The new Act on Counteracting Money Laundering and Terrorism Financing of 1st March 2018
September 13, 2018
NEW REGULATIONS ON COUNTERACING MONEY LAUNDERING AND TERRORISM FINANCING
The new Act on Counteracting Money Laundering and Terrorism Financing of 1st March 2018 (Journal of Laws 2018, item 723), hereinafter referred to as the Act, changes the definition of the rules and procedure for counteracting money laundering and terrorist financing that have been in force so far. Its aim is to adapt Polish regulations to the provisions of Directive 2015/849 and the new Financial Action Task Force 9 FATF recommendations) and to increase the effectiveness of the Polish system. The new regulations introduced new obligated institutions and changed the tasks of existing institutions such as accounting offices and tax advisors.
The provisions in force from 13th July 2018 expand the group of entities under the Act on entities operating in the field of the so-called trusteeship services. These services include:
- formation of companies or other legal persons,
- acting as a director or secretary of a company, partner in a partnership or a person in a similar position in relation to other legal persons or organizing for other person the possibility of acting as such persons,
- providing registered office, business address, correspondence or administrative address and other related services for an enterprise, partnership or any other legal entity or legal arrangement,
- acting as a trustee of a trust, which was created by legal act or similar legal arrangement or by organizing for another person the possibility of acting in that capacity,
- acting as a person exercising rights from shares or interests for a person other than a company listed on a regulated market subject to disclosure requirements in accordance with European Union law or subject to equivalent international standards or organizing for another person the possibility of acting in this capacity.
This category of obligated institutions is called the “trust”.
In many cases, accounting offices or tax advisors can provide such services due to the nature of their business.
OBLIGATED INSTITUTIONS
Within the obligated institutions, of course, there are both accounting offices and tax advisors as well as auditors. They have access to their clients’ financial information and therefore their role is quite important from the point of view of the Act.
A very important element of the new Act is the inclusion of the liability of members of the management bodies, appointed representatives of the management of the unit as well as individual employees and associates of entities providing services involving keeping accounting books.
The Act imposes an obligation to implement appropriate internal procedures aimed at responding quickly to potential violations of regulations, which primarily results in the initiation of trainings for the entire accounting office team.
Lack of implementation of the relevant regulations is threatened with a sanction of PLN 1 million.
Within 3 months from the entry into force of the new act, accounting offices should provide notifications of a transaction above the threshold and a form identifying them according to the existing regulations.
The entry into force of the new implementing provisions was envisaged in the period of months from the day when the Act became effective.
The changes that affect the activities of accounting offices in adjusting their procedures to the Act, relate primarily to:
- introduction of new obligations, including those in the field of financial security,
- introduction of the Central Registry of Owner Beneficiaries,
- modification of the provisions regarding interruption of transactions and blocking accounts,
- changes to the provisions on control and sanctions
Accounting offices and other obliged institutions are required by the provisions of the new Act to prepare and update the risk assessment of money laundering and terrorist financing and transfer of information on suspicious transactions conducted by commercial law companies to the Central Registry of Owner Beneficiaries.
In addition, the threshold for cash transactions has changed compared to the previous act – it was set at EUR 15,000. This applies to a single transaction and several if they are interrelated.
The risk assessment performed by the accounting office consists of three steps:
- transaction analysis,
- recognition of the risk of money laundering or financing of terrorism,
- assessment of the identified risk.
In Article 33 para. 3 of the Act, the elements of given transactions are indicated, which should be taken into account in the above processes:
- Customer type,
- Geographical area,
- Purpose of the account,
- Type of products, services and methods of their distribution,
- The level of property values deposited by the customer or the value of transactions carried out.
Accounting offices are required to monitor business relationships on an ongoing basis to detect suspicious circumstances (which may be related to money laundering or terrorist financing). They are also obliged to identify the owner beneficiary and not only as it was regulated in the previous law, to take action in this area. This identification obligation also applies to the customer’s representative and his/her authorization to act on behalf of the customer.
