The AML Act (Act No. 253/2008 Coll.) has been in force in the Czech Republic for over 17 years. Yet most obliged entities — real estate agents, accountants, tax advisors, lawyers — still fulfil their obligations on paper. This article analyses why a paper-based approach has reached its limits and how technology can replace it in a way that holds up during a FAU inspection.
Table of contents
Why Paper-Based Processes Are No Longer Enough
The law does not require a digital system. But it does require demonstrability — and that is where the paper-based approach hits its limits. A FAU inspector does not just need to see the outcome of a check. They need to see when, by whom and how the screening was carried out.
A paper record reading 'PEP: NO' with no date, no source and no name of the person who performed the check may be considered incomplete by the FAU. A sanctions screening without an exact timestamp is hard to substantiate — sanctions lists are updated daily and without a precise date it is impossible to verify whether the list used was current.
Four Critical Weaknesses of the Paper-Based Approach
Based on an analysis of FAU inspection findings and the experience of obliged entities, four recurring problem areas can be identified:
Unreliability of manual screening
Consolidated EU sanctions lists contain thousands of entries updated every day. Manual checks are prone to errors — typos, outdated list versions or missed matches. A digital system automatically compares every client against the current lists in real time.
Missing audit trail
The FAU does not just need the result — it needs to see when, by whom and how the screening was performed. A digital system stamps every step with a timestamp and the operator's name. Paper cannot reliably provide this.
Inability to monitor ongoing relationships
The law requires continuous monitoring of business relationships throughout their duration. Paper systems cannot systematically track changes in sanctions lists or flag updates for existing clients — a digital platform performs this check automatically.
Non-scalability as client portfolios grow
For a sole trader with ten clients, a paper system is manageable. For a firm with hundreds of clients it becomes unreliable. A digital tool processes any number of clients with the same speed and the same level of documentation.
Regulatory Trends: AMLR 2024/1624 and the New AMLA
EU Regulation 2024/1624 (AMLR), which takes effect on 10 July 2027, raises the bar further. It requires verifiable and auditable compliance processes — it is no longer enough to show that an obligation was met, but also how and when.
The Financial Analytical Office (FAU) already demands increasingly well-documented processes with timestamps during inspections. Digital systems are inherently prepared for this trend — paper-based systems are not.
What a Digital AML Platform Handles Automatically
Modern AML software for obliged entities covers the entire compliance cycle without paper documentation:
- Structured workflow for client identification — all statutory data in one place
- Automatic screening against current EU and UN sanctions lists in real time
- Risk scoring following FAU methodology — PEP, high-risk jurisdiction, nature of business
- Audit trail with timestamp and operator identity for every step
- Automatic archiving for the statutory retention period of 10 years under § 16 of Act No. 253/2008 Coll.
The result is compliance documentation that holds up during a FAU inspection — with no additional manual effort.
Conclusion: Digitalisation as Protection, Not an Unnecessary Cost
Obliged entities that move to digital AML processes do not just gain convenience. They gain regulatory protection — immediate documentation that proves the correct procedure was followed during any inspection. And they gain lower operating costs, because every check, every record and every report is handled automatically.
AML compliance technology does not change the law. It changes an obliged entity's ability to actually comply with it — demonstrably, consistently and without unnecessary administrative burden.
This article was originally published on ePravo.cz. The author is Petr Václavek, founder of AML PROOF, s.r.o.
Read the original on ePravo.cz