February 2025 – Are you a real estate developer in Romania? Do you have as your primary activity NACE Code (Cod CAEN) 4110 – “Development of building projects” (i.e. the newly NACE Code 6812 as per the recent NACE Rev. 3 classification)?
If so, you should be aware that you are qualified as an “obligated entity” for purposes of Romanian anti-money laundering legislation compliance. And the National Office for Prevention and Control of Money Laundering (the “ONPCSB”) is actively auditing real estate developers for compliance.
Below are some of the key principles to keep in mind.
Background
The European Union passed Directive (UE) 2015/849 in 20 May 2015 (i.e., the 4th Anti-Money Laundering Directive). This was fully transposed into Romanian legislation via the Law No. 129/2019 regarding the prevention and combating of money laundering and terrorism financing, as well as to amend and supplement other pieces of legislation (the “AML Law”).
However, the Romanian authorities deviated from the EU legislation. Under the definition of “obligated entities”, under Article 5(h) of the AML Law, the Romanian authorities added in 2020 also “real estate developers.”
The Romanian authorities have since clarified that by “real estate developers”, they mean all developers with the NACE Code 4110 – “Development of building projects” (i.e., the newly NACE Code 6812).
These requirements apply to real estate developers engaged in leasing activities, specifically those involved in transactions with a monthly rent equivalent of EUR 10,000 or more in RON, as well as to those developers acting as intermediaries in real estate leasing activities.
Practical repercussions: Requirement to notify the ONPCSB
So, what does the above mean in practice?
First and foremost, there is the active obligation for all real estate developers to notify the ONPCSB that they are an obligated entity:
- The filing of a notification to the ONPCSB within 15 days as of the commencement of the activities regulated under the applicable AML laws.
- Non-compliance with this obligation may lead to fines between RON 5,000 and RON 10,000 (approximately EUR 1,000 to EUR 2,000), along with the potential for an additional penalty of 10% of total income reported for the previous ended fiscal period.
Practical repercussions: Need for a robust AML program
Besides the administrative requirement to notify, there is also the part of substance: real estate developers must have a robust AML program that complies with the requirements of Romanian and EU legislation. This must incorporate, among others, the following elements:
1. Know your customer (KYC):
Conducting due diligence checks on all clients.
This includes verifying the client's identity and corporate documentation, identifying the beneficial owner, and ensuring the client is not involved in illegal activities by reviewing publicly available information and sanctions lists.
2. Risk-based approach:
Developers must implement internal procedures to assess the risk level associated with each client, business relationship, or transaction. These procedures should consider factors such as the client’s location, business activities, the nature of the transaction, and the source of funds.
3. Appointment of an AML compliance officer:
The appointment of one or more individuals responsible for overseeing compliance with AML regulations, based on the scale of transactions carried out.
4. Transaction monitoring:
Ongoing monitoring of transactions is required to detect and report suspicious activities that may suggest money laundering or terrorist financing.
5. Reporting suspicious activities:
Reporting any suspicious transactions or activities to the ONPCSB that may be related to money laundering or terrorist financing.
6. Employee training:
Employees in client-facing roles, as well as those in compliance, legal, and financial departments, must undergo regular training to understand AML regulations and recognize potentially suspicious transactions.
Non-compliance with these AML requirements could result in significant fines, which will be determined based on the specific violations.
Next steps?
Real estate developers should consider carefully their obligations for AML compliance, as the repercussions can be significant financially or otherwise. As mentioned, we are aware of the ONPCSB conducting audits of real estate companies. The 4110 NACE Code (i.e., the newly NACE Code 6812) is readily available for the public to see on the Trade Registry website.
As a first step, a real estate developer should determine if it has registered or not. And it must implement a compliance program.
The Kinstellar Bucharest team has significant experience in advising clients on AML compliance. We would be happy to assist.