AML law. Three letters that appear more and more frequently — in the media, in corporate obligations, and in fines from state authorities. But what is the AML law actually about? Why does it exist? And what does it mean for you if you run a business? In this article, we explain it clearly, concisely, and without unnecessary legal jargon.
Table of contents
What is the AML law?
AML stands for Anti-Money Laundering — measures against money laundering. In the Czech Republic, this is Act No. 253/2008 Coll., on certain measures against the legalisation of proceeds of crime and financing of terrorism.
The law sets out rules designed to prevent money obtained through criminal activity — such as fraud, corruption, tax evasion, or drug trafficking — from being 'laundered' and used as legitimate funds. It also protects the financial system from being misused for terrorist financing.
Why does the AML law exist?
Money laundering is not movie fiction. It is a global problem that affects an estimated 2–5% of world GDP annually. The AML law exists to:
- Protect the financial system from misuse
- Make it harder for illegally obtained money to flow through the economy
- Help state authorities detect suspicious transactions
- Prevent the financing of terrorism and organised crime
The law is based on European directives (AMLD) and recommendations from the international organisation FATF. From 2027, the new AMLR regulation (EU 2024/1624) will apply across the EU, further harmonising and tightening the rules.
What does the AML law require?
The law defines a set of obligations that so-called obliged entities must fulfil. The most important include:
- Client identification (KYC) — verifying the identity of every client before starting a business relationship
- Customer due diligence (CDD) — assessing the purpose of the transaction, source of funds, and beneficial owner
- Screening — checking clients against sanctions lists, PEP registers, and adverse media
- Risk assessment — assigning a risk score to each client and transaction
- Internal policies (SVZ) — an internal AML manual with procedures and responsibilities
- Suspicious transaction reporting — the obligation to report suspicious transactions to the FAU
- Record archiving — retaining documentation for 5–10 years
Does the AML law apply to you?
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Who does the AML law apply to?
The AML law does not only apply to banks. It covers a wide range of subjects — so-called obliged entities. These typically include:
- Banks, insurance companies, and financial institutions
- Real estate agents and intermediaries
- Lawyers and notaries (for certain transactions)
- Accountants and tax advisers
- Dealers in precious metals, art, and luxury goods
- Crypto-asset service providers
- Any entrepreneur accepting cash payments over EUR 10,000
What matters is not the company name or its size, but the specific activity it carries out. Even a sole trader with one employee can be an obliged entity.
How does the AML law work in practice?
In practice, this means that before every transaction or business relationship, you must go through several steps:
1. Client identification
You verify the client's identity — for natural persons from an identity document, for legal entities from the commercial register. You determine the ultimate beneficial owner (UBO).
2. Risk assessment
You assign a risk level to each client based on their profile, type of transaction, geography, and other factors. For high-risk clients, you carry out enhanced due diligence (EDD).
3. Ongoing monitoring
AML is not a one-off exercise. You must continuously monitor business relationships, update risk assessments, and respond to changes in the client's profile.
4. Suspicious transaction reporting
If you encounter a transaction that doesn't make economic sense, doesn't match the client's profile, or has unclear sources of funds, you must report it to the Financial Analytical Office (FAU).
What are the consequences of violating the AML law?
Failure to comply with AML obligations has real consequences. The Financial Analytical Office (FAU) is inspecting and sanctioning with increasing rigour:
- Fines ranging from hundreds of thousands to millions of Czech crowns — in 2025, the FAU imposed a record fine of CZK 2.4 million
- Public disclosure of sanctions — reputational damage to the business
- Activity bans for up to one year — in serious cases
Most fined businesses are not fraudsters. They are ordinary companies that underestimated formal obligations — missing documentation, non-functional internal policies, failure to identify clients. These are precisely the mistakes the AML law is designed to prevent.
Conclusion
The AML law is not unnecessary bureaucracy. It is a key tool for protecting the financial system from misuse. If you operate in a regulated sector, the AML law applies to you — and compliance is monitored and enforced.
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