Potential Consequences of Failure to Comply with Anti-Money Laundering Regulations
January 07, 2020

Failure to comply with anti-money laundering

Companies falling within the scope of the Swedish Measures Against Money Laundering and Terrorist Financing Act (hereinafter referred to as the Anti-Money Laundering Act) must take certain actions in order to prevent money laundering. A company failing to take such actions risks exposing both itself and its key individuals for severe consequences. Banks and other financial entities run the risk of being ordered to pay heavy fines in case of breach of the anti-money laundering regulation.

The obligation to comply with the anti-money laundering regulation applies even before any business is in place. Certain businesses under the Anti-Money Laundering Act must make a written notice to the Swedish Companies Registration Office (Sw. Bolagsverket). This applies on, e.g. operators conducting professional trade with products where it can be assumed that transactions take place in the minimum amount of EUR 5,000 in cash, usually car-dealers, or jewelers, and operators conducting professional accounting, but does not apply to, among others, an approved or authorized accountant or registered audit firm. This notice is recorded in a certain anti-money laundering registry.

If no notice is sent, the Swedish Companies Registration Office can issue an order towards the operator to register. If the operator still doesn’t register, the Swedish Companies Registration Office can order the operator to cease with its business.

In addition, a majority of all Swedish legal persons must register any beneficial owner. Registration of beneficial owner has to be done within four weeks from the registration with the Swedish Companies Registration Office. If registration is not done within the set time, the Swedish Companies Registration Office can order a legal person to register within a set time limit. Should a legal person not comply with such an order, the Swedish Companies Registration Office can, subject to a penalty payment, order the legal person or an CEO, a director or the holder of a corresponding position, to comply. The Swedish Companies Registration Office can continuously order the legal person or any key individual to pay a penalty for as long as they are not compliant.

In more serious cases of breaches of the anti-money laundering regulation, an operator can also be sentenced to pay heavy fines or face prison. The severity of the sentence depends on the severity of the crime, including the extent of the money laundering. For the most serious types of money laundering, a perpetrator can be sentenced to maximum six years in prison.

Under the Anti-Money Laundering Act, a legal person can be subject to fine in the maximum amount of one million euro. However, for certain legal persons who falls under the Anti-Money Laundering Act, e.g. banks and other financial corporations, the fines are even higher, the highest amount of five million euro or ten percent of the operator’s revenue. For banks with revenues amounting to hundreds of millions of euro, such a fine could amount to tens of millions of euros.

In summary, the obligation to comply with the anti-money laundering regulation starts with the registration of the company. Should an operator not be compliant, it risks being hit with heavy fines. In worst case, an operator or a key individual of a company can be sentenced to pay heavy fines or even face prison.

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This article is presented in cooperation with Eversheds Sutherland Sweden.