In order to ensure the highest quality of our services, we use small files called cookies. When using our website, the cookie files are downloaded onto your device. You can change the settings of your browser at any time. In addition, your use of our website is tantamount to your consent to the processing of your personal data provided by electronic means.

Back

Communication no. 22 on practical aspects of the application of customer due diligence measures and the submission of notifications referred to in Articles 74 and 86 of the AML/CFT Act.

Due to doubts regarding the proper application of customer due diligence measures, in particular with regard to:

  • assessment of business relationships and obtaining information concerning their objective and intended nature,
  • examining the origin of assets available to the customer,

the General Inspector of Financial Information (hereinafter referred to as the “General Inspector”) notes the following issues.

 

 

  1. Selected provisions of the Act on counteracting money laundering or financing of terrorism.

The Act of 1 March 2018 on counteracting money laundering and financing of terrorism (hereinafter referred to as the “AML/CFT Act”) imposes a number of obligations related to, among others, the application of customer due diligence measures.

 

In accordance with Article 35(1) (1) and (2)(a), (b) and Article 35(2) of the AML/CFT Act, the obligated institutions shall apply the customer due diligence measures in the case of, inter alia, establishing business relationship, performing an occasional transaction (which meets the conditions specified in point 2 (a) or (b)) and in relation to customers with whom they maintain business relationships, taking into consideration the identified risk of money laundering and financing of terrorism, in particular, in situations when a change in formerly determined nature or circumstances of business relationships occurred.

 

Article 34(1) of the AML/CFT Act indicates that customer due diligence measures comprise, among others, assessment of business relationship and, as applicable, obtaining information concerning its objective and intended nature, and ongoing monitoring of customer's business relationship. Ongoing monitoring of customer's business relationship should be understood in particular as follows:

  • the analysis of transactions carried out throughout the course of business relationship in order to ensure that such transactions are compliant with the knowledge of the obligated institution on the customer, the type and scope of activity carried out by it, as well as compliant with the money laundering and financing of terrorism risk associated with such a customer,
  • examining the origin of assets available to the customer – in cases justified by circumstances,
  • ensuring that any possessed documents, data or information concerning the business relationship shall be updated on an on-going basis.

 

As stipulated in Article 43(3) of the AML/CFT Act, the obliged institutions carry out ongoing analysis of transactions performed.

 

In the light of Article 41 (1) and (2) of the AML/CFT Act, should the obligated institution be unable to apply one of the customer due diligence measures referred to in Article 34(1):

  • it shall not establish a business relationship,
  • it shall not perform an occasional transaction,
  • it shall not conduct transactions through the bank account,
  • it shall terminate business relationships.

The obligated institution shall also assess whether the inability to apply the customer due diligence measures forms basis for providing the General Inspector with the notification referred to in Article 74 or Article 86 of the AML/CFT Act.

 

In accordance with Article 43(4) of the AML/CFT Act, in the case of disclosure of unusual or excessively complex transactions and of high amounts which seem legally or economically unjustified, the obligated institutions shall:

  • undertake measures in order to clarify circumstances under which such transactions were carried out,
  • intensify ongoing monitoring of customer's business relationships.

 

The obligated institutions shall apply enhanced customer due diligence measures in cases of a higher risk of money laundering or financing of terrorism as well as in cases referred to in Articles 44-46 of the AML/CFT Act. In accordance with Article 43(2) of the AML/CFT Act, a number circumstances may substantiate an increased money laundering and financing of terrorism risk, in particular:

  • establishing business relationships under unusual circumstances,
  • the subject of economic activity pursued by the customer comprising processing of a considerable number of cash transactions or cash transactions for high amounts,
  • ordering transactions where the customer is the beneficiary by unknown or non-associated third parties,
  • establishing or maintaining of business relationships or performing an occasional transaction without a physical presence of the customer (where the associated increased risk of money laundering and financing of terrorism has not been otherwise mitigated).

The General Inspector recalls that the list of circumstances indicating higher risk set out in Article 43(2) (1)-(10) of the AML Act has a non-exhaustive (indicative) nature.

 

The rules of submission of:

  • notification of circumstances which may indicate the suspicion of committing the crime of money laundering or financing of terrorism – are defined in Article 74 (1)-(3) of the AML/CFT Act,
  • notification of acquiring justified suspicion that the specific transaction or specific assets may be associated with money laundering or financing of terrorism – are defined in Article 86 (1) and (2) of the AML/CFT Act.

 

 

  1. Selected circumstances (examples) which the obligated institutions consider to be the basis for submitting a notification to the General Inspector.

In the submitted notifications, the obligated institutions shall inform about various circumstances which in their opinion can indicate a suspicion of committing a crime of money laundering or financing of terrorism. For the purposes of this Communication, the General Inspector notes only selected circumstances (examples) indicated by the obligated institutions. 

1.

