In connection with the authority vested, pursuant to Article 12(1)(11) of the Law on Anti-Money Laundering and Countering the Financing of Terrorism of 1 March 2018 (Journal of Laws, item 723, as amended) - hereinafter referred to as the "AML/CFT Act", to make available knowledge and information in the scope of AML and terrorist financing regulations, the General Inspector of Financial Information - hereinafter referred to as the "Inspector General" draws attention to the following.

 

1. Selected provisions of the AML/CFT Act, including the amended regulations.

In accordance with Article 33(1) of the AML/CFT Act, obliged institutions, as defined in Article 2(1) of the AML/CFT Act, are obliged to apply CDD measures with respect to their clients.

A catalogue of CDD measures was defined in Art. 34 sec. 1 of the AML/CFT Act. However, cases in which obliged institutions must apply them are indicated in Article 35 of the AML/CFT Act. For example, in light of the current wording of Article 35(2) of the AML/CFT Act, obliged institutions shall apply CDD measures also with respect to clients with whom they have business relations, taking into account the identified risk of money laundering and terrorist financing, in particular when there has been a change in the previously established nature or circumstances of the business relationship. Pursuant to Article 33 (4) of the AML/CFT Act, obliged institutions shall apply CDD measures to the extent and with the intensity taking into account the recognized risk of money laundering and terrorist financing associated with the business relationship or occasional transaction and its assessment.

Pursuant to Article 34(1)(4)(a) of the AML/CFT Act, as part of its ongoing monitoring of a client's business relationship, an obliged institution shall, among other things, conduct an analysis of transactions conducted as part of the business relationship to ensure that the transactions are consistent with the obliged institution's knowledge of the client, the type and scope of the client's business and consistent with the money laundering and terrorist financing risks associated with the client.

In light of Article 43.3 of the AML/CFT Act, obliged institutions conducts ongoing analysis of the transactions carried out. At the same time, the Inspector General points to the amended wording of Article 43(4) of the AML/CFT Act, by the Act of 30 March 2021 amending the AML/CFT Act and some other acts: "In case of disclosure of transactions:

1) complicated or

2) involving high amounts that are not justified by the circumstances of the transaction, or

3) conducted in an unusual manner, or

4) seemingly without legal or economic justification

- obliged institutions take measures to clarify the circumstances under which these transactions were carried out and, in the case of transactions carried out as part of business relationships, intensify the application of the CDD measure referred to in Article 34.1.4 with respect to the business relationships under which these transactions were carried out."

The new drafting of the provision of the Law in question does not fundamentally alter the obligations imposed on obliged institutions in connection with the disclosure of transactions with the characteristics indicated in that provision. In order to provide greater clarity to the provision of Article 43.4 of the AML/CFT Act, the characteristics of the transactions, the disclosure of which requires obliged institutions to take the actions specified in this article, have been indicated in separate drafting units.

 

2. Selected (exemplary) circumstances considered by the Inspector General as improper performance of statutory duties under the AML/CFT Act.

For the purposes of this communication, the Inspector General highlights selected circumstances that, in his opinion, indicate improper performance of obligations under the AML/CFT Act.

Example 1:

An obliged institution established a business relationship with a client who is a natural person declaring that the account established at the obliged institution will receive the client's remuneration due to employment under an employment contract. For a few months, the account received funds in the amount corresponding to the average monthly remuneration, and then, for example, an amount over a dozen times higher than previous inflows was received. The obliged institution did not take any actions in connection with the transaction, in particular it did not take any actions to establish the source of the assets at the disposal of the client.

Example 2:

An obliged institution started a business relationship with a client that was a newly established commercial law company, declaring that the account established with the obliged institution would receive funds related to day-to-day business operations. The account was not credited for a few months, after which, for example, several transactions exceeding one million PLN were received. The obliged institution did not undertake any actions in connection with the transactions, in particular it did not undertake any actions aimed at establishing the source of the assets at the disposal of the client.

Assessment of the actions of obliged institutions

In both of the presented examples, there were circumstances indicating that the obliged institutions failed to carry out activities in terms of ongoing analysis of the conducted transactions, as well as failure to apply CDD measures to clients. In particular, the obliged institutions:

• failed to ensure that transactions carried out in the framework of business relations are consistent with the knowledge of this institution about the client, the type and scope of its activities and consistent with the risk of money laundering and terrorist financing associated with this client,
• failed to investigate the source of the property held by the client
• failed to ensure that documents, data or information in their possession relating to the business relationship were kept up to date.

In both examples, there were circumstances indicating the nature of the transaction was inconsistent with the obliged institution's knowledge of the client. Moreover, in the first example there was a situation where the client received receipts to the account in the amount many times exceeding the declared amount of receipts. In the second case, the new client of the obliged institution, who has practically no transaction history and no experience or reputation to explain the amount of inflows to the account, receives inflows of significant (million) value.

It should be stressed that a situation in which the account of a client of an obliged institution, who already has a transaction history of at least several months, receives funds that are several times higher than the total value of all inflows to the client's account, e.g. for the previous 12 months, and the obliged institution does not apply CDD measures towards the client, in particular does not undertake any actions to establish the source of the assets, is unacceptable from the point of view of the provisions of the AML/CFT Act.

