According to the latest analyses by the National Bank of Poland, the number of cash transactions is systematically decreasing. Banknotes and coins are increasingly being replaced by payment cards and electronic methods of finalizing transactions. Despite this, there are situations in which counterparties prefer cash settlements. For small transactions, the payment method chosen is irrelevant. The problem arises when, as part of our business activities, we pay or accept payments in cash equal to or exceeding €10,000 . Upon such a transaction, in accordance with the Act of 1 March 2018 on Counteracting Money Laundering and Terrorism Financing (consolidated text: Journal of Laws of 2020, item 971) (hereinafter referred to as the AML Act), we acquire the status of an obligated institution. We will then be required to implement all security measures specified in the AML Act. Failure to comply with these obligations exposes us to severe sanctions, both administrative and criminal.

Obligated institutions

Under the AML Act, obligated institutions are entities on which the Act imposes a number of obligations related to counteracting money laundering and terrorist financing. Article 2, Section 1 of the AML Act contains a closed list of obligated institutions, which include, among others, domestic banks, branches of foreign banks, branches of credit institutions, cooperative savings and credit unions, insurance companies, accounting offices, entities operating cryptocurrency exchanges and exchange offices, as well as entrepreneurs within the meaning of the Act of 6 March 2018 – Entrepreneurs' Law, to the extent that they accept or make payments for goods in cash with a value equal to or exceeding the equivalent of EUR 10,000, regardless of whether the transaction is conducted as a single operation or several operations that appear to be related .

This means that when accepting a payment in cash from a contractor, the entrepreneur is subject to the provisions of the AML Act and is therefore obliged to comply with all obligations arising from the Act.

It's worth emphasizing that splitting payments into parts won't avoid the obligations imposed by the AML Act. Businesses must implement security procedures regardless of whether the transaction is conducted as a single operation or several seemingly related ones.

Obligations of obligated institutions

From a practical point of view, the obligations of obligated institutions are often divided into five basic categories:

1. identifying and assessing risks related to money laundering and terrorism financing,
2. implementation and application of financial security measures proportionate to the risk identified during the customer analysis,
3. collecting and forwarding to the appropriate institutions the information provided for by law,
4. cooperation with the General Inspectorate of Financial Information in the event of suspicion of money laundering or terrorism financing,
5. implementation of organizational activities aimed at ensuring the proper implementation of the basic tasks of obligated institutions.

Failure by an obligated institution to fulfil the above obligations may result in both administrative and criminal sanctions being imposed on it.

Administrative sanctions

Pursuant to Article 150 paragraph 1 of the AML Act, the catalogue of administrative penalties includes:

1. publication of information about the obligated institution and the scope of the infringement of the provisions of the Act by that institution in the Public Information Bulletin on the website of the office serving the minister responsible for public finances;
2. an order to cease certain activities by the obligated institution;
3. withdrawal of a license or permit or deletion from the register of regulated activities;
4. a ban on performing duties in a managerial position by a person responsible for the infringement of the provisions of the Act by the obligated institution, for a period not longer than one year;
5. a financial penalty.

Importantly, a fine may be imposed up to twice the amount of the benefit gained or loss avoided by the obligated institution as a result of the infringement or – if it is impossible to determine the amount of such benefit or loss – up to the equivalent of EUR 1,000,000 .

Criminal sanctions

Pursuant to Article 156 Section 1 of the AML Act, failure by an obligated institution to notify the General Inspector of circumstances that may indicate a suspicion of money laundering or terrorist financing, or failure to notify the General Inspector of a reasonable suspicion that a specific transaction or assets covered by such transaction may be related to money laundering or terrorist financing, as well as failure to provide the General Inspector with false data regarding transactions, accounts or persons, is punishable by imprisonment from 3 months to 5 years . If the perpetrator of the above-mentioned act acts unintentionally, they are subject to a fine .

Summary

The AML Act does not prohibit accepting cash payments. However, we must remember that if we accept cash payments for goods or services exceeding €10,000, our business will be legally included among obligated institutions, with all the consequences arising from the AML Act.

When discussing topics related to cash transactions, it is impossible not to mention other limits applicable to entrepreneurs.

Pursuant to Article 19 of the Act of 6 March 2018 – Entrepreneurs' Law (Journal of Laws of 2018, item 646), making or accepting payments related to the business activity performed takes place via the entrepreneur's payment account in each case when:

1. the party to the transaction from which the payment results is another entrepreneur, and
2. the one-time transaction value, regardless of the number of payments resulting from it, exceeds PLN 15,000 or the equivalent of this amount, while transactions in foreign currencies are converted into PLN at the average foreign exchange rate announced by the National Bank of Poland on the last business day preceding the date of the transaction.

It follows from the above that for every transaction exceeding PLN 15,000 concluded between businesses, there is an obligation to make payments through a payment account. Importantly, failure to comply with this obligation is not subject to criminal penalties or misdemeanor sanctions. It also does not affect the effectiveness of the legal act from which the payment is based. However, failure to comply with this obligation may have tax consequences. The consequence of conducting a transaction above PLN 15,000 without using a payment account is that these funds cannot be included as tax-deductible costs.

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

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