Commercial companies established in Poland make and accept payments of significant value (a few hundred thousand, several million) from foreign contractors for whom they allegedly delivered goods located abroad or provided services outside the country. These companies often do not have adequate human, financial, or technical resources as well as fixed assets and experience to participate in international trade or provide services outside the country.

In some of the cases presented, persons representing companies do not have a place of residence in Poland and are unable to demonstrate why the companies were established in Poland. Apart from the registered office, which is often located in a virtual office, the companies do not have any significant connections with Poland.

In many situations, the commencement of the activity described above was preceded by changes in ownership, including the acquisition of stocks/shares in the company from entrepreneurs providing services, inter alia, in the area of establishment of legal persons or provision of registered office and business address or correspondence address.

2.

A foreigner accepts significant cash payments from Polish or foreign citizens to bank accounts, and then transfers these funds to the benefit of entities pursuing economic activity. Apart from the presumption that the customer may pursue unrecorded economic activity, the obligated institutions usually do not point to any other circumstances which may indicate that the funds come from the activity contrary to the law or regulated activity carried out without permission.

 

 

  1. Practical aspects of the application of customer due diligence measures and the submission of notifications referred to in Articles 74 and 86 of the AML/CFT Act.

The General Inspector shares the view that the circumstances mentioned above may raise reasonable doubts as to the actual objective of establishing business relationship with a given obligated institution, as well as the actual origin of assets. Therefore, the obligated institution should identify the risk of money laundering and financing of terrorism and apply adequate customer due diligence measures. The obligated institution should, for example, analyse whether as a result of personal changes in the customer's management board, the takeover of the customer by a new owner or commencing performance of new transactions the previously determined nature or circumstances of the business relationships have changed. 

 

The General Inspector has reservations about the scope of application of customer due diligence measures by the obligated institutions and the content of notifications referred to in Article 74 or Article 86 of the AML/CFT Act.

 

In accordance with Article 74(2) of the AML/CFT Act, the notification of circumstances which may indicate the suspicion of committing a crime of money laundering or financing of terrorism shall be submitted to the General Inspector immediately, not later than two business days following the day of confirming this suspicion by the obligated institution. Therefore, after determining the circumstances which can indicate a suspicion of committing a crime of money laundering or financing of terrorism, and before submitting the notification to the General Inspector, the obligated institution, depending on the specific factual context, should apply enhanced customer due diligence measures or intensify ongoing monitoring of the customer's business relationships by taking at least one measure or more to confirm the acquired suspicion, for example:

  • carry out examination of the origin of assets (e.g. by requesting the customer to submit explanations or documents regarding the origin of funds),
  • determine the objective and circumstances under which the customer makes payments to the benefit of selected addressees (e.g. by requesting the customer to make available documents related to transactions performed).

 

In a situation where the explanations and documents submitted by the customer do not raise significant doubts as to the origin of assets, as well as the objective and intended nature of the transactions performed, the obligated institution may, for example, resume conducting transactions through the bank account.

 

In a situation where the customer fails to submit the requested information and documents (e.g. avoids contact and turning up in the obligated institution, refuses to present the origin of assets or does not provide relevant documents related to transactions performed) or they prove to be insufficient or unreliable, the obligated institution shall consider:

  • notifying the General Inspector of circumstances which may indicate the suspicion of committing the crime of money laundering or financing of terrorism (in accordance with Article 74 (1)-(3) of the AML/CFT Act), or
  • notifying the General Inspector of a suspicion that the specific transaction or specific assets may be associated with money laundering or financing of terrorism (in accordance with Article 86 (1)-(2) of the AML/CFT Act).

 

In addition, in any case of inability to apply one of the customer due diligence measures referred to in Article 34(1), the obligated institution shall not establish a business relationship, shall not conduct transactions through the bank account, shall not perform an occasional transaction, or shall terminate business relationship with the customer.

 

In accordance with Article 74(3)(8) and second sentence of Article 86(2) in conjunction with Article 74(3)(8) of the AML/CFT Act, the above notifications should include justification. This means that the obligated institution, in the context of determining circumstances which can indicate the suspicion of committing a crime of money laundering or financing of terrorism, shall describe, among others:

  • what information and documents were collected before establishing a business relationship (e.g. what profile of the customer's economic activity was determined, what frequency of transactions was declared, what origin of assets was indicated),
  • what information was collected by the obligated institution in the course of the business relationship (e.g. whether the acquired assets and performed transactions were consistent with the determined profile of economic activity, whether there were changes in ownership, whether any circumstances affected the change in the risk attributed to the customer, whether a domestic bank received a notice from a foreign bank regarding the return of funds, and if so – what reason was indicated by the foreign bank),
  • what customer due diligence measures were applied after determining the circumstances which could indicate the suspicion of committing a crime and what was their result (e.g. whether the customer's transactions with selected contractors were analysed and specific cases were selected for further in-depth analysis),
  • what activities were undertaken in relation to the customer after determining the circumstances which could indicate the suspicion of committing a crime and what was the result (e.g. whether telephone contact was made with the customer or the customer was obliged to submit contracts and invoices, whether the customer presented the requested documentation in whole or in part), 
  • what information and documents were analysed after determining the circumstances which could indicate the suspicion of committing a crime and what was the result (e.g. whether there was ambiguity in the contracts and invoices presented by the customer),
  • what was the impact of determining the circumstances which could indicate the suspicion of committing a crime on the business relationship (e.g. whether due to the customer's failure to submit documents the obligated institution decided not to conduct transactions through the bank account or to terminate a business relationship).

