives in terms of internal safeguards, KYC duties, reporting obligations, etc.?

The reporting entities’ obligations under the AML Act follow the main principle of the AML Directive(s). These include customer due diligence (CDD), the collection of information and documents and their storage; an assessment of the risk of money laundering and terrorist financing, and the disclosure of information on suspicious operations, transactions and customers. There are no obligations that go beyond those required under the AML Directives.

8. Is a National Risk Assessment adopted in your jurisdiction? If yes, what are the main identified risks?

Yes, a National Risk Assessment for Money Laundering and Terrorist Financing (“NRA”) was adopted in Montenegro in 2015. This risk assessment contains an action plan for the fight against money laundering and financing of terrorism. 

According to unofficial publicly available information a revision of the NRA in being discussed.

9. What are the main CTF measures in your country?

The only measures provided under the AML Act relate to KYC, and include a prohibition on providing financial services, funds and other financial assets and economic resources, if these cannot be carried out properly. 

Following any suspicious activity, the financial intelligence unit must be notified and will carry out an investigation or monitor the subject.

10. What are the criminal and/or regulatory and/or other risks for corporate bodies/directors/employees under your national law if failing to comply with AML/CTF legislation? Is there regular enforcement of the AML/CTF legislation in your country?

The Montenegrin Criminal Code recognises both money laundering and financing of terrorism as standalone criminal offences. Predicate crimes that are committed either in or outside Montenegro can support a money laundering charge brought in Montenegro. 

The penalties prescribed in the Criminal Code for Money laundering are:

  • imprisonment from six months up to 12 years depending on the sum of the laundered money and circumstances at hand as well as a fine; and
  • the funds which were laundered will be confiscated.

The penalties prescribed in the Criminal Code for Financing terrorism are:

  • imprisonment from one to ten years and the funds used to fund terrorism will be confiscated. 

Legal entities can in principle bear criminal liability under Serbian law. Namely, the Responsibility of Legal Entities Act states that if a legal entity has enriched itself through the proceeds of a crime committed by an employee or a director, the legal entity can be sanctioned with a fine. The fine cannot be less than twice the amount of the damages or more than one hundred times the amount of the damages; in monetary terms, at least EUR 1,000 and up to EUR 5,000,000, and depends on the length of the jail time prescribed.

The AML Act provides a range of sanctions for non-compliance with the key requirements, such as customer checks, record-keeping, and suspicious transaction reporting. The sanctions take the form of fines and penalties which vary depending on the type of the infringement and range from EUR 2,000 to EUR 20,000, for legal entities and EUR 400 to EUR 2,000 for individuals.

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Radivoje Petrikić
Partner
Vienna
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Milica Popović
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Belgrade