Real Estate Agencies and AML

Why does the AML Act concern you?

The obligations apply to anyone with a "real estate brokerage" trade license under the Real Estate Brokerage Act. It is not enough to simply be a real estate dealer – you must have this specific professional trade license. If you do not have it and still broker real estate, you are breaking the law twice.

The ARROWS law firm deals with AML issues for real estate clients daily. We have completed dozens of implementations of internal control systems and know where the greatest risks lie. Need legal assistance? Contact us at consultation@arws.cz.

What is client identification and when must you perform it?

Client identification is the first step, where you ascertain and verify a person's identity using an identity document. In practice, this means obtaining a copy of an ID card or passport and comparing the photograph with the person standing in front of you.

Client due diligence goes deeper – you ascertain the origin of funds and assets and check whether the transaction shows signs of a suspicious transaction. This distinction is crucial, and confusing these terms is one of the most common mistakes.

You must perform identification whenever the transaction value exceeds EUR 1,000. For real estate transactions, this practically means always, as even the cheapest property exceeds this amount. The obligation applies to both parties – the seller and the buyer.

What documents must you request from the client?

The list of documents is not explicitly stated in the law, but the practice and methodology of the Financial Analytical Unit (FAÚ) are quite precise. You must obtain:

• A valid identity document – ID card, passport, foreigner's residence permit

• Proof of the source of assets – an extract from the Land Registry, title of acquisition (purchase agreement, gift deed, inheritance decision)

• Proof of the source of funds – loan agreement, proof of income, tax returns, gift deed, decision on the payment of a share in profits

For legal entities, you also need an extract from the Commercial Register and proof of who is authorized to act on behalf of the company. In the case of trust funds, this involves documents from the Register of Trusts.

The ARROWS law firm prepares complete lists of required documents for real estate agencies based on the transaction type and client structure. For an immediate solution to your situation, write to us at consultation@arws.cz.

New obligation from February 2025: Notification of a contact person

From 1 February 2025, every real estate agency must notify the FAÚ of a contact person and the contact hours during which the unit can reach them. This information obligation applies to all obliged entities and has specific formal requirements.

Deadline for compliance: New brokers have 30 days from the date they become an obliged entity. Existing brokers had to fulfill this obligation by 3 March 2025 at the latest.

The notification is made via the MoneyWeb form system on the formulare.fau.gov.cz portal, by logging in through a data box. The form includes:

• Designation of the obliged entity (loaded from ARES)

• Name of the contact person, phone, email

• Contact hours for the unit

Failure to comply with this obligation can be fined up to CZK 10,000,000.

How long must you retain the data?

Identification data and all documentation related to the transaction must be retained for 10 years from the completion of the transaction or the termination of the business relationship. This also applies to transactions that were ultimately not completed.

Storage must be secured so that no unauthorized person has access to the documents. It can be in paper or electronic form on a durable data carrier. In electronic form, you must ensure protection against unauthorized access, alteration, or destruction.

The ARROWS law firm prepares secure documentation archiving systems for clients in compliance with the AML Act and GDPR. Do not hesitate to contact our firm – consultation@arws.cz.

When must you report a suspicious transaction?

The obligation to report a suspicious transaction is one of the most important duties. The report is submitted to the Financial Analytical Unit (FAÚ) without undue delay, no later than 5 calendar days from the day you became aware of the suspicion.

A suspicious transaction can take various forms:

• The client wants to sell a property significantly below market price

• The price is clearly disproportionate to the client's financial situation

• The funds originate from a country with inadequate AML regulation

• The client is conducting complex or unusually large transactions with no economic reason

The report must include the identification data of all participants, the essential circumstances of the transaction, and any other relevant information. You are obliged to report a suspicion even if you terminate the transaction – failure to comply with this obligation is punishable by a fine of up to CZK 10 million.

Employee training: An obligation many firms overlook

Real estate brokers must ensure that employees and associates are trained at least once every 12 calendar months. The training applies to everyone who may encounter suspicious transactions in the course of their work.

The training content must include:

• Typologies and signs of suspicious transactions

• Requirements set by the obliged entity for performing identification and due diligence

• Procedures for reporting a suspicious transaction

• Elements of internal control systems

This obligation is often overlooked, yet non-compliance can be sanctioned with a fine in the millions of crowns. Training must be conducted before an employee is assigned to the relevant position and then regularly thereafter.

The ARROWS law firm organizes professional training for real estate agencies, including certificates. Our portfolio includes more than 150 joint-stock companies, 250 limited liability companies, and 50 municipalities and regions. We pride ourselves on speed and high quality. For information about training, write to consultation@arws.cz.

How high are the fines in reality?

The FAÚ imposes fines in the millions of crowns. In 2025, a fine of CZK 2.4 million has already been imposed on a smaller real estate agency for violating several AML obligations. The upper limit for fines was increased to CZK 10,000,000 by an amendment to the Act.

The Unit inspects:

• Whether you have internal control systems in place

• Whether you are performing identification and due diligence correctly

• Whether you are retaining documentation for the entire statutory period

• Whether you are reporting suspicious transactions on time

• Whether you have a designated contact person and have fulfilled the information obligation

The fines are not theoretical – the FAÚ actively inspects and penalizes. Reputable agencies cannot afford to underestimate these obligations.

International transactions and enhanced due diligence

If the client or beneficial owner is a person from a country that inadequately applies measures against the legalization of proceeds of crime, you must apply enhanced due diligence measures. The same applies to transactions involving funds from unclear sources.

In practice, we handle many cases with an international element. Thanks to the ARROWS International network, built over ten years, we handle cases almost daily where a Czech real estate agency is on one side and a buyer from a non-EU country is on the other. We provide legal services outside the Czech Republic and can connect clients with verified partners abroad.

If you are handling a transaction with an international element, contact us at consultation@arws.cz. Our lawyers are ready to help you.

Why entrust your AML agenda to the ARROWS law firm

AML issues are much more complex in practice than they first appear. All the steps that seem simple have hidden exceptions, procedural details, links to other regulations, and risks that a layperson often does not see. The ARROWS law firm deals with this agenda daily, which can significantly save the client's time and minimize the risk of errors.

The individual obligations are intertwined and require a systematic solution. From designating a contact person, through client identification and due diligence, to reporting suspicious transactions and archiving – every step must be performed precisely. ARROWS is insured for damages up to CZK 500,000,000, which means maximum security for the client.

We regularly partner with corporate lawyers to resolve special matters. Our portfolio includes more than 150 joint-stock companies, 250 limited liability companies, and 50 municipalities and regions. We can connect clients with each other if they have interesting investment or business opportunities. And we are also happy to listen to interesting entrepreneurial or business ideas. If you do not want to risk mistakes, damages, or fines, safely leave the entire matter to ARROWS – just contact the firm at consultation@arws.cz.

Don't want to solve this problem alone? More than 2,000 clients trust the ARROWS law firm, and we have been awarded Law Firm of the Year 2024. See our references HERE, and it will be our honor to help you solve your problem. The inquiry is free of charge.