Money Laundering - Tax Evasion

What Law is governing money laundering?

Law 4557/2018 regarding the prevention and suppression of legalization of proceeds from criminal activities and financing of terrorism incorporates the 4th European Directive on the Prevention of Money Laundering and Terrorist Financing (AMLD4) in the Greek legislation. To this end, this law of punitive character (and as such to be strictly interpreted) establishes a mechanism of control/supervision of the market, which is accompanied by several obligations, as well as administrative and criminal sanctions.

What actions qualify as activities for the legalization of proceeds (money laundering)?

The following, when intentionally committed, shall be regarded as money laundering:

• the conversion or transfer of property deriving from criminal activities, aiming at the concealment or disguise of the illicit origin of the property,
• the concealment or disguise of the truth, as it concerns the nature, origin, transfer, movement or use etc. of property deriving from criminal activities,
• the acquisition, possession, administration or use of property, knowing, at the time, that such property derives from criminal activities,
• the utilization of the financial sector (by placing therein or moving through it proceeds from criminal activities) for the purpose of lending false legitimacy to such proceeds,
• the set-up of organization and the participation in such organization for committing one or more of the acts defined above
• participation in attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions referred above.

What are the criminal activities the proceeds of which should not be legalized?

The criminal activities (predicate offences) the proceeds of which should not be legalized are, amongst others, the following:

• Crimes that usually have an international dimension such as participation in an organized criminal group, sexual exploitation and trafficking of human beings, offences related to narcotic drugs, terrorist acts and terrorist financing
• Crimes of corruption such as bribery of judges, bribery of foreign civil servants or EU employees,
• Computer fraud,
• Tax evasion,
• Smuggling, and
• any other offence generating any type of economic benefit, punishable by imprisonment of more than six months.

Predicate offences must be committed either in Greece or in another country, provided that in the latter case, such activities (a) would qualify as predicate offences if committed in Greece and (b) are punishable offences according to the law of such other country.

Who qualifies as obliged entity?

Obliged entities are inter alia credit and financial institutions, accountants, auditors, tax consultants, notary publics and lawyers in specific cases, real estate agents, merchants of high value goods for transactions above € 10,000. casinos etc.

For the implementation of their obligations, the obliged entities are supervised and instructed by specific competent public Authorities (depending on the entities’ sector) such as, among others, the Bank of Greece, the Hellenic Capital Market Committee, the Independent Authority for Public Revenue, the Hellenic Gaming Commission etc.

What are the main obligations of the obliged entities?

In order to prevent money laundering, obliged entities are mainly required to (i) apply customer due diligence measures and (ii) report suspicious transactions to the Anti-Money Laundering Authority. Generally, obliged entities have to take measures of due diligence, report suspicious transactions, provide information about those transactions and maintain records and data.

What due diligence measures must the obliged entities take?

Due diligence (usual, simplified or enhanced, depending on the risk grade of both the clients and the transactions) consists mainly of the provision of information regarding the identity of the client, the beneficial owner of the client and the actual nature of the transaction. Special reference is made to measures to be taken for bearer accounts, casinos, legal entities established in a non-reliable third country, transactions without the presence of the client, cross border relations of correspondent banks, politically sensitive persons (state leaders, members of parliaments, high ranking civil servants etc.).

Credit and financial institutions are prohibited from keeping secret, anonymous or only numbered accounts, anonymous passbooks, anonymous safety deposit boxes, accounts in another name or incomplete name of the beneficiary when compared to the name of its identification documents and Tax Registration Number in Greece or in the beneficiary’s country of tax residence with which there is an agreement for the exchange of information.

What are the reporting obligations of the obliged entities?

Obliged legal entities and their directors and employees have to promptly inform on their own initiative the Greek Financial Intelligence Unit (FIU) in case they know or have reasonable grounds or suspicions that funds, regardless of the amount involved, are the proceeds of criminal activity or are related to terrorist financing. They are also obliged to provide information to the Greek FIU at its request. The above entities shall not disclose to the customer concerned or to other third parties that information has been or will be transmitted as above, or that money laundering or terrorist financing analysis is being or may be carried out.

How long do the obliged entities have to retain transactions’ records and data?

The obliged entities have to retain either hardcopy or in electronic form documents and information necessary to comply with the customer due diligence requirements for a period of five years after the end of the business relationship with the customer, or after the date of an occasional transaction.

Does the Law provide for a Beneficial Ownership Register?

Yes. The Law provides for three types of Beneficial Ownership Registers:

Beneficial Ownership Special Registers should be maintained at the headquarters of the legal entities with registered seat in Greece and should be accurate and updated under the responsibility of the legal representative or a specially authorized person. The information should contain the name, date of birth, nationality and country of residence of the beneficial owners, as well as the type and extent of the rights they hold. The aforementioned Register should be filed with the Central Register within 60 days from its creation, as well as any update of the above information.

Α Beneficial Ownership Central Register must be created by 31.1.2019 by the General Secretariat of Information Systems and will be linked electronically with the Tax Identification Number (TIN) of each legal entity. The Central Registry obtains information by all Greek legal entities or entities with registered seat in Greece, as well as Public and other Authorities. The Central Registry may also interconnect with the General Commercial Register (GEMI) and the Securities Depositories, on a basis of a Ministerial Decision.
A Special Register of Beneficial Ownership of Trusts must be created and maintained by the trustees of any express trusts. The information should contain the name, date of birth, nationality and country of residence of the beneficial owners, as well as the type and extent of the rights they hold. The aforementioned information should be recorded in a special section of the Central Register within 60 days from its creation, as well as any update of the above information.

What are the consequences of non – compliance with the recording obligation in the above Registers?