The situation is similar in the case of new clients who have practically no transaction history and no experience or reputation to explain the amount of inflows to the account. Situation, in which such client's account is credited with payments of significant (e.g. million) value, and the obliged institution does not apply any CDD measures towards the client, in particular does not undertake any actions to establish the source of the assets, is, again, unacceptable from the point of view of the AML/CFT Act.

 

3. Practical aspects of actions taken by obliged institutions when a client carries out transactions that are inconsistent with the institution's knowledge of the client, the type and scope of its business.

An obliged institution is required to ensure that transactions conducted in the course of a business relationship are consistent with the institution's knowledge of the client, the nature and scope of the client's business, and consistent with the money laundering and terrorist financing risks associated with that client.

The regulations cited in this communication indicate that, in the case of obliged institutions that maintain accounts for clients in the course of a business relationship (e.g., banks, cooperative savings and credit unions, payment institutions), there is a requirement, among other things, to:

• accurately establish a client profile, which will then be used to monitor the business relationship on an ongoing basis;
• identify transactions that are inconsistent with the institution's knowledge of the client and the nature and extent of the client's business, and are inconsistent with the money laundering and terrorist financing risks associated with the client;
• ensure that transactions conducted in the course of the business relationship are consistent with that institution's knowledge of the client, the nature and extent of the client's business, and consistent with the money laundering and terrorist financing risks associated with that client.

It also means that the obliged institution ensures that the transactions executed by the client are in accordance with the established profile of that client (i.e. the knowledge acquired during the establishment of the relationship and during its maintenance), which consists in particular of the following elements:

• the value of the transferred funds (the obliged institution ensures that the value of the actual transactions does not deviate from the client's declaration or the documents submitted by the client),
• frequency of transactions (the obliged institution ensures that the frequency of actual transactions does not deviate from the client's declaration or documents submitted by the client),
• type of transaction (the obliged institution ensures that the transactions carried out by the client are consistent with the type of transactions indicated in the client's declaration),
• the subject of the transaction (the obliged institution ensures that the transactions carried out by the client are in accordance with the business profile declared by the client),
• direction/country of transactions (the obliged institution ensures that the direction/country of transactions carried out through the account is consistent with the directions/countries of transactions indicated in the client's declaration).

The obligation to ensure that transactions carried out by the client are consistent with the obliged institution's knowledge of the client, the type and scope of its business and consistent with the money laundering and terrorist financing risk associated with that client applies to all clients regardless of their type (natural persons, legal persons, organisational units without legal personality) and the risk level assigned (e.g. low, medium, high). 

An obliged institution cannot base its knowledge of a client solely on the basis of its previous transactions. For example, if during the establishment of the relationship the client declared, inter alia, that he would receive remuneration for work, and then his first transactions indicate that he conducts business activity, the obliged institution cannot automatically conclude that:

• the purpose of the business relationship becomes the performance of transactions related to the conduct of the client's business,
• each subsequent transaction related to the conduct of the client’s business is consistent with the obliged institution's knowledge of the client, the nature and scope of the client's business and consistent with the money laundering and terrorist financing risks associated with that client.

In particular, it must be assumed that in the example described, there has been a change in the previously established nature or circumstances of the business relationship. This means that the client's activity, which differs from the information held by the obliged institution (statements, declarations or documents submitted by the client) requires immediate application of CDD measures, including the updating of documents and data. At the same time it should be emphasised that the obliged institution should know and understand the economic rationale behind the client's transactions. A situation in which an obliged institution accepts laconic explanations, which do not allow for a true understanding of the client's activity, cannot be understood as a proper application of the CDD measure referred to in Article 34(1)(4)(a)-(c) of the AML/CFT Act.

 

4. Planned activities for controlling obliged institutions.

In the cases presented in Section III of this communication there were circumstances justifying taking action under the AML/CFT Act, in particular with regard to investigating the source of the assets. Failure to take action on the part of the obliged institutions in situations similar to those presented indicates that the obliged institution did not comply with the provisions of the AML/CFT Act. Identification of such cases by the Inspector General may result in control measures being taken against the obliged institution by entities referred to in Article 130 sections 1 and 2 of the AML/CFT Act.

Execution by obliged institutions of transactions that are not consistent in particular with the information declared by the client regarding the value of transferred funds, frequency of the transaction, type of transaction, subject matter of the transaction, direction/country of the transaction, may be recognised by inspectors as a failure to comply with the obligation to apply the CDD measure referred to in Article 33 in connection with Article 34.1.4 of the AML/CFT Act.

Failure on the part of the obliged institutions to take action where the client carries out transactions that are complex or involve large amounts that are not justified by the circumstances of the transaction, or are carried out in an unusual manner, or seem to have no legal or economic justification may be regarded by the inspectors as a failure to comply with the obligation to apply the CDD measure referred to in Article 33 in conjunction with Article 34.1.4 of the AML/CFT Act.

The lack of information possessed by obliged institutions, which should then be used for ongoing monitoring of the business relationship (in particular the information declared by the client about the value of transferred funds, frequency of transactions, type of transaction, subject matter of the transaction, direction/country of the transaction) may be recognised by controllers as a failure to comply with the obligation to apply the CDD measure referred to in Article 33 in conjunction with Article 34.1.3 of the AML/CFT Act.