Enacted Summary
In their 2005 report on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in Slovenia, the Council of Europe's Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) concluded that the 2002 Law on Prevention of Money Laundering largely complies with international standards and covers all relevant aspects with respect to organizations (financial institutions) and designated non-financial businesses and professions. Terrorist financing is a separate criminal offense in Slovenia, according to the report, and the provisions on terrorist financing in Slovenia meet the requirements of the 1999 United Nations Convention on the Suppression of Terrorist Financing. The report also mentions that the Office for Money Laundering Prevention, the Slovenian Financial Intelligence Unit (a constituent body within the Ministry of Finance) is operationally independent. The report, however, mentioned that the suspicious transaction reporting requirements in Slovenia are wanting as they do not cover terrorist financing as required by the Financial Action Task Force (FATF). In 2006, the MONEYVAL published a progress report on Slovenia's efforts to implement their 2005 recommendations. The progress report points out that a new AML/CFT Law was being drafted that would not only transpose the third European Union Directive but also better meet the latest, revised version of the international standards on AML/CFT and bring Slovenia closer to compliance with many FATF recommendations, especially those pertaining to terrorism financing. The law (Prevention of Money Laundering and Terrorist Financing Act) came into force in 2007, and owing to its relative newness, it has yet to be assessed against the FATF requirements. However, the general perception is that this Law is an improvement over its predecessor.
General Overview
In 2005, the Council of Europe's Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) published a report on Anti-Money Laundering and Combating the Financing of Terrorism, wherein it identified fraud, abuse of economic power, tax evasion, unjustified acceptance of gifts, abuse of office or official duties, acceptance of a bribe, unlawful manufacture of and trade in weapons and explosive materials as the major sources of domestic criminal proceeds. The MONEYVAL report noted that Slovenian authorities estimate a growing demand for money laundering as the number of economic offenses against property and drug offenses increases.
The main laws governing anti-money laundering (AML) and combating the financing of terrorism (CFT) in Slovenia at the time of the MONEYVAL report were the 2002 Law on the Prevention of Money Laundering, the Penal Code, the Code of Criminal Procedure, the Securities Market Act, the Foreign Exchange Act and several other Directives. According to the 2005 MONEYVAL assessment, the Law on the Prevention of Money Laundering "is robust and largely in line with the applicable international standards. It covers all the relevant aspects in respect of organizations (financial institutions) and designated non-financial businesses and professions. Areas of non-financial activities beyond those covered by the European Union (EU) and Financial Action Task Force (FATF) provisions have been identified as exposed to risks and made subject to the AML/CFT provisions" (p. 13). Terrorist financing is criminalized under Article 388a of the Penal Code as a separate criminal offense, and these provisions meet the requirements of the 1999 United Nations Convention on the Suppression of Terrorist Financing, which Slovenia has also ratified. In 2006, the MONEYVAL published a progress report detailing the progress made by Slovenia in implementing their 2005 AML/CFT recommendations. According to this progress report, "the internal Slovenian legislative agenda is directed towards harmonization of domestic law with the provisions of these new instruments [third EU Directive, and the revised Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism (Strasbourg Convention)], and is determined to bring domestic legislation into line with the new standards on countering of the financing of terrorism" (p. 5). The country, was, in 2006, in the midst of drafting a new Law on Prevention of Money Laundering and Financing of Terrorism (AML/CFT Law) to replace the 2002 Law on the Prevention of Money Laundering and to "implement the latest, revised international standards" (p. 5). The AML/CFT Law (Prevention of Money Laundering and Terrorist Financing Act No. 60) was adopted in 2007 and its text asserts that it transposes the third EU Directive as well as EU Directive 2006/70/EC into Slovenian law.
The main bodies responsible for anti-money laundering supervision in the financial sector are the Ministry of Finance (MoF), the Ministry of Foreign Affairs, the Bank of Slovenia, the Securities Market Agency, the Insurance Supervision Agency, the Slovene Institute of Auditors, and the State Office for Gaming Supervision (MONEYVAL 2005). Article 42 of the anti-money laundering law requires all these agencies to report to the financial intelligence unit (FIU), the Office for Money Laundering Prevention (OMLP), if there is reasonable evidence of non-compliance with the law's provisions. The 2005 MONEYVAL report notes that the OMLP is responsible for the prevention and detection of money laundering, and the OMLP website notes that the office serves as a clearing house between the institutions in the financial system and the judicial bodies and the police. The law enforcement bodies in Slovenia include the Ministry of Justice, the Police Service, the Slovene Intelligence and Security Agency (SOVA) and the State Prosecution.
