Austrian FMA Updates Simplified Due Diligence for Specific Escrow Accounts

Key Takeaways

• The Austrian Financial Market Authority (FMA) has issued an ordinance regarding the applicability of simplified due diligence obligations for certain escrow accounts held by lawyers, notaries, and property managers.
• This regulation allows credit institutions to apply reduced due diligence measures under specific conditions, provided they can effectively monitor for unusual or suspicious transactions.

Deep Dive

This regulatory update clarifies the scope of simplified due diligence (SDD) obligations for credit institutions operating in Austria. Specifically, it addresses the management of collective trust, probate, guardianship, and insolvency escrow accounts maintained by lawyers or notaries. The ordinance provides a framework where banks may rely on the professional's role to facilitate identity verification, provided certain risk thresholds are met.

A key requirement introduced is that credit institutions are permitted to use simplified measures only if they do not possess information suggesting a high risk of money laundering or terrorist financing. For accounts managed by authorized property managers for condominium associations, the regulation permits the use of land register extracts to verify the identity of co-owners, provided those co-owners are natural persons. However, the institution retains the right—and obligation—to request further information directly from the lawyer, notary, or property manager if existing data is insufficient to fulfill reporting obligations under the FM-GwG.

While the document does not specify a new future deadline for implementation, it references existing legal frameworks (StF: Federal Law Gazette II No. 7/2017) and implies that these rules are an extension of current anti-money laundering (AML) protocols. Compliance teams must ensure that their internal risk assessment models are updated to reflect that the application of SDD is strictly prohibited if any available information suggests an increased risk profile for a specific account or client.

For compliance professionals, the recommended action is to review the existing due diligence procedures for escrow accounts held by legal and property management professionals. It is critical to establish a robust mechanism for requesting supplemental identity information from the account holders (the lawyers or notaries) when the credit institution's internal monitoring detects potential discrepancies. Furthermore, the impact assessment suggests that while administrative burdens may decrease through SDD, the operational risk remains high if the institution fails to monitor these accounts for unusual transaction patterns.

Source: Austrian Financial Market Authority