The temptation may arise for IO managers that, after all, the IO has not had an AML/CFT policy in place to date, and the general operating costs of the business are rising, so we can still hold off for a while on implementing or updating AML/CFT.

Nothing could be further from the truth. Not having an AML/CFT procedure or not updating it for years can lead to costly consequences. The saying the wily loses twice may therefore seem apt, although on AML/CFT grounds we should say that the wily loses up to 10% of last year’s turnover.

What administrative penalties are provided for in the AML/CFT Act?

Let us perhaps start with the end in mind, i.e. how much can be lost for the lack of an AML/CFT policy.

The AML/CFT Act provides for a range of administrative penalties for violations of AML/CFT regulations. The most extensive, by far, are the regulations on fines.

Without a properly implemented AML/CFT policy, you must expect:

1. Ostracism:

• IO data and the extent of AML/CFT Act violations can be published on the BIP website for up to 5 years
• What does the GIIF make available on the BIP website?

Depending on whether the IO is a natural or legal person, the following are made available e.g.: PESEL, name, registered office address, TIN.

2. loss of authorisation:

• • The OI may be obliged to stop carrying out certain activities or even lose its licence, entry in the register of regulated activities or lose its authorisation
  • The individual who was responsible for the breach may be administratively banned from holding a management position for up to one year.

3. a high fine:

• their amount depends on the type of activity carried out
• basic OIs can expect twice the benefit or loss avoided by breaching AML procedures, or €1,000,000 if this cannot be estimated
• specific IOs (e.g. banks, lending institutions, investment funds, currency exchange offices) have to watch out for more severe penalties of up to €5,000,000 or 10% of the turnover shown in the most recent financial statements due to the high risk of their activities

ATTENTION: Areyou a natural person running, for example, a currency exchange business? You must reckon with a fine of up to PLN 20,868,500

What does the selection and amount of the administrative penalty depend on?

1. 1. The sooner the better – the authority examines which provision of the AML/CFT Act was violated and how long the violation lasted, as well as how much of the IO’s fault is involved
      • .For example, rectifying a flawed AML/CFT policy even years later may be more beneficial than waiting for the authority to make a mistake and thus accumulating a fine like a snowball.
   2. Profit and loss account– the authority examines what the OI has achieved (or what losses it has avoided) by failing to implement a correct AML/CFT policy, or what losses third parties have suffered as a result.
      • For example, the authorities may take a different view of AML/CFT policy violations through faulty record-keeping, and a different view in the case of a bank handling multi-million dollar transactions linked to ‘higher risk’ persons
   3. The past also counts– the authority verifies how the IO’s cooperation with the state’s AML/CFT authorities has been so far, and maybe the IO has already had some stumbling blocks on AML/CFT grounds ending in a penalty.
      • For example, an IO’s ‘recidivism’ will be treated with greater severity than an incidental, first-time breach of AML/CFT policy

IMPORTANT: a fine is not final and such a decision can be appealed. An administrative appeal path is then triggered, which makes it possible to fight for, for example, the decision to be overturned altogether or the fine to be reduced.

For example:

GIIF decision -> appeal to Minister of Finance -> complaint to WSA -> cassation complaint to NSA

It is worth adding that the authority itself may waive the imposition of an administrative penalty. This is the case when, for example, the seriousness of the infringement is negligible and the OI has implemented corrective measures. However, this is an optional possibility and will not always be applicable.

Who can impose an administrative penalty on an OI?

• General Inspector of Financial Information – primary authority investigating and imposing administrative penalties on IOs
• President of the National Bank of Poland – only interested in entities conducting cantor activities
• Financial Supervision Authority – imposes penalties in the case of IOs subject to KNF supervision
• Minister responsible for public finance – deals with the withdrawal of powers relating to the gambling industry

Which violations of the AML/CFT Act are sanctioned with an administrative penalty?

Examples of violations sanctioned by an administrative penalty:

• Failure to designate persons from the management responsible for AML/CFT
• Lack of designation of a so-called AML Officer a.k.a. Compliance Officer – i.e. an employee in a managerial position responsible for ensuring IO compliance with AML/CFT
• Lack of an internal and updated AML/CFT procedure
• Weaknesses in risk assessments – failure to prepare risk assessments, to update risk assessments, or to report information to the FIU
• Weaknesses in FMLs – failure to apply FMLs, including enhanced FMLs
• Defective documentation – failure to record FSCs applied, inadequate record keeping, deficiencies in documenting analysis results
• Failure to notify the GIFI of suspicious transactions
• Failure to notify the GIFI of a suspected money laundering or terrorist financing offence
• Failure to stop suspicious transactions

What are the record fines?

The aftermath of an increasingly tight AML/CFT system, catching not only money launderers but also paying attention to IOs and AML/CFT procedures implemented (or not), are fines reaching, in extreme cases, more than PLN 20,000,000 in Poland.

Definitely lower fines are imposed in the case of IOs conducted in the form of sole proprietorships of natural persons. They generally oscillate around a few thousand zlotys.

table of examples of fines imposed on IOs in Poland

Recent years have also been record years in terms of fines imposed by counterparts of the GIIF or the FSA in Western Europe and the US. The sums there are considerably higher than those observed in the domestic market and reach amounts of up to several billion dollars.

table of examples of fines imposed on IOs worldwide

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