The OMLP was established in 1994 within the MoF. The OMLP is operationally independent. Since 1996, it is a member of the Egmont Group and applies the Egmont Principles on Information Exchange when dealing with its foreign counterparts. According to the 2005 MONEYVAL report, it compiles comprehensive statistics from all relevant agencies and reports annually to the government on the performance of the anti-money laundering system. Per the 2006 MONEYVAL progress report, banks were the most commonly used financial intermediary for money laundering in 2005 and 2006, and also made the most suspicious transaction reports and currency transaction reports to the OMLP. In 2006, the OMLP forwarded 14 notifications on money laundering and 13 information on other serious offenses to the Criminal Police Directorate/State Prosecution. The amount of seized assets amounted to approximately 3 million euros in 2006. Although terrorism financing has been made a criminal offense since 2004, the country does not consider itself a high terrorism target. No terrorism financing related offenses have been detected or prosecuted as of the date of the 2006 report. Also, no freezing of terrorism-related assets have taken place under the relevant UN Security Council resolutions or EU regulations. The police and other prosecution authorities have, nevertheless, asserted that they have enhanced detection, investigation, and prosecution of money laundering offenses and this has resulted in increased investigations and court cases. However, only one conviction for money laundering had been made as of 2006.
The Principles
CP1. Legal Systems and Related Institutional Measures
According to the 2005 MONEYVAL assessment, the Law on Prevention of Money Laundering (LPML) "is robust and largely in line with the applicable international standards" (p. 13). The 2005 MONEYVAL report also found that Slovenia largely complies with R 1 and fully complies with R 2. Both recommendations relate to the criminalization of money laundering. Similarly, Slovenia largely complies with SR 2 dealing with the criminalization of money laundering and terrorist financing. The assessment notes, however, that Article 388a of the Penal Code is not fully in line with SR 2 and its interpretative note, and that the list of terrorism related offenses in the Code is not definitive. The 2006 MONEYVAL progress report noted that Slovenia, at the time, was in the process of amending the Penal Code, and the MONEYVAL recommendation for Article 388a would be taken into consideration during the preparation of the new law ,which came into force in 2007. With respect to FATF R 3 and SR 3 on the confiscation, freezing, and seizing of proceeds of crimes, the mutual evaluation found Slovenia to be largely compliant. According to the MONEYVAL report, "the seizure and confiscation regime under Slovene law is basically comprehensive and well-balanced" (p. 12). Nevertheless, the report called for more priority to be given to asset detection and asset recovery. In this respect, the 2006 MONEYVAL progress report mentions that although seizure of assets occurred, their eventual confiscation rarely followed, primarily due to the weakness in the provisions of the Criminal Procedure Act. However, the Act was amended in 2005 and the report expects that the proportion of seizures and confiscations will narrow in its aftermath. As for SR 3 relating to freezing measures related to terrorism financing, the progress report noted that a new Law on Restrictive Measures had been drafted, and was expected to be adopted in 2006. This Act was expected to improve the procedures relating to unfreezing of funds by competent authorities under the relevant UN Security Council resolutions and EU regulations. In Slovenia, terrorist financing is a separate criminal offense under Article 388a of the Penal Code. According to the 2005 MONEYVAL report, the provision meets the requirements of the 1999 UN Convention on the Suppression of Terrorist Financing. The MONEYVAL assessment considers the lack of any obligations in the law to report suspicions of terrorist financing "the real shortcomings as regards the observance of relevant international standards. Nonetheless, the FIU does take certain measures in the financing of terrorism area" (p. 13). Amendments to the legislation have been proposed after the introduction of the third EU Directive.
Slovenia largely complies with FATF R 26, R 30 and R 32, which are related to the FIU and its functions. Shortcomings include the non-coverage of financing of terrorism, a lack of staff and adequate training, and insufficient specification and detail in money laundering, financing of terrorism, and criminal proceeds statistics. With respect to law enforcement, prosecution, and other competent authorities, Slovenia partially complies with FATF R 27 (Law Enforcement Authorities), fully complies with FATF R 28 (Powers of Competent Authorities), and largely complies with FATF R 30 (Resources, Integrity and Training), and FATF R 32 (Statistics). The 2005 MONEYVAL report points out that more emphasis should be put on police-generated money laundering cases and asset recovery. Insufficient investigations lead to unsuccessful prosecution. To the recommendations relating to law enforcement authorities, the 2006 and (3) there has been no increase in staff resources in the police departments, although new regulations are expected to provide for additional officers in some departments. Slovenia complies with SR 9 related to cross border declaration and disclosure. The 2005 MONEYVAL report states that the OMLP is the Slovenian FIU and was established in 1994 within the Ministry of Finance. The OMLP is operationally independent. Since 1996, it is a member of the Egmont Group and applies the Egmont Principles on Information Exchange when dealing with its foreign counterparts. It compiles comprehensive statistics from all relevant agencies and reports annually to the government on the performance of the anti-money laundering system. Slovenia is compliant with SR 9 relating to cash couriers.
