Belarus introduces heavier reporting requirements for CSOs based on AML/CTF measures

The aim and content of amendments

The law “On amendments to the Law of the Republic of Belarus “On measures to prevent legalization of criminally obtained income, financing of terrorist activity and financing of proliferation of weapons of mass destruction” was adopted on May 13, 2020. The law was published on May 19, 2020 on the National Legal Internet Portal and will enter into force in six months after publication. This law stipulates that the Ministry of Justice should determine what public associations and foundations include as content, how they archive and publish their reports on their activity and other data. The law also requires them to take measures to prevent funding of terrorist activity and funding of proliferation of weapons of mass destruction.

In explaining the purpose of the law, the drafters (State Control Committee jointly with the National Bank, the Ministry of Justice and other state bodies) note that the legislator aims to increase the transparency of information on the activities of non-profit organizations (foundations, public associations, etc.) in order to counter their possible involvement in the financing of terrorist activities and laundering criminal proceeds.

It is important to note that this general reporting requirement was introduced in addition to and along with “special-purpose” reports to be submitted to the Social Security Fund, the Belarusian State Insurance, reports when receiving foreign gratuitous aid or internal donors reporting.

Different types of reporting for CSOs

More specifically, all public associations, regardless of the risk evaluation, the scale of their activity or the volumes of received funds, will have to prepare several types of general reports:

  1. Yearly report to the Ministry of Justice under the already existing Law “On public associations”(if a public association violates the deadlines for submitting a report for three consecutive years, the Ministry of Justice has the right to initiate the forced liquidation of this CSOs in court).
  2. New report under the now updated Law “On measures to prevent legalization of criminally obtained income, financing of terrorist activity and financing of proliferation of weapons of mass destruction”.

Also, there is another requirement added, which is mandatory publishing of reports (including a financial one). This is planned to be introduced in 2020 according to the draft law, announced by the Government for 2020. The justification for the introduction of obligatory publication of financial reports with the recommendations of the Group of States against Corruption (the GRECO is a structure within the Council of Europe system) seems questionable. It does not arise from the essence of the GRECO evaluation, which relates to funding of political parties only and not public associations (Third Evaluation Round Summary of the Evaluation Report on Belarus Incriminations (ETS 173 and 191, GPC 2) (Theme I),  Transparency of party funding (Theme II) –  Adopted by GRECO at its 77th Plenary Meeting (Strasbourg, 16-18 October 2017)). It is important to note that in 2019 GRECO, in an unprecedented move, has publicly declared Belarus non-compliant with GRECO’s anti-corruption standards, accusing Belarus has never authorized publication of any of the evaluation or compliance reports.

The Ministry of Justice, being the responsible institution to develop the new procedure on CSO reporting on AML, has informally promised that the new report will be as easy and simple as possible for CSOs in the most non-burdensome manner.

Belarusian CSO Meter 2019 Recommendations on the issue of reporting of AML/CFT

CSOs worry that the increased number of reports to be prepared by public associations is inefficient, will affect and distract the focus of their work from achievement of statutory goals to administrative work. More precisely, the Belarusian CSO Meter Report, published in 2019, has worked on this issue and provided recommendations and guidance. Namely, the report concluded that “The measures stipulated by law to AML/CTF are disproportionate and are based neither on risk assessment nor on respect for human rights standards. Reporting on AML/CTF should be introduced for only those CSOs which fall under risk criteria in accordance with the Financial Action Task Force (FATF) standards”.

Furthermore, the Belarusian CSO Meter Report recommended that: The Government should introduce the risk-based approach to the legislation on AML/CTF, which takes into account actual non-involvement of CSOs in the activity on money laundering and funding of terrorism, as well as refuse assessment of CSO transactions’ compliance with their charters as a criterion for relating financial transactions to those requiring special control. In addition, it recommended to extend approaches, regulations and practice, applied to participation of CSOs in decision-making on development of draft normative acts with participation of affected CSOs.

