One of the key requirements arising from the Act of 1 March 2018 on Counteracting Money Laundering and Terrorist Financing (hereinafter referred to as the AML Act ) is that all obligated institutions have and apply an internal AML procedure.

If we determine that our business activity meets any of the conditions listed in Article 2 of the AML Act, and we are therefore an obligated institution, the question arises: where should we begin preparing the internal procedure?

Information on the elements that a procedure consistent with the requirements of the AML Act should consist of can be found in Article 50, Section 2 of the Act in question. According to the said provision:

the internal procedure of the obligated institution specifies, taking into account the nature, type and size of the business activity conducted, the rules of conduct applied in the obligated institution and includes in particular the definition of:

1. activities or actions undertaken to mitigate the risk of money laundering and terrorist financing and to properly manage the identified risk of money laundering or terrorist financing;
2. principles for recognising and assessing the risk of money laundering and terrorist financing related to a given business relationship or occasional transaction, including principles for verifying and updating the previously conducted assessment of the risk of money laundering and terrorist financing;
3. measures taken to appropriately manage identified money laundering or terrorist financing risks associated with a given business relationship or occasional transaction;
4. principles of applying financial security measures;
5. rules for storing documents and information;
6. rules for the performance of duties including providing information on transactions and notifications to the Inspector General;
7. principles of disseminating knowledge of anti-money laundering and anti-terrorist financing regulations among employees of obligated institutions;
8. rules for reporting by employees of actual or potential violations of anti-money laundering and counter-terrorism financing regulations;
9. principles of internal control or supervision of compliance of the activities of the obligated institution with the provisions on counteracting money laundering and terrorism financing and the rules of conduct specified in the internal procedure;
10. rules for recording discrepancies between the information collected in the Central Register of Beneficial Owners and the information on the client’s beneficial owners established in connection with the application of the Act;
11. principles for documenting difficulties identified in connection with the verification of the identity of the beneficial owner and actions taken in connection with the identification of a natural person holding a senior management position as the beneficial owner.

In practice, therefore, an internal procedure is nothing more than a document meeting the aforementioned requirements of the AML Act. Before being implemented, or if it is updated, this document is subject to approval by senior management of the relevant obligated institution.

What should you remember when preparing an internal AML procedure?

Above all, remember that an internal AML procedure should be tailored to the specific type of obligated institution, taking into account the nature and size of its operations. Using ready-made templates available online or forms received from friends, even if they operate in a similar industry, is not a good solution. It's also worth emphasizing that the procedure should actually be applied to the business we conduct, not simply prepared and "shelfed." The point is not to prepare extensive documents that no one will read. It is definitely better to implement a condensed procedure that has actual practical application. It should be noted that obligated institutions expose themselves to sanctions for failing to implement AML procedures . Therefore, simply having documentation without implementing it does not exempt the entity from potential liability.

The above is confirmed and at the same time a warning by the case of an entrepreneur running a currency exchange business, on whom an administrative financial penalty was imposed by the President of the National Bank of Poland on 2 April 2019 under Decision 9/2019 for:

“Failure to take into account the nature, type and size of the business activity conducted in the rules of conduct applied in the obligated institution, specified in the “internal procedure of the obligated institution” – which constitutes a failure to comply with the obligation referred to in Art. 50 sec. 2 of the Act.”

To sum up, it is important not only to prepare documentation, but also to remember that it must be adapted to the business we conduct and actually used in practice.

This alert is for informational purposes only and does not constitute legal advice.

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