ID2. Preventive Measures - Financial Institutions
The 2005 MONEYVAL report notes that, with regard to customer due diligence, including enhanced and reduced measures, Slovenia largely complies with FATF recommendations R 5 and 7, partially complies with FATF R 8 and does not comply with FATF R 6. With respect to FATF R 5 (Customer Due Diligence, CDD), the report revealed a lack of obligations to conduct CDD in case of a suspicion of financing of terrorism. At the same time, however, the identification procedures for wire transfers are applied at a threshold higher than recommended by the FATF. The 2006 MONEYVAL progress report finds that the OMLP and the supervisory authorities have continued to provide guidance to entities to perform customer identification and that the adoption of the new AML/CFT Law was expected to lay down consistent CDD requirements for the entire financial sector. As for exchange offices, the BoS, the sector's supervisor notes that instead of lowering the threshold, identification of suspicious transactions should be intensified. It also assessed the practice in the sector jointly with the OMLP and found no need for adjustments. Slovenia does not comply with FATF R 6 (Political Exposed Persons, PEPs); however, according to the MONEYVAL assessment, the Slovenian authorities intend to implement enhanced measures on PEPs once the third EU Directive is in place. The MONEYVAL assessors also expressed concern that it is unclear how businesses involved in issuing and performing operations with debit and credit cards implement preventive measures. Therefore, they consider Slovenia only partially compliant with FATF R 8 (New Technologies and Non Face-To-Face Business). The 2006 MONEYVAL progress report noted that specific policies for financial institutions to prevent misuse of technology for money laundering and terrorism financing was expected to be addressed in the new AML/CFT Law.
According to the 2005 MONEYVAL report, Slovenia complies with FATF R 9 (Third Parties and Introduced Businesses), FATF R 4 related to financial institution secrecy or confidentiality, and FATF R 10 on record keeping. Slovenia largely complies with SR 7 on wire transfer rules. Slovenia largely complies with FATF R 11 and fully complies with R 21, both of which relate to monitoring of transactions and relationships. As of 2005, R 11 was not transposed into national laws. The recommendations related to suspicious transaction reports (STRs) are R 13, 14, 19, and 25. Slovenia is only partially complaint with R 13 on STRs, according to the 2005 MONEYVAL report since "financing of terrorism is not covered" (p. 142). The FATF's 2004 methodology defines the preparation of STRs in the case of suspected terrorist financing activities a basic obligation in order to meet its requirements on R 13. Slovenia is largely compliant with R 14 and 25, and compliant with R 19. Slovenia is non compliant with SR IV as according to the 2005 MONEYVAL report there was no reporting of financing of terrorism in the country at the time of the assessment. To these shortcomings and recommendations, the 2006 MONEYVAL progress report points out that the adoption of the new AML/CFT Law was expected to introduce CDD and STR measures in the case of terrorism financing. As for wire transfer rules, although the AML Law does not explicitly cover wire transfers for CDD procedures, they do come under its general requirements for all financial sectors. Further, the new AML/CFT Law was expected to stipulate CDD procedures for wire transfers in accordance with the third EU Directive and the draft EU Regulation on Information on the Payer Accompanying Transfers of Funds that comply with SR VII.
The 2005 MONEYVAL report also states that Slovenia largely complies with FATF R 15 on internal controls, compliance and audit; however, there was a lack of specific provisions on employee screening, and the responsibilities and powers of compliance officers needed to be clarified. Since Slovenia does not require financial institutions to ensure that their foreign branches comply with AML/CFT criteria, it achieves only partial compliance with respect to FATF R 22. Per the 2006 progress report, however, this shortcoming was expected be addressed in the new AML/CFT Law. Also, the BoS already checks, in conjunction with host supervisory authorities, the compliance of internationally active Slovenian banks with FATF R 22. As far as R 18 on shell banks is concerned, Slovenia largely complies with this recommendation.
Slovenia largely complies with FATF R 17, 23, 30, 32, and 25 and complies with R 29, which are related to the supervisory and oversight system, competent authorities and self-regulatory organizations (SROs). The 2005 MONEYVAL report notes that the speed of the administrative sanctions negatively affects their effectiveness (R 17). Moreover, regarding FATF R 23, the MONEYVAL assessment points out that the supervision outside the banking sector needs to be intensified in order to ensure adequate reporting of STRs. As far as statistics are concerned, the report found them not detailed and specific enough, particularly on money laundering and financing of terrorism matters, as well as confiscation and criminal proceeds. Regarding FATF R 30, an increase in staff and adequate training is needed. According to the MONEYVAL report, SR 6 on Anti-Money Laundering Requirements for Money/Value Transfer Services is not applicable for Slovenia.
