The President of the Republic of Poland recently signed a law amending national regulations on counteracting money laundering and terrorism financing. Furthermore, authorities authorized to conduct inspections and issue decisions regarding administrative penalties are increasingly active in these areas. For these reasons, it is worth briefly outlining who may be subject to penalties for non-compliance with AML/CFT regulations, their amounts, and for which violations.

Who can be punished?

Administrative penalties may be imposed primarily on obligated institutions, i.e., entities subject to various obligations under the Act on Combating Money Laundering and Terrorist Financing (hereinafter referred to as the AML Act), including the identification and assessment of money laundering and terrorism financing risks, and the obligation to cooperate with the General Inspector of Financial Information (hereinafter referred to as the GIFI). These entities have been divided into 25 groups and include not only large enterprises (e.g., domestic banks), but also foundations, associations, tax advisors, and auditors. The full list can be found in Article 2 of the AML Act.

It should be noted, however, that not only the entities indicated above may be subject to liability. If a competent authority determines that an obligated institution has violated certain obligations, a fine (including a fine of up to PLN 1 million) may be imposed on specific individuals. This group includes:

• members of the management board of the obligated institution, responsible for performing AML duties,
• senior management responsible for performing the duties specified in the Act,
• employees holding managerial positions, responsible for ensuring compliance of the activities of the obligated institution and its employees with AML regulations.

For what violations?

The list of violations for which an administrative penalty may be imposed is very broad. The AML Act divides them into three main categories: failure to comply with:

1. obligations within the scope of the provisions of the AML Act (Article 147),
2. obligations in the scope of EU law (Article 148),
3. obligations in the context of the application of restrictive measures (Article 149).

The first group is by far the most practical. It lists numerous obligations imposed on obligated institutions, including the most basic ones, such as appointing a responsible person, preparing a risk assessment and periodically updating it, implementing internal procedures, and submitting suspicious transaction notifications.

What are the penalties?

The AML Act refers to the concept of an impending administrative penalty for all three categories of failure to comply with obligations indicated above. This term is defined by the legislator and means:

1. publication of information about the obligated institution and the scope of the infringement of the provisions of the Act by this 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.

A fine is imposed up to twice the amount of the benefit gained or loss avoided by the obligated institution as a result of the violation, or – if the amount of the benefit or loss cannot be determined – up to the equivalent of EUR 1,000,000. This represents a significant increase compared to the previously applicable AML/CFT regulations, which set the upper limit at PLN 750,000.

As you can see, imposed administrative penalties can be very severe for businesses. Even the lightest of them, such as publishing information about a violation of regulations, can negatively impact a company's credibility and, consequently, its financial problems. More severe sanctions, such as the revocation of a license, immediately eliminate the entity from the market, while a high fine can quickly exclude the obligated institution from further operation.

What influences the punishment?

The decision regarding the amount of the fine imposed is not entirely arbitrary. The Act provides for a number of factors that the authorized body must consider when imposing it. When determining the type and amount of the administrative fine, both for the obligated institutions and the responsible individuals mentioned above, the following factors are taken into account:

1. the seriousness of the violation and its duration;
2. scope of responsibility of the obligated institution;
3. financial opportunities;
4. the scale of benefits achieved or losses avoided by the obligated institution, if such benefits or losses can be determined;
5. losses suffered by third parties due to the infringement, if they can be determined;
6. the degree of cooperation with the authorities competent in matters of counteracting money laundering and terrorism financing;
7. previous violations of the provisions of the Act.

Moreover, in particularly justified cases, the authority may even decide not to impose a penalty. These situations include:

1. the gravity of the violation of the provisions of the Act is insignificant and the obligated institution has ceased to violate the provisions of the Act, or
2. for the same conduct, an administrative penalty has been previously imposed on the obligated institution by a final decision by another authorized public administration body, or the obligated institution has been finally punished for a petty offence or a fiscal petty offence, or has been finally convicted for a crime or a fiscal crime, and the previous penalty meets the purposes for which an administrative penalty should be imposed

Is all this a real threat to me?

Many people believe that penalties for failing to comply with the Anti-Money Laundering and Terrorism Financing Act actually only affect the largest market players. However, with each year that the new regulations have been in effect, authorized bodies have been conducting more and more inspections and imposing more and more penalties on a wide variety of obligated institutions. As regularly published on the Ministry of Finance website shows, three of the five most recently imposed penalties concerned sole proprietorships. Of course, in these cases, the amounts typically ranged from a few thousand to several dozen thousand złoty. However, examples of recently imposed high penalties include PLN 500,000 imposed on a real estate agency and PLN 3.7 million imposed on a bank (the decision is not yet final).

It's important to remember that anti-money laundering and counter-terrorism financing regulations regularly impose more and more obligations on obligated institutions. Furthermore, meeting them once is not sufficient, as the regulations require periodic updates.

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

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