 

In accordance with Article 76(1) of the AML/CFT Act, on request of the General Inspector, the obligated institution shall immediately submit or make available any information or documents held, required for the implementation of the General Inspector’s tasks defined in the Act. In such a case, the obligated institution is obliged to provide, among others, full and comprehensive information and copies of documents acquired while applying customer due diligence measures (for example, all documents being the basis for submitting the notification referred to in Article 74 or Article 86 of the AML/CFT Act).

 

The General Inspector notes that the submission of the notification referred to in Article 74 or Article 86 of the AML/CFT Act shall not be a circumstance:

  • allowing for attributing a lower risk of money laundering and financing of terrorism to the customer, or
  • allowing the obligated institution to limit the application of customer due diligence measures or to cease to apply enhanced customer due diligence measures, or
  • exempting the obligated institution from intensified ongoing monitoring of the customer's business relationships, or
  • exempting the obligated institution from the obligation not to conduct transactions through the bank account or to terminate business relationships with the customer should it be unable to apply customer due diligence measures.

 

Moreover, recurring circumstances identified by the obligated institution which may indicate the suspicion of committing a crime of money laundering or financing of terrorism should be included in the internal documentation (procedure and risk assessment) and used when applying customer due diligence measures (e.g. while establishing a business relationship and in its course). For example, in a situation where the obligated institution has established that a recurring circumstance which may indicate the suspicion of committing a crime of money laundering or financing of terrorism consists in making and accepting payments exclusively/in the vast majority from foreign contractors by a company established in Poland in a virtual office by a foreigner who does not have a place of residence in the territory of Poland (the situation described in II.1 of this Communication), this institution, depending on the specific factual context, should, among others:

  • update the risk assessment and the internal procedure regarding the risk of money laundering and financing of terrorism in the context of products or services offered to the company operating in the above-mentioned manner, 
  • determine, while establishing a business relationship, why the company was established by a foreigner in Poland, taking into consideration the circumstances of acquiring stocks or shares from entrepreneurs providing services in the area of establishment of legal persons (e.g. the obligated institution may request that the customer provide information about its connections with Poland, employees, domestic contractors, and assess the reliability of the information provided),
  • determine, while establishing a business relationship, the circumstances and reasons for establishing the company in a virtual office (e.g. the obligated institution may request that the customer provide information about other places of the activity performed, services used within the virtual office, and assess whether the nature of the customer's activity allows and justifies establishing a company in a virtual office),
  • confirm the probability, while establishing a business relationship, of the company's commercial relations with domestic and foreign entrepreneurs (e.g. the obligated institution may request that the customer provide information on how its services are offered, how contracts with contractors are concluded, and assess the reliability of information provided),
  • confirm the probability, while establishing a business relationship, of delivery of goods outside borders or the provision of services outside the country (e.g. an obligated institution may request that the customer provide information on the method of placing orders by contractors, distribution channels used, and assess the reliability of information provided),
  • determine, while establishing a business relationship, whether the company has adequate resources to conduct international trade or provide services outside the country (e.g. the obligated institution may request that the customer provide information on employees, organisational solutions used, and assess the reliability of information provided),
  • consider attributing higher risk to the company in accordance with the updated risk assessment and internal procedure (in a situation where the collected information about the company allows establishing a business relationship),
  • apply customer due diligence measures to the extent and with an intensity taking into account the identified risk of money laundering and financing of terrorism,
  • submit the notification (referred to in Article 74 of the AML/CFT Act), taking into account the comments made in this Communication, in the case of establishing circumstances which may indicate the suspicion of committing the crime of money laundering or financing of terrorism.

 

 

At the same time, the General Inspector recalls that in accordance with Article 147 of the AML/CFT Act the obligated institution which fails to fulfil the obligation to:

  • prepare risk assessment and its update,
  • apply the customer due diligence measures,
  • document the applied customer due diligence measures and the results of the current analysis of performed transactions,
  • demonstrate the application of the adequate due diligence measures on request of the authorities authorised to perform the control,
  • forward or make available information on request of the General Inspector,
  • submit notifications referred to in Article 74 or Article 86(1) of the AML/CFT Act

− shall be subject to administrative penalty.

{"register":{"columns":[]}}