Businesses will have to explain to the banks why they are cashing out incoming funds so quickly

The National Bank is proposing to require commercial banks to scrutinise more closely companies and sole traders who withdraw a significant proportion of their income in cash or use their accounts to transfer money rapidly to third parties. If a customer refuses to provide the necessary documents, the bank will be obliged to refuse to carry out the transaction.

The draft amendments to the banking control requirements were published by the National Bank on 28 August.

The regulator proposes establishing a separate list of indicators under which cash withdrawals or the transit of funds through a business account should be considered high-risk transactions.

A situation may attract the bank’s attention where a significant proportion of a company’s turnover is withdrawn in cash, and the volume and regularity of such transactions do not correspond to the nature or scale of its operations.

Additional checks may also be carried out if funds are withdrawn shortly after being credited to the account, are withdrawn in several small amounts, or are transferred to third parties, including abroad, without any obvious economic justification.

The activities of a recently registered company or sole trader may also be deemed suspicious if significant sums immediately begin to pass through the account, which are disproportionate to the length of time the business has been operating and the declared nature of its activities.

Banks will be required to pay particular attention to incoming payments from abroad that are subsequently withdrawn as cash, as well as the reverse situation, where a large sum is deposited into an account in cash and is soon transferred to other parties or abroad.

The list of indicators of heightened risk also includes the regular use of a corporate card primarily for cash withdrawals, if such transactions do not correspond to the client’s business activities.

Upon identifying one or more of these indicators, the bank will be required to establish the origin of the funds and the economic rationale behind the transaction. The customer may be asked to provide contracts, invoices, delivery notes and other documents confirming their relationship with the sender or recipient of the funds.

The business owner will also have to explain why the money was required specifically in cash and whether the amount requested is commensurate with the scale of their business.

If the customer refuses to provide the documents, the bank will be obliged to refuse to carry out the transaction. If, following verification, suspicions of possible money laundering or the financing of criminal activity remain, the transaction may be suspended, and the customer’s account may be temporarily suspended or closed entirely. A report on the suspicious transaction will be sent to the financial intelligence unit.

However, the draft does not impose a general ban on cash withdrawals from the accounts of companies and sole traders. Nor does it set uniform amounts or limits applicable to all banks.

Each bank will have to determine independently in its internal documents what proportion of cash withdrawals, what time interval between the receipt and withdrawal of funds, and what transaction volumes are considered atypical. In doing so, the nature of the business, turnover and risk profile of the specific client must be taken into account.

Thus, a routine business transaction, provided supporting documents are available, should not be automatically blocked. However, businesses that actively deal in cash may face additional enquiries and checks from banks more frequently.

The new requirements apply to accounts held by legal entities and sole traders. Transactions carried out by ordinary individuals who are not registered as sole traders are not directly affected by the draft.

The National Bank explains the initiative by referring to the results of the national risk assessment for 2022–2024. The use of shell companies and controlled entities for the transit and cashing out of money was classified as a high-level risk.

In such schemes, money may be successively transferred through the accounts of several companies and entrepreneurs, after which it is withdrawn in cash. Fictitious contracts for the supply of goods or the provision of services may be used to give the transactions the appearance of legitimacy.

Banks will also be required to keep separate records of high-risk transactions, refusals to process them, and instances where information has been reported to the financial intelligence unit. This information will have to be provided to the National Bank upon request.

The document is currently a draft and is subject to public consultation.