FINANCIAL SECURITY MEASURES
An important element from the point of view of the new act is also the imposed obligation to introduce appropriate documentation of the financial security measures applied. It should also be remembered that financial security measures should be applied before establishing economic relations even when performing a one-off business transaction. The requirement to introduce appropriate strategies, procedures and control measures to effectively reduce the risks associated with money laundering and terrorist financing are fulfilled by introducing internal procedure of the obligated institution described in art. 50 of the Act. This documentation is to contain rules of conduct under which all employees of the obligated institution are obliged to act, the nature of the procedures, the type and size of the business. The abovementioned article specifies the minimum requirements for this internal procedure:
- determination of actions taken to reduce the money laundering and financing of terrorism associated with the given economic relations or occasional transaction, including the principles of risk identification and assessment, their verification and updating,
- measures used to properly manage the identified money laundering or terrorist financing risks,
- rules for the application of financial security measures,
- rules for storing documentation and information,
- rules of performing duties involving the transmission of information on transactions and notifications to GIIF,
- principles of dissemination among the employees of the obligated institution knowledge of the provisions on counteracting money laundering and financing of terrorism,
- principles of reporting by employees of actual or potential violations of regulations in this respect,
- principles of internal control and supervision of compliance of the obligated institution’s activities with the discussed provisions.
REGULATIONS ON COUNTERACING MONEY LAUNDERING AND TERRORISM FINANCING – REPORTING
As regards the storage and collection of information on economic transactions, there is a division into transactions reported for their value and for suspicious transactions regardless of value.
Registered transactions relate to transactions with a value of over EUR 15 thousand (the so-called “above-threshold transactions”).
Entities providing accounting services, excluding tax advisors and statutory auditors, are obliged to collect and provide information about transactions indicated in the Act. This includes:
- Accepted payment or withdrawal of cash with an equivalent of over 15 thousand Euro,
- Transfer of cash with an equivalent of over 15 thousand Euro, except:
- Transfer between payment account and deposit, which belongs to the same customer,
- Domestic transfer of cash from another obligated institution,
- Transactions related to the institution’s own economy,
- Transactions carried out on behalf of or for the benefit of public finance sector entities,
- Transactions carried out by a bank associating cooperative banks if the information was provided by a cooperative bank,
- Transfer of title to secure property values for the duration of the agreement on transfer of ownership.
In practice, accounting offices are required to report only when they are involved in cash transactions, i.e. when the payment or withdrawal of cash will be the equivalent of EUR 15,000.
Currently, it will not be too burdensome for this kind of reporting due to the fact that such cash transactions are rare in the light of the statutory limitation of cash transactions up to PLN 15 thousand.
In case of above-threshold transactions, the accounting office provides information in such transactions within 7 days from the date of accepting payment or making a withdrawal.
Currently, however, the law provides for a departure from the necessity of occurrence of a specific transaction – the mere suspicion of committing money laundering or terrorist financing is subject to notification.
Notification to the GIIF (General Inspector of Financial Information) should be forwarded without delay, however not later than within 2 business days after the obligated institution has confirmed the suspicion.
Obligated institutions, their employees and other persons acting on behalf of and for the benefit of the obligated institutions shall keep secret the fact of forwarding information to the General Inspector.
TRAININGS AND PROCEDURES
Obligated institutions are obliged to ensure the participation of persons performing anti-money laundering duties in training programs. This also applies to obligated institutions run individually by individuals.
Moreover, obligated institutions have to introduce internal procedures which serve the purpose of understanding the issues of counteracting money laundering and financing of terrorism, early detection of suspicious transactions and threshold transactions, proper reporting and keeping a register of transactions and analyses in terms of risk assessment of individual transactions.
A novelty in relation to the existing regulations is the introduction of an open central register of owner beneficiaries of transactions related to money laundering or terrorism financing. It is a register maintained by the Minister of Finance in the IT system serving the processing of information on owner beneficiaries of capital companies.
PENALTIES AND SANCTIONS
The breaching of the provisions of the Act is sanctioned by publishing the information in the Public Information Bulletin or a fine of up to EUR 1 million.
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