VZCZCXRO4010
RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHVI #1188/01 1151413
ZNR UUUUU ZZH
R 251413Z APR 06
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 3213
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RHEFHLC/DEPT OF HOMELAND SECURITY WASHDC
RUCNFB/FBI WASHDC
RUEABND/DEA HQS WASHINGTON DC
RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 02 VIENNA 001188 
 
SIPDIS 
 
SIPDIS 
 
TREASURY FOR FTAT AND OFAC 
TREASURY FOR OCC (EILEEN SIEGEL) 
TREASURY ALSO FOR OASIA/ICB (VIMAL ATUKORALA) 
TREASURY PLEASE PASS TO FEDERAL RESERVE AND SEC 
(E.JACOBS) 
TREASURY ALSO PASS TO FINCEN 
DHS FOR CBP/ICE 
JUSTICE FOR DOJ/CRM/ATMLS AND FOR OIA (RICHARD OWENS) 
DEA HEADQUARTERS FOR DOF AND OFE 
FBI FOR CID 
 
E.O. 12958: N/A 
TAGS: EFIN PTER ETTC AU
SUBJECT:  GoA Intensifies Fight Against Misuse of 
Financial Markets 
 
 
Summary 
------- 
 
¶1.  The GoA has approved new regulations that will give 
the Austrian Financial Market Authority (FMA) additional 
powers against the misuse of financial markets for money 
laundering and terrorist financing.  The legal 
regulations will authorize the FMA to prosecute the 
unauthorized operation of financial entities, file 
receivership or bankruptcy procedures for investment 
service providers, and impose fines for failing to comply 
with enforcement orders.  These regulations follow-up on 
the binding guidance, which the FMA issued in January, on 
the complex customer identification regulations, which 
aim  to enforce and clarify the know-your-customer 
principle.  End Summary. 
 
 
Strengthening Financial Oversight 
--------------------------------- 
 
¶2.  The Austrian Parliament's Plenary recently passed a 
GoA omnibus bill on financial issues.  The legislation 
helps the Austrian Financial Market Authority (FMA) to 
fight the misuse of financial markets for money 
laundering and terrorist financing, prosecute the 
unauthorized operation of financial entities, and 
strengthen enforcement measures.  The new regulations 
also provide for an increase in administrative fines by 
50% or more. 
 
 
Prosecuting Unauthorized Business 
--------------------------------- 
 
¶3.  The new law allows the FMA to prosecute unauthorized 
financial service providers and gives the FMA additional 
means to execute these provisions.  (Note: The current 
law only allows FMA oversight of licensed businesses. 
End Note.)  The FMA will be able to request information 
and data from natural and legal persons, check books, 
documents and electronic data storage media, and can 
publicize information about sanctions against individuals 
and firms.  Independent from criminal proceedings, the 
FMA can order unauthorized businesses to regularize their 
legal situation.  In case of non-compliance, the FMA can 
undertake a wide variety of measures, from stopping 
websites to closing down the business.  Penalties to 
enforce any such FMA decision will rise to Euro 30,000 
($37,500) from Euro 726 ($908).  FMA fines for 
unauthorized banking or other financial services 
providing will rise from Euro 20,000 ($25,000) to Euro 
50,000 ($62,500). 
 
 
Sharp Increase in FMA Fines 
--------------------------- 
 
¶4.  The legislation provides for substantial increases in 
fines in a wide variety of areas.  A new default fine of 
Euro 7,000 ($8,750) in cases in which financial service 
providers do not meet their legal obligations, do not 
implement FMA orders in a timely manner, or fail to 
provide the FMA requested documents, data, financial 
statements, and audit reports.  Moreover, the omnibus 
bill foresees a general 50% or more increase in FMA fines 
for administrative violations of the Banking Act, 
Investment Fund Act, Real Estate Investment Fund Act, 
Securities Supervision Act, E-money act, Stock Exchange 
Act, Capital Market Act, and Insurance Supervision Act. 
 
 
Stricter Regulations for Securities Supervision 
--------------------------------------------- -- 
 
VIENNA 00001188  002 OF 002 
 
 
 
¶5.  The legislation also tightens the Securities 
Supervision Act to prevent financial losses for customers 
of investment service providers.  The FMA may prohibit 
the withdrawal of equity or profits or the distribution 
of profits, appoint a qualified lawyer or accounting 
professional as government commissioner, or forbid the 
current managers from directing the firm.  The FMA will 
be party to any receivership and bankruptcy procedures. 
 
 
FMA Outlines Customer Identification Procedures 
--------------------------------------------- -- 
 
¶6.  In January, the FMA issued a "Circular Letter on 
Identification" to intensify efforts to combat money 
laundering and terrorist financing.  The circular aims to 
establish uniform interpretations of customer 
identification regulations, which in practice have 
varied.  It also serves as binding guidance and 
establishes the know-your-customer principle as the 
supreme principle for banks, insurers and financial 
services brokers.  The FMA stated that financial 
providers "must not accept funds from anonymous 
individuals."  Financial service providers must 
furthermore ensure that they do not establish business 
relations with persons who are under criminal 
investigation or who are on international lists of wanted 
persons.  Financial service providers must know their 
customers and have their ID data available at any time. 
Among other things, the circular elaborates on procedures 
for the identification of legal persons, in case of 
trusteeship, and for non-face to face transactions.  The 
full text of the circular is available on the FMA's 
homepage (in German language only): 
http://www.fma.gv.at/de/pdf/rs-id-31.pdf 
 
MCCAW