Austria comes clean

Austria’s accession to the European Union in 1995 led to reforms that brought its law into line with the provisions of the first EC Money Laundering Directive. However, its transition to a new more open regime has not been entirely smooth as Sue Grossey reports.

In its July 1997 evaluation, the FATF stated: “Anonymous passbooks may be a traditional savings instrument in Austria for anyone qualifying for Austrian residency. However, they are vulnerable to money laundering, even if they are not the most widely used method of laundering money. They can and have been used to launder illegal proceeds in several cases. The retention of these instruments is contrary to Recommendation 10, and steps should therefore be taken to remove this form of anonymous account.” A year later, Austria reported to the FATF that it had closed the legal loophole which allowed professional clients to go unidentified and provided anti-money laundering guidelines, but had done nothing about anonymous passbook accounts. The President of the FATF then wrote a letter to the government of Austria, expressing his concerns, and in September 1998 sent a “high level mission” to Vienna to remonstrate with the Austrian Minister of Finance, Rudolf Edlinger. Mr Edlinger conceded that no new anonymous passbook accounts would be opened but declined to address the issue of the existing accounts. In February 1999, the FATF issued a public statement under Recommendation 21, calling on Austria to remove anonymous passbook accounts and warning financial institutions of the risks associated with such accounts. A year later, in the face of continuing inaction, the FATF threatened to suspend Austria’s membership. On 20 March 2000, Austria amended its Banking Act and announced its intention to eliminate anonymous passbook accounts, by requiring that holders be identified before any deposit or withdrawal could be made. The FATF finally agreed that Austria had met its demands, and removed the threat of membership suspension.