The Cash Payment and the Suspicious Client
A client, Mr. K, comes to notarize a loan agreement under which he lends 25,000,000 AMD to a company registered three weeks earlier, with the loan secured by a mortgage on an apartment owned by the company's director. Mr. K insists on paying the loan amount in cash at the notary's office, in 5,000,000 AMD bundles, and asks the notary not to record the cash payment in the deed. He declines to explain the source of funds and becomes irritated when asked. The director is present but lets Mr. K speak for both. The notary's office has a threshold of 3,000,000 AMD for enhanced customer due diligence.
1. What are the notary's AML obligations here, and may the notary proceed with the act as requested?
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The transaction exceeds the enhanced-due-diligence threshold and presents multiple risk indicators: a newly incorporated borrower, a cash payment far above the threshold, a request to omit the payment from the deed, an unexplained source of funds, and one person dominating both sides. The notary must identify and verify both parties and the beneficial owners of the company, establish the source of funds, and conduct enhanced due diligence. The notary may not record a false or incomplete deed: omitting the cash payment would misrepresent the transaction. The notary should refuse to certify the deed as requested, and if the suspicion is not resolved, decline the act and consider a suspicious-transaction report to the financial intelligence unit.
2. How should the notary respond to the request to keep the cash payment out of the deed?
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The notary must refuse. A notarial deed must reflect the actual transaction; deliberately omitting a material term at a party's request would make the notary complicit in creating a misleading record and could facilitate concealment. The notary should explain that the payment will be recorded as stated or the act will not be performed, and document the refusal and the client's reaction.
3. If the notary decides to file a suspicious-transaction report, what may the notary tell the parties?
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Nothing that would tip them off. The notary must not disclose that a report has been or will be made. The notary may simply state that the act cannot be performed today and give a neutral reason (e.g., missing documentation or unresolved verification), while preserving confidentiality. The report itself and its contents are confidential and are not subject to the ordinary duty to explain the refusal to the client beyond what the law requires.