AUSTRIA
Summary

Sanctions

None

FAFT AML Deficient

No

Higher Risk Areas

US Dept of State Money Laundering Assessment

Medium Risk Areas

Weakness in Government Legislation to combat Money Laundering

Compliance of OECD Global Forum’s information exchange standard

Compliance with FATF 40 + 9 Recommendations

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Austria is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Austria was undertaken by the Financial Action Task Force (FATF) in 2016. According to that Evaluation, Austria was deemed Compliant for 12 and Largely Compliant for 14 of the FATF 40 Recommendations.

Key Findings

Austria has a mixed understanding of its ML/TF risks. The NRA does not provide a holistic picture of ML/TF risks that are present in the jurisdiction. Each competent authority has its own concept of ML/TF risks based on its practical experience; however, in most cases they do not match with each other and do not provide a complete picture of country’s ML/TF risks. Austria did not demonstrate that it had any national AML/CFT policies. Domestic cooperation mechanisms do not result in the development and implementation of policies and activities that would be coordinated in a systematic manner.

A-FIU functions well as a predicate offence and associated ML investigation unit, rather than as a financial intelligence unit. The approach of the FIU with regard to STR analysis is primarily investigative (as opposed to intelligence approach). The FIU conducts only very basic operational analysis and does not conduct any strategic analysis to support the operational needs of competent authorities. The available IT-tools do not enable the A-FIU to cross-match STRs or conduct data-mining to find trends and patterns across STRs. The A-FIU does not conduct any analysis of TF-related STRs. There have been a number of instances (across different types of reporting entities) where customers became aware that an STR was filed in their respect and raised complaints directly against the reporting entity (and in some cases, the person who filed).

Austria’s ML offence is generally comprehensive and in line with the Vienna and Palermo Conventions. But Austria does not pursue ML as a priority and in line with its profile as an international financial centre. The need in practice to prove a predicate offence beyond a reasonable doubt in order to demonstrate the illegal origin of funds limits the ability to detect, prosecute, and convict for different types of ML (in particular relating to foreign predicates and stand-alone ML).

Sanctions applied by the courts for ML are not dissuasive, as penalties actually applied are very low (normally probation for a first time offense). As a result of these issues, prosecutors generally do not lay ML charges and instead focus on pursuing the predicate offence.

Austria has a generally comprehensive framework for police powers and provisional and confiscation measures; however Austria does not pursue confiscation in line with its risk profile. A key deficiency is in the step (“sequestration”) required to apply to freeze bank accounts which can only be obtained if the prosecutor can prove to the court that there is a specific risk that the assets will disperse without such an order.

The authorities have a good understanding of the TF risks, and Austria exhibits many characteristics of an effective system for investigating and prosecuting those involved in terrorist actions. The legal framework for the investigation and prosecution of terrorist and TF is generally sound and there are specialised authorities for investigation, intelligence and prosecution in these fields. Every counter-terrorism investigation includes an investigation into potential TF. Some convictions on terrorist activities and TF were obtained.

Austria has not undertaken a domestic review and comprehensively looked at potential risks within the NPO sector to identify which subset of NPOs that might be of particular risk of being misused for TF. However police authorities have identified and investigated some NPOs exposed to terrorist and TF risks and also conducted numerous targeted TF-related outreach to associations in the last years. There is insufficient monitoring and supervision of administrative requirements of the large majority of NPOs.

Austrian financial sector supervisors appropriately conduct fit and proper tests and criminal background checks in licensing and registering credit institutions. The FMA also proactively targets unlicensed financial service providers as it considers these types of activities to be a key risk to the sector and has established a dedicated function to address these activities. In general, the FMA has a sound understanding of ML/TF risks present in the institutions it supervises. Based on this understanding, it has developed strategies using supervisory tools to risk rate the institutions it regulates, and its staff is appropriately qualified to perform assigned functions. However, effective implementation of these supervisory strategies is limited by a lack of adequate resources especially related to the supervision of higher risk credit institutions. The lack of adequate supervision regarding passported MVTS providers and e-money institutions is also a significant gap.

Austria demonstrates many characteristics of an effective system for international cooperation. Austria provides assistance to countries who request it, and the Austrian authorities regularly ask their foreign counterparts for information and evidence. Most countries that gave input on the international co-operation of the Austrian authorities (speaking broadly) found it to be generally satisfactory. Conversely, Austria is generally satisfied with the co-operation that it receives.

Risks and General Situation

Austria is one of the most developed countries in the world with a GDP of about EUR 329 296 billion in 2014. Austria has a highly-developed and robust financial market, with assets totalling approximately 355% of GDP. The financial system is dominated by banks that hold 75% of the total financial sector assets. Austria has one of the densest banking and branch networks in Europe and is dominated by the universal banking structure. Austrian banks generally provide the full range of banking services and only a few institutions have highly specialised business models.

Austria’s National Risk Assessment on ML/TF (NRA) was coordinated the Ministry of Finance (BMF), was finalised in April 2015, and published in October 2015. The work was conducted in the framework of a working group (WG NRA) which included representatives of all ministries and authorities responsible for combating money laundering and financing of terrorism. Austria finalised its first NRA in April 2015, and published it in October 2015. While the NRA was an important first step, and used elements of the FATF Guidance on National Money Laundering and Terrorist Financing Risk Assessment published in February 2013, it does not provide a holistic picture of ML/TF risks that are present in the jurisdiction.