Non-compliance with the above recording obligation in the Special Registers entails the suspension of provision of a tax clearance certificate and the imposition of a fine of € 10,000 by the Greek FIU, that also sets a deadline for compliance. In case of non-compliance or recurrence, the fine shall be doubled.

Who has access to the Registers?

Direct and unrestricted access to the above Registers is provided to the Greek FIU and, in certain cases, to judicial and other competent audit authorities. The obliged entities and their supervisory authorities may have access only to the extent that they apply the due diligence measures. Any other person or organization that can demonstrate specific legitimate interest may have access to the minimum information of the central Beneficial Owners’ Register. Under certain conditions, the Registers’ data may be transmitted to the competent authorities of another EU Member State.

Are there sanctions for the breach of the provisions of the Money Laundering Legislation?

Yes. Both criminal and administrative sanctions are incurred for the breach of provisions of the Money Laundering legislation. Criminal sanctions include imprisonment or incarceration, as well as imposition of fines of up to € 2,000,000. depending on the offence.

Administrative sanctions, including fines, withdrawal of authorization, cease of business activities’ operation, public statements etc., are imposed to:

• the obliged entities (individuals or legal entities) in case they breach their obligations, and
• legal entities for the benefit of, or on behalf of which money laundering or one of the predicate offenses is committed by an individual.

The fine for the obliged entities may reach up to € 5,000,000 and an additional fine of up to € 1,000,000 may be imposed on the members of the Board of Directors, Managing Directors, managers or other employees of the legal entity. The fine for the obliged individuals may rise up to € 1,000,000.

TAX EVASION

What is tax evasion and what is the applicable legal framework regarding tax evasion?

Tax evasion, in a broad sense, could be defined as the methodical avoidance of the proper payment of the taxes imposed by law. Τax evasion in a strict sense, comprises of actions that are criminally sanctioned and which according to Law 4557/2018 mentioned above may be treated as predicate offences in order to investigate money laundering cases. The main legislative framework that is applicable to tax evasion is Law 2523/1997 and Law 4174/2013 as recently amended by Law 4337/2015, as well as the provisions of the Criminal Code and the Code of Criminal Procedure. Tax evasion crime has been redefined in an effort to broaden its definition and include more cases of non-disclosure of income and non-tax payment.

Apart from the criminal sanctions, other administrative penalties may be applicable in cases of violation of tax and customs legislation, such as imposition of additional taxes and fines, placement into custody, freezing of accounts, prohibition of certain transactions etc. These administrative sanctions may be imposed irrespective of the imposition of criminal sanctions and in many cases they are imposed in parallel.

What are the main tax evasion offenses?

Omission of filing or filing of false income tax return, or concealing income in order to avoid payment of income tax, as well as real estate tax (ENFIA, EFA). By way of concealing net income, the law also covers cases of fictitious expenses or where fictitious expenses are invoked in the tax return, in order to hide the real net income. Tax evasion is also committed if taxation on vessels (tonnage tax) is not remitted to the State,
Non remittance or incorrect remittance of VAT and other withholding taxes and duties,
Issuance and receipt of false, fictitious or falsified tax records as well as the infringement of the rules of the Code of Books and Records.

What are the penalties for tax evasion?

Two to five years imprisonment is imposed for evading tax payments of amounts of € 100,000 – 150,000 per tax year for certain types of tax or € 50,000 – 100,000 in case of VAT.

For the avoidance of paying tax, duty or contribution, five to twenty years imprisonment is imposed if the amount involved exceeds the amount of € 150,000 (in case of other tax, duty or contribution) or € 100,000 per tax year (in case of VAT).

Imprisonment for three months to five years is imposed for the issuance/falsification/receipt of fictitious tax records in general. Especially, imprisonment for one to five years is imposed for the issuance/receipt of fictitious tax records for a non-existing transaction, if the total amount of fictitious tax records ranges between € 75,000 to € 200,000. If the aforesaid amount exceeds € 200,000 imprisonment for five to ten years is imposed.

With respect to legal entities, who is considered as perpetrator of the crime of tax evasion?

With respect to legal entities, perpetrators of the crime of tax evasion are the individuals that are appointed or indeed exercise the duties of administration or management (e.g. Chairmen of Board of Directors, Managing Directors, general managers for societes anonymes, administrators for Partnerships and Limited Liability companies etc.). The definition of perpetrators and accomplices of tax evasion crimes has been extended by Law 4174/2013 as amended by Law 4337/2015 and also includes those individuals who participate in practice in the management or the representation of the legal entity.

The head of the accounting department in any kind or type of entity, or anyone associated in any way in general in the commission of such offenses, including the person signing the tax returns as a proxy are considered as direct accomplices of the crime of tax evasion.

Therefore, an individual is considered to be a perpetrator of a tax evasion crime if he has contributed by any act or omission in the execution of the crime.

Who is responsible for the criminal prosecution?

The competent tax officers should immediately file a criminal complaint in case of tax evasion crimes. The criminal prosecution is initiated automatically by the competent Prosecutor and follows the provisions of the Criminal Code and the Code of Criminal Procedure.

Does the filing of an administrative or a Court appeal stop the criminal proceedings?

No. The filing of an administrative or a Court appeal does not affect the criminal proceedings.

Does the criminal procedure stop after the payment of the taxes and the fines?

It depends on whether the offense has been committed before or after 1.1.2014. After this date the payment of taxes and fines does not affect the criminal procedure. If the offence is committed before 1.1.2014, then if the taxes and the fines are paid, the tax authorities will
not notify the Prosecutor.

When does the statute of limitation of tax evasion crimes start?

The statute of limitation of tax evasion crimes starts from the issuance of a final court decision on the appeal, or, if no appeal has been filed, from the time the tax findings have become final due to the non-filing of an appeal.