Prague – The government has tasked the director of the Financial Analytical Office (FAÚ), Jiří Hylmar, with preparing a draft law that would enable the confiscation of assets obtained from illegally sourced funds. Prime Minister Andrej Babiš announced this after a cabinet meeting. This step signals a fundamental shift in the state's approach to combating money laundering – and raises new questions and obligations for obliged entities.
Table of contents
- What happened and why it matters
- FAÚ: from a ministry division to an independent authority
- 250,000 entities, 8 officials: a capacity problem
- What the proposed confiscation law will change
- Impact on obliged entities: what to do now
- European context: Czechia is not alone
- Conclusion: preparedness is the best defence
What happened and why it matters
The government reviewed FAÚ's report on the state of anti-money laundering efforts in the Czech Republic. FAÚ director Jiří Hylmar highlighted an alarming disproportion: approximately 250,000 entities that should report suspicious transactions are overseen by just eight officials.
The Prime Minister confirmed that the government intends to support FAÚ's fight against money laundering – not only in terms of staffing, but also legislatively. The result should be a law enabling the confiscation of assets demonstrably obtained from illegal sources.
FAÚ: from a ministry division to an independent authority
The Financial Analytical Office serves as the financial intelligence unit for the Czech Republic. Until the end of 2016, it operated as part of the Ministry of Finance. Since January 2017, it has been an independent administrative authority with direct access to bank accounts and a key role in investigating economic crime.
In eight years of independent operation, FAÚ has secured funds exceeding CZK 21 billion. The office assists in investigating virtually all major economic crime cases in the Czech Republic.
250,000 entities, 8 officials: a capacity problem
The figures presented by Director Hylmar to the government reveal a fundamental structural problem in the Czech AML system. A quarter of a million obliged entities – from banks and insurance companies to real estate agencies and art dealers – are required to report suspicious transactions. Yet FAÚ's capacity to oversee them is wholly inadequate.
This imbalance has a direct impact on practice: inspections are sporadic but all the more thorough. When FAÚ arrives, it expects full preparedness. Obliged entities that relied on the assumption they would never be checked find themselves in an increasingly risky position.
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What the proposed confiscation law will change
The new law is intended to enable the state to seize assets where it is proven they originate from illegal activity. Compared to current practice, where asset seizure is often lengthy and procedurally complex, the new regulation should provide more effective tools.
For obliged entities, this means one thing: diligence in AML processes is no longer optional. If your client identification, source-of-funds checks, or suspicious transaction reporting has gaps, the risk of sanctions is growing.
- More rigorous tracking of clients' asset origins
- Stricter requirements for business relationship documentation
- Higher expectations for the quality of suspicious transaction reports
- Potentially higher penalties for non-compliance with AML obligations
Impact on obliged entities: what to do now
Although the law does not yet have a precise timeline, its preparation clearly signals the direction Czech AML regulation is heading. Obliged entities should:
- Review and update internal policies and procedures – is your AML manual current and does it reflect actual practice?
- Review the risk assessment – does it cover all relevant categories of clients, products, and geographic areas?
- Ensure quality client identification and due diligence (KYC/CDD) – do you genuinely understand your clients and their transactions, not just formally?
- Set up processes for timely suspicious transaction reporting – do you have a clear procedure for who evaluates and reports suspicions to FAÚ?
- Train employees – do your people know what a suspicious transaction is and how to act?
European context: Czechia is not alone
The proposed law fits into a broader European trend. The European Union is systematically tightening AML regulation – from the new AMLA regulation to the 6th Anti-Money Laundering Directive (6AMLD). Confiscation of illegally acquired assets is one of the pillars on which the EU builds its approach to financial security.
Czech companies that wish to do business within the EU will need to adapt not only to national but also European legislation. Early preparation is key.
Conclusion: preparedness is the best defence
Tasking the FAÚ director with preparing an asset confiscation law is a clear signal: the state is serious about fighting money laundering. For obliged entities, a simple rule applies – the sooner you start implementing quality AML processes, the lower your risk.
Do not count on never being inspected. Prepare for it.