AML Directive and the risk of money laundering

by Monika Behrens

6 February 2019

The AML regulations so far have mainly targeted money laundering and terrorist financing in the financial sector. The most recent, 4th Anti-Money Laundering Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, modifies this to some extent. In the course of the directive's implementation Poland has introduced new regulations to its Anti-Money Laundering and Terrorist Financing Act of 1 March 2018.

4th AML Directive

The directive is a part of a legislative package to increase market transparency, tighten up the tax system and hinder financing of criminal activities. It also deals with fiscal crimes and corruption and is supposed to increase transparency of financial transactions and corporate activities. The way to achieve this is through easy access to information about beneficial owners meaning individuals who control an enterprise or derive benefits from its operations. The directive attempts to prevent tax evasion and protect business dealings (access to information about potential business partners). The regulations may apply to e.g. schemes involving a VAT fraud and attempts to involve unaware businesses in such schemes.

Changes by Polish lawmakers

In Poland, the 4th AML Directive is implemented through the Act on Counteracting Money Laundering and Terrorist Financing of 1 March 2018. It extends the list of institutions obliged to comply with the act to include, without limitation, providers of services for companies or trusts or those who offer exchange of virtual currency for legal tenders. The act also introduces a number of new obligations for the obliged institutions, e.g. to implement a procedure for anonymous reporting of violations of anti-money laundering and terrorism financing laws, implement a group procedure, develop and update risk assessment. Another novelty is the obligation to report information on beneficial owners to the Central Register of Beneficial Owners (CRBO). 

The act came into force on 13 July even though the deadline for the implementation of the directive expired on 26 June 2017. One of the reasons behind the delay was the rule that obliged the EU Member States to set up such a register. Furthermore, the effective date of the provisions on the register was postponed for 18 months after the promulgation of the act, i.e. until 13 October 2019.

Penalties for violations of the act include without limitation:

• fines for financial institutions up to EUR 5 million;
• other administrative penalties, such as concession / licence withdrawal or deletion from the register of regulated businesses;
• ban on performance of managerial functions by the person responsible for the obliged institution's violation of the act;
• criminal liability of the person acting for or on behalf of the obliged institution – up to 5 years of imprisonment.

Central Register of Beneficial Owners (CRBO) in Poland

The register is a tool for checking ownership structure of companies and preventing tax evasion by actual owners. The Polish register will be public and free. The following entities are obliged to report and update information about beneficial owners:

• general partnerships;
• limited partnerships;
• partnerships limited by shares;
• limited liability companies;
• joint-stock companies, except public companies.

Reportable information includes details of the beneficial owners and the members of the company's governing body or the shareholders authorised to represent the company, i.e.

• full name;
• citizenship;
• country of residence;
• Polish personal identification number PESEL or date of birth (for people who have no PESEL);
• the amount and type of share interest or the rights of the beneficial owner.

The authorised representative of the company must submit reports to the registry and at the same time make a statement that the reported information is true under criminal liability for making false statements.  Importantly, persons who submit and update information about beneficial owners are liable for damage caused by reporting untrue information. They are also liable for missing statutory deadlines for reporting and updating. The liability may be avoided if the damage is caused by force majeure or exclusively for reasons attributable to the injured party or a third party for which the reporting person is not responsible. Companies that fail to report information to the register within statutory deadlines risk liability and administrative fines up to PLN 1 million.