In the case of financial institutions, investment institutions, in particular in relation to relations with entrepreneurs, it is no longer surprising to use Know Your Client (Meet Your Client – KYC) procedures, but whether due to requirements Act dated 1 March 2018 to combat money laundering and terrorist financing (Journal of Laws of 2018, item 723, (hereinafter referred to as ‘the Act’) should other operators also apply at least similar procedures? This appears necessary in order to demonstrate, in the event of a possible inspection from the GIIF, that the obligations imposed by the Act have been duly exercised by the Institution.
Unfortunately, there is no "one size fits all" solution in the scope of the Act in practice – any transaction, customer, establishment of economic relations – that requires an individual approach and individual assessment of whether they may be related to money laundering or terrorist financing, or supporting another crime.
It should be borne in mind that at the request of the authorities (GIIFs) it is the Obligated Institutions that they have taken appropriate financial security measures taking into account the level of recognised risk of money laundering and terrorist financing related to the economic relationship or to the occasional transaction
Who Are New responsibilities
New Act dated 1 March 2018 to combat money laundering and terrorist financing (Journal of Laws of 2018, item 723, (hereinafter referred to as ‘the Act’), quite widely indicated the catalogue of Binding Institutions, i.e. entities that are to strictly apply the Act in the course of their business activities, including professional activities.
They are not only financial institutions, but also:
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- insurance undertakings and life insurance intermediaries
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- entrepreneurs carrying out exchange operations, exchange services or foreign exchange intermediation,
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- entities carrying out economic activities relating to the exchange of virtual currencies and means of payment,
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- notaries for certain activities carried out in the form of a notarial act,
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lawyers, legal advisers, foreign lawyers, to the extent specified in the Act, including to the extent that they provide legal assistance to clients who are capital companies (which indicates a fairly broad coverage of the scope of the cases in which the Act is to be applied); the obligations do not apply to legal advisers and foreign lawyers who pursue a profession in the framework of an employment relationship or a business relationship in local or state offices,
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tax advisors (in principle in all aspects of the profession),
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statutory auditors,
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economic operators providing services to create legal persons or organisational units not having legal personality, to act as a member of the board, to provide a seat or address, to act or to enable them to act as trustee of trust, to act or to enable them to act as a person exercising rights of shares or shares in a body other than a company listed on a regulated market,
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entities operating in the field of bookkeeping services;
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real estate brokers;
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postal operators,
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entities operating in the field of games of chance, betting, card and slot games,
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Foundations, in so far as they accept or make cash payments of a value equal to or greater than the equivalent 10,000 EUR,
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associations, in so far as they accept or make cash payments of a value equal to or greater than the equivalent 10,000 EUR,
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to the extent that they accept or make payments for goods in cash of a value equal to or greater than the equivalent 10,000 EUR,
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entrepreneurs operating a safe deposit box facility,
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loan institutions.
Financial Security Measures
The institutions are required to apply financial security measures (‘SBFs’) in their activities, which include:
1) identification of the customer and verification of his identity;
2) identification of the beneficial owner and taking reasonable steps to:
- (a) verification of his identity,
- (b) establishing the ownership and control structure - in the case of a customer who is a legal person or an organisational unit without legal personality;
- 3) assessing economic relations and, as appropriate, obtaining information on their purpose and intended nature;
4) ongoing monitoring of customer economic relations, including:
(a) an analysis of transactions carried out in the context of economic relations to ensure that those transactions are in line with the knowledge of the customer, the nature and extent of his business and the risk of money laundering and terrorist financing associated with that client,
(b) the examination of the source of the assets at the customer's disposal - in cases justified by circumstances,
(c) ensuring that the documents, data or information held concerning economic relations are kept up to date.
It is important that, before establishing economic relations or before conducting an occasional transaction, the entities to apply the Act inform the client about the processing of his personal data.
Responsibilities are required to apply the SBF to customers during:
1) establishing economic relations;
2) conducting occasional transactions:
(a) equivalent 15,000 EUR or more, whether or not the transaction is carried out as a single operation, or several operations which appear to be linked, or
(b) which represents a transfer of funds to an amount exceeding the equivalent 1,000 EUR;
- carrying out an occasional cash transaction of equivalent value 10,000 EUR or more, whether or not the transaction is carried out as a single operation, or several operations which seem to be linked to each other - in the case of traders, in so far as they accept or make payments for goods in cash
- bet on bets and receipt of wins of equivalent value 2,000 EUR or more, whether or not the transaction is carried out as a single operation or several operations which appear to be linked,
- suspected money laundering or terrorist financing;
- doubts as to the veracity or completeness of the previously obtained customer identification data.
Procedure of the Binding Institution
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primarily has the obligation to apply financial security measures,
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should take into account in particular (but not exclusively) factors relating to: 1) the type of customer; 2) the geographical area; 3) the type of products, services and their distribution; 4) the level of assets deposited by the client or the value of transactions carried out; 5) the purpose, regularity or duration of economic relations.
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When assessing the likelihood of money laundering and terrorist financing, use your own life and work experience and behavioral factors.
It should be borne in mind that at the request of the authorities (GIIFs) it is the Obligated Institutions that they have taken appropriate financial security measures, taking into account the level of recognised risk of money laundering and terrorist financing related to the economic relationship or to the occasional transaction.
In practice, this boils down to demonstrating that the collected data were collected and evaluated on an ongoing basis and efforts were made to obtain them.
The fulfilment of these obligations can be documented, for example, using the KYC form and the relevant assessment table, documents from relevant registers, copies of credentials, identity documents, customer/counterparty statements obtained.
Author:
Aleksandra Księżyk – Legal advisor, Director of the Legal Department in Warsaw Chancellery Russell Bedford Dmowski and Partners Law Firm sp. k.