In line with what was recommended, the failures that have led to this new heavier reporting requirement are as follows:

  • Lack of implementation of risk-based approach to the legislation on AML/CTF, and failure to consider the results from evaluation concerning CSOs

In February 2020 the Eurasian Group (EAG)/FATF has published a “Mutual Evaluation Report of the Republic of Belarus” on measures to combat money laundering and terrorist financing. The Assembly of Pro-Democratic NGOs of Belarus presume that the risk-based approach on Recommendation 8 was not implemented well at the level of the national legislation. Specific CSOs risk assessment was not done, but general NRA showed that risk for non-profit organizations (NPOs) is regarded low. This evaluation was based on the 2012 FATF Recommendations, and was prepared using the 2013 Methodology. The evaluation was based on information provided by the country, and information obtained by the evaluation team during its 2019 on-site visit to the country (however, the degree of contacts of the evaluation group with representatives of CSOs was extremely small). The findings of this assessment have been reviewed and endorsed by the FATF, but without any consultation with a broad circle of CSOs as direct stakeholders. 

The main stage of the EAG evaluation campaign has taken place in March 2019 during EAG assessment team visit and during their final visit in September 2019. The previous evaluation was conducted in Belarus 10 years ago. Unfortunately, both visits of the EAG assessors team were without contact with CSOs. There was only a meeting with business associations in the framework of meetings with the private sector – but without contact with broader circle of CSOs. The Belarusian government just published a summary of the national assessment, not a full report (see official communication: “Interagency Commission has approved the final report on national assessment of risks of money laundering and financing of terrorism – January 18, 2019.). In particular, according to the final report summary on national assessment of money laundering and financing of terrorism risks, the absence of facts when CSOs are used to commit acts relating to money laundering is evidence of low risk of their involvement into criminal activity. Activity of international terrorist organizations, their branches or members has not been recorded in the Republic of Belarus. There have been no facts of presence on the territory of the Republic of Belarus of individuals or organizations, included in the UN sanction list, as well as presence of their property or other owned by them assets detected. Organizations have not been recognized as terrorist by decisions of courts of the Republic of Belarus. There have been no facts of use of CSOs for funding of terrorist activity in the Republic of Belarus.

  • Lack of involvement of CSOs in evaluations of risk and development of draft normative acts

Despite, the requirements and recommendations, Belarus CSOs were not involved in the above mentioned evaluation processes. Furthermore, in the development of the amendments in the new law which introduced new reporting requirements, CSOs opinion were not considered, nor they were involved and/or consulted in the development team. CSOs have criticized the new type of reporting proposed by the bill in stage of his second reading in the Parliament as being too broad (catch-all and “indiscriminate weapon”) and not appropriate to the actual risks, not relevant to the current risk assessment and national assessment results.

  • Failure to address other relevant recommendations by CSOs, such as to refuse assessment of CSO transaction compliance with their charters

Another important recommendation in relation to these reporting requirements, that was given in the Belarus CSO Meter report was that the state should refuse assessment of CSO transactions’ compliance with their charters as a criterion for relating financial transactions to those requiring special control. This has not been amended yet. Namely, the existing law on AML/CTF obliges banks to control that the financial transactions of CSOs correspond with their statutory objectives (The Law “On actions to be taken to prevent legitimization of the proceeds of crime and the financing of terrorism and financing the weapons of mass destruction proliferation” of June 30, 2014, art. 7.). The law on AML/CTF stipulates that financial transactions of CSOs are subject to special control regardless of the fact if they were carried out or not, if they do not comply with the objectives of client’s activity stipulated by CSOs founding documents or the character of CSOs’ activity. It is enough for a transaction to have only this characteristic to be qualified as risky. Banks are held responsible for special control over such transactions – they are obliged to conduct special actions in respect of such transactions of their CSOs’ clients, including their registration in a special form, requiring identification of an individual who conducts a transaction.