ID3. Preventive Measures - Designated non-Financial Business and Professions
The 2005 MONEYVAL report notes that Slovenia partially complies with FATF R 12 relating to customer due diligence and record keeping. However, neither terrorist financing nor PEPs are covered by Slovenian legislation. Similarly, Slovenia only partially complies with FATF R 16 relating to suspicious transaction reporting. Shortcomings with respect to R 16 include the non-coverage of financing of terrorism and deficient reporting from designated non-financial businesses and professions (DNFBPs). Moreover, according to the mutual evaluation report, safe harbor provisions should cover criminal liability. The 2006 MONEYVAL progress report mentions in this regard that the new AML/CFT Law was expected to bring Slovenian legislation in line with international standards. It was expected to cover CDD and STR requirements for DNFBPs, introduce measures against terrorism financing in this sector, and cover PEPs for enhanced CDD measures.
Slovenia largely complies with FATF R 24 and 25 relating to regulation, supervision and monitoring. Supervision in this sector is shared by the FIU and the State Office for Gaming Supervision. The MONEYVAL report notes that a risk-based approach is still in an early stage. Resources needed to be increased to monitor and ensure compliance by DNFBPs. Also, more sector-specific and financing of terrorism guidelines are needed. The 2006 MONEYVAL progress report notes in this regard that (1) the OMLP has strengthened its staff by employing an additional person to monitor the DNFBPs; (2) risk of the entities and sectors is taken into account while conducting supervision (in recent times, the real-estate agencies are more closely monitored due to their money laundering and terrorism financing vulnerability); (3) the new AML/CFT Law is expected to improve supervisory authority over the DNFBP sector with power shifted from the OMLP and redistributed among the OMLP, the Market Inspectorate, and tax authorities, increase supervisory resources of the OMLP, and introduce restrictions on certain trades and professions, such as real-estate agencies, retailers, and travel agencies. Slovenia largely complies with FATF R 20 relating to other non-financial business and professions, the 2005 MONEYVAL report notes.
NC4. Legal Person and Arrangements & Non-Profit Organizations
According to the 2005 MONEYVAL report, Slovenia complies with FATF R 33 on access to beneficial ownership and control information. Furthermore, the MONEYVAL report notes that the FATF R 34 on "Legal Arrangements - Beneficial Owners" is not applicable. Slovenia only partially complies with SR VIII (Non-Profit Organizations) because there is no special review of the risks undertaken in the not for profit sector. Per the 2006 MONEYVAL progress report, Slovenia undertook a comprehensive review of the Non-Profit Organizations (NPO) sector at the highest governmental level in 2006 with respect to the adequacy of laws and regulations that govern it, the size, features, and activities of the NPOs, their funding and financial management, and their vulnerability to the threat of terrorism financing. The review found that (1) the laws were outdated, although some of them have been revised in the light of new developments; (2) the authority to regulate and monitor the sector was inadequate; (3) some detection of the threat of terrorism financing have been made by prosecution authorities, although none have been substantiated to make a terrorism financing related criminal offense. The governmental working group that conducted the study, however, did forward some suggestions to make the sector more transparent and accountable and to prevent its abuse by terrorists. The report was submitted to the government in July 2006, notes the MONEYVAL progress report.
CP5. National and International Co-operation
The 2005 MONEYVAL report found that Slovenia complies with FATF R 31 on national cooperation and largely complies with R 32 on statistics. According to the report, "at the operational level, it is understood that national co-operation is good among the supervisory bodies and the OMLP and between the OMLP and the Police, the Tax Authority, the Foreign Currency Inspectorate, the State Prosecution Office and the Secret Service" (p. 18). As far as FATF R 32 is concerned, the MONEYVAL evaluation notes that the statistics are not detailed and specific enough, particularly on money laundering and financing of terrorism matters as well as confiscation and criminal proceeds.
Slovenia complies with FATF R 35 and SR I on conventions and UN special resolutions. Slovenia also complies with all FATF recommendations relating to mutual legal assistance, except for FATF R 38 regarding mutual legal assistance on confiscation and freezing. The 2005 MONEYVAL report points out that the "mutual legal assistance framework, both in money laundering and in terrorism financing cases, is comprehensive and complete. Everything is in place to render effective and timely assistance in investigations, seizures and confiscations, and in practice, there are no indications to the contrary" (p. 19). However, the report urges the authorities to establish an asset forfeiture fund. Slovenia fully complies with FATF R 37 and R 39 relating to extradition and SR V on International Cooperation. Slovenia is largely compliant with FATF R 32 and R 40 on other forms of international cooperation. The MONEYVAL evaluation remarks that there is a broad capacity for information sharing by the FIU; however, there is insufficient information on how much information is shared by supervisors.
