Further changes in AML for entrepreneurs - new obliged entities and additional security measures

The Polish legislator, still trying to adapt the national regulations to the EU AML V Directive, will once again deal with the amendment to the Act on Counteracting Money Laundering and Terrorism Financing (hereinafter: the "Act").

According to the latest draft amendment, which appeared on the website of the Government Legislation Centre on January 12, 2021, additional entities will be included in the catalog of obliged institutions. Moreover, entrepreneurs should prepare for the application of further security measures in relations with their contractors.

Extended catalog of obliged entities

The draft amendment in particular expands the catalog of obliged entities that are subject to the Act. The act will also apply to entrepreneurs:

• whose main business is providing the assistance or advice on tax matters,
• trading or intermediating in the trade of works of art, collectors' items and antiques, including when such activities are carried out in art galleries or auction houses, as well as storing indicated items, when this activity is carried out through free ports, however, in both cases only where the value of the transaction or a series of linked transactions amounts to EUR 10 000 or more.

New obligations for obliged entities

The new draft proposes a number of changes, including three fundamental ones. The first concerns the application of financial security measures. According to the amendment, apart from the obligation to apply the indicated measures to their new contractors, obliged entities will also have to apply financial security measures to existing contractors when:

• there has been a change to the previously determined nature or circumstances of the business relationship or a change in the previously determined data relating to the customer or beneficial owner,
• during a given calendar year, the institution was obliged under the provisions of law to contact the client in order to verify information on beneficial owners, in particular when such an obligation resulted from the provisions of the Act on the exchange of tax information with other countries.

Importantly, if the proposed changes enter into force, any, even the smallest change in the nature, circumstances of the business relationship or customer data, will result in the need to reapply security measures.

The second change concerns the extension of the scope of entities that are subject to the obligation of reporting and updating information on beneficial owners. Until now, this catalog included commercial companies, while according to the planned changes, they will also include, among others partnerships, trusts, cooperatives or associations that are subject to entry in the National Court Register and foundations.

Thirdly, the proposed changes also provide for an extension of the catalog of circumstances that support the use of enhanced financial security measures in connection with the increased risk of money laundering or terrorist financing. These measures should be applied in the case of:

• business relationships or occasional transactions with oil, arms, precious metals, tobacco products, cultural artifacts, ivory, protected species or other items of archaeological, historical, cultural and religious importance or of rare scientific value,
• linking a business relationship or an occasional transaction with a third country national applying for residence rights or citizenship in a Member State, in exchange of capital transfers, purchase of property or government bonds, or investment in corporate entities in that Member State.

The draft also introduces changes in the scope of tightening the rules for applying financial security measures in relation to clients from high-risk third countries, emphasizes that the obliged entities, when verifying the identity of the client, should not rely solely on the information contained in the Central Register of Real Beneficiaries, as well as proposing new obligations for entities providing virtual currency exchange services.

Although the draft has not yet been submitted to the Government office, it should be expected that due to the need to implement the provisions of the AML directive, the planned changes will come into force shortly. Entrepreneurs should therefore prepare for updating existing procedures and implementing new obligations in order to avoid severe financial penalties and other disciplinary tools offered by the Act.

Both the latest draft and the amendments to the Act to date are aimed at a radical tightening of the principles of counteracting money laundering and financing of terrorism, expanding the catalog of entities required to apply them, and imposing new, additional obligations on them.