Theft, drug trafficking, and fraud are the main predicate crimes in Austria according to conviction and investigation statistics. Human trafficking/migrant smuggling is perceived to be high risk, but the ML-related knowledge is very limited, as there have been no convictions for ML related to these predicate offences so far.

There is considerable ML risk associated with the activities of organised crime groups (originating in Italy or post-Soviet Union countries). Their areas of activity will often include drug trafficking, human trafficking and migrant smuggling, fraud, and tax crimes (especially VAT fraud). The proceeds are laundered through cash-intensive businesses (such as hotels, restaurants, and cafes), usually with straw men acting as directors and shareholders. Sometimes simpler techniques such as money remittance using straw men (or money mules) will be used.

Being an important regional and international financial centre as well as a gateway to Central, Eastern, and Southeastern Europe (CESEE) countries, Austria faces a range of ML and TF risks. Austria is particularly vulnerable to proceeds from a variety of international crimes transiting through Austria such as corruption, embezzlement, etc. Companies established offshore with Austrian bank accounts are vulnerable for these purposes.

TF risks are mainly associated with a considerable migrant population coming from conflict zones, some of whom may be sympathetic to extremist and terrorist organisations, including by providing financial support. The funds originate both from legal (salaries, social benefits) and illegal (theft, fraud, other petty crimes) sources. The movement of funds is usually conducted through money remittance service providers. Sometimes money transfers are performed through third countries. TF risks are influenced by the support of certain communities settled in Austria to conflict zones abroad, particularly in the regions of the north Caucasus and the Kurdistan region, and to Islamist terrorist organizations in countries as Iraq and Syria. Detected activities are mainly related to small cells, self-financed through legal and illegal means and, also, to Austrian residents travelling to conflict zones abroad to help foreign terrorist groups.

 

US Department of State Money Laundering assessment (INCSR)

Austria was deemed a Jurisdiction of Primary Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Perceived Risks:

Austria is a major regional financial center. Austrian banking groups control significant shares of the banking markets in Central, Eastern, and Southeastern Europe. Money laundering occurs to some extent within the Austrian banking system as well as in non-bank financial institutions and businesses. Money laundered by organized crime groups derives primarily from fraud, smuggling, corruption, narcotics trafficking, and trafficking in persons. Theft, drug trafficking, and fraud are the main predicate crimes in Austria according to conviction and investigation statistics. Austria is not a frequent offshore destination for illicit funds and has no free trade zones.

Casinos and gambling are legal in Austria, but in some provinces slot machines are prohibited, and there are efforts underway to limit certain aspects of sport betting. The laws regulating casinos include AML/CFT provisions. There are migrant workers in Austria who send money home via all available channels, including regular bank transfers and money transmitters, but also informal and illegal remittance systems. No information is available to what extent informal systems are used.

 

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SANCTIONS

There are no international sanctions currently in force against this country.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

75

World Governance Indicator – Control of Corruption

90

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

Economic conditions in Austria -- particularly those relevant to foreign investors – continue to remain favorable. As a small and highly internationalized economy, Austria was affected by the world economic downturn in 2009 and the 2012/2013 recession in the Eurozone, but is recovering and expecting modest economic growth over the next years. Macroeconomic fundamentals are relatively healthy, however, the Austrian government’s crisis response and the multi-billion Euro disaster of a major Austrian bank led to a deterioration in public finances.

Austria is a highly developed industrial nation with a huge and dynamic services sector. The country’s geopolitical position between Western European industrialized nations and the growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with the European Union (EU) and non-EU countries in CESEE. Border controls between Austria and all of its eight neighboring countries were lifted under the EU's Schengen agreement. EU enlargements in 2004 and 2007 strengthened Austria's attractiveness as an investment location by increasing access to markets in Eastern Europe, but expansion also bolstered Austria's competitors in that region so that, due to their vicinity, Budapest, Prague, and Bratislava now compete directly with Vienna for foreign investors.

Austria offers many advantages for foreign investors, including political stability, motivation and skill of labor, high productivity and international competitiveness, rule of law, quality of life and personal security. Austria further scores with high-quality health, telecommunications and energy infrastructure. The administrative system is transparent. Labor-management relations are relatively harmonious in Austria, which has a low incidence of industrial unrest.

Austria receives lower marks for the high tax burden (despite an attractive corporate tax model), low innovation dynamics, a huge public sector, and a complex regulatory system with an over-boarding bureaucracy (also for established businesses). Long-term aspects that the Austrian government needs to address are shortcomings in the education system and the lack of structural reforms, including of the health and pension systems and of the state to reform the costly federalism and reorganize competencies among the various levels of government.

Some 340 U.S. companies have invested in Austria; many have expanded their original investment over time.

Altogether, Austria continues to offer a stable, advantageous and attractive climate for foreign investors, albeit one with some challenges.

 

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FURTHER REPORTS

AML News/Updates

10 January 2013  -  Austria’s enforcement of foreign bribery laws far too weak, but could pick up soon says OECD

Read More

 

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