Responsibility of an obliged institution for violation of the Act on combating money laundering and the financing of terrorism – administrative penalties

When an obligated institution fails to comply with its obligations under the Act on combating money laundering and the financing of terrorism (hereinafter: referred to as the ‘AML’), it may be subject to an administrative penalty. It should be noted that the potential penalty is not only imposed on the obligated institution itself, but also on its board members, senior management (as defined in Art. 6 of the AML), as well as employees in a managerial position, whose responsibilities include ensuring that the activities of the obligated institution and its employees and other persons performing activities for the obligated institution comply with the provisions of the Act (Art. 8 of the AML).

The reasons for imposing an administrative penalty are set out in detail in Articles 147 – 149 of the UAML, where the most common include failure to:

1. prepare a money laundering and terrorist financing risk assessment relating to the activities of the obliged institution and failure to update it, which should be prepared at least every 2 years,
2. apply financial security measures, including but not limited to recognizing the risk of money laundering and terrorist financing by the obliged institution in relation to business relationships, obliged institution, or occasional transactions,
3. implement an internal procedure for anonymous reporting of AML and terrorist financing violations,
4. report suspicion of money laundering or terrorist financing offenses,
5. comply with information obligations.

Administrative penalties are imposed in a form of a decision of the General Inspector for Financial Information, the President of the National Bank of Poland, and the Polish Financial Supervision Authority. When imposing a penalty, the competent authority takes into account factors that affect the penalty, including the gravity and duration of the violation, the financial capacity of the obligated institution, the scale of profits gained by the entity, losses incurred by third parties in connection with the violation, the degree of cooperation of the obligated institution with the competent authorities in anti-money laundering matters, as well as whether the entity has previously committed a violation of the AML provisions.

The administrative penalties are (closed catalog):

1. publication of information about the obliged institution and the scope of violation of the provisions of the AML by this institution in the Public Information Bulletin on the entity website of the office serving the minister responsible for public finance (which involves the risk of loss of reputation by the obliged institution, which in turn may affect its position on the market),
2. order to discontinue certain activities undertaken by the obliged institution,
3. withdrawal of a concession or permit, or removal from the register of regulated activities,
4. a ban on the performance of duties in a managerial position by a person responsible for the breach of the AML by the obliged institution, for a period not exceeding one year,
5. a pecuniary penalty (up to double of the benefit gained or loss avoided, with the maximum amount of the pecuniary penalty being EUR 1,000,000). In the case of obliged institutions operating as banks, credit institutions, cooperative savings and credit unions, domestic payment institutions, small payment institutions, investment firms, and other entities referred to in Art. 2 par. 1 (1-5, 7-11, 24 and 25) of the AML, the pecuniary penalty is higher and amounts respectively to up to EUR 5,000,000 (or up to 10% of the turnover shown in the last approved financial statements) for legal persons and up to PLN 20,868,500 for natural persons.

In justified cases, where (i) the gravity of the breach is negligible and the obliged institution has ceased the breach, or (ii) another authorized public administration body has already imposed a penalty on the obliged institution for the same behavior, or the obliged institution has been validly punished for a misdemeanor or fiscal misdemeanor or validly convicted of a crime or fiscal offense and the previous penalty meets the objectives for which the administrative penalty should be imposed, the abovementioned bodies may refrain from imposing such an administrative penalty. This occurs by decision and is a right, not an obligation of the authority.

Of particular note is the obligation imposed on commercial companies to report information on beneficial owners and to update such information within 7 days from the date of entry in the National Court Register or date of data change. So far, this obligation did not apply to partnerships and public companies (as defined in the Act on Public Offerings, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies of 29 July 2005). The amendment to the AML extends the circle of entities obliged to notify changes to the Central Register of Beneficiaries (hereinafter: ‘CRBR’) to include partnership companies, as well as other entities, such as European economic interest groups, European companies, cooperatives, including European cooperatives, associations subject to registration in the National Court Register, and foundations. Also to be included in the above list is a trustee (or a person of equivalent position) of trust (i) domiciled or established in the territory of the Republic of Poland or (ii) entering into business relations or acquiring real estate in the territory of the Republic of Poland in the name or on behalf of the trust. The financial penalty, in this case, is up to PLN 1,000,000.

The amendment to the AML introduces Art. 60a, according to which the beneficial owner who has not provided the obliged institution with all the information and documents necessary to notify/update the CRBR is subject to a financial penalty of up to PLN 50,000. The new provisions of the AML also provide for a fine of up to PLN 100,000 for entities (i) conducting activities for companies or trusts without obtaining an appropriate entry in the register of such activities and (ii) conducting virtual currency activities without first obtaining an entry in the appropriate register.

The AML allows for the imposition of penalties on persons performing management functions in obligated institutions, i.e., members management board (Article 6 of the AML), the person responsible for implementing the obligations set forth in the Act (Article 7 of the AML), and the employee responsible for supervising the compliance of the obligated institution’s activities with the regulations (Article 8 of the UAML). The above-mentioned individuals can be fined up to PLN 1,000,000 if the obliged institution they manage violates the obligations set forth in Art. 147 and 148 of the AML.

The Act also regulates the issue of criminal liability, which will be listed in a separate article.