The European Committee on Crime Problems and Select Committee of Experts on the Evaluation of Anti-money Laundering Measures (CDPC & MONEYVAL) conducted a mutual evaluation of Poland's anti-money laundering and combating the financing of terrorism (AML/CFT) regime in 2006 and released its findings in a 2007 report. In this report, the evaluators concluded that Poland is fully or largely compliant with only 18 of the 40+9 Financial Action Task Force (FATF) recommendations and special recommendations (SR) and is non-compliant with 11. The same report observed that although Poland has made significant improvements in its AML regime since its last mutual evaluation in 2002, its overall AML/CFT framework is lacking when assessed against FATF's requirements. Most importantly, the CDPC & MONEYVAL report notes that Poland is non complaint with SR II as it has yet to criminalize terrorist financing as mandated by the United Nations Security Council Resolution 1373. A 2008 report by the U.S. Department of State (DoS) notes that Poland was expected to transpose the European Union's Third Money Laundering Directive into Polish legislation in December 2007 but parliamentary elections delayed this process. There is little further information publicly available regarding the adoption of this Directive. The EU's Third Directive requires that all EU member countries implement the FATF Recommendations.

General Overview

Based on the findings of its 2006 mutual evaluation, the European Committee on Crime Problems and Select Committee of Experts on the Evaluation of Anti-money Laundering Measures (CDPC & MONEYVAL) released a report in 2007 (hereafter referred to as the 2007 CDPC & MONEYVAL report) on Poland's anti-money laundering and combating the financing of terrorism (AML/CFT) regime against the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations (SR). According to the 2007 CDPC & MONEYVAL report, "overall, certain elements in the Polish AML/CFT framework are missing" (p. 6) as evident from the lack of legislation criminalizing the financing of terrorism. The 2007 mutual evaluation observed that Poland is fully compliant with only 5 Recommendations and Special Recommendations (SRs); largely compliant with 13; partially compliant with 18; non-compliant with 11, and two recommendations are not applicable in the Polish context. Most importantly Poland is non complaint with SR II, as it has yet to criminalize terrorist financing as mandated by United Nations Security Council Resolution 1373. Currently, according to the report, the financing of terrorism can be addressed under the umbrella of aiding and abetting an act of terrorism.

Among the missing elements in Poland's AML/CFT framework, as identified by the 2007 CDPC & MONEYVAL report are: the lack of a common understanding by all stakeholders of the obligations under the AML Act and "a greater emphasis on the recognition, analysis and reporting of suspicious activity by obliged entities" (p. 6). Other key inadequacies of Polish law include the complete lack of a "conspiracy to commit money laundering" offense and a lack of clear legal provisions for implementing action against EU internals. The CDPC & MONEYVAL report also notes that increased coordination amongst the key players within the AML system is sorely needed to ensure a consistent approach. A 2008 report by the U.S. Department of State (DoS) titled "International Narcotics Control Strategy Report 2008" notes that the authorities in Poland, over the last several years, have worked towards establishing an AML/CFT framework in Poland that conforms to international standards, however, the report notes that Poland still has much to achieve in this regard. The current Polish framework, the report notes, remains deficient and non-compliant with the FATF requirements.

The Criminal Code criminalizes money laundering for all serious crimes. The August 1997 Banking Act and 1998 Resolution of the Banking Supervisory Commission, add customer identification requirements and institute a threshold reporting requirement. Despite the existence of the these earlier laws, it was the 2000 Act on Counteracting Introduction into Financial Circulation of Property Values Derived from Illegal or Undisclosed Sources and on Counteracting the Financing of Terrorism (AML Act) that really helped improve the Polish AML regime, according to the 2008 U.S. DoS Report. Per the same report amendments to the 2000 AML Act have helped bolster Poland's AML/CFT regime still further. Moreover, Poland was expected to transpose the European Union's Third Money Laundering Directive into Polish legislation in December 2007 but parliamentary elections delayed this process and there is little further information publicly available regarding the adoption of this Directive. The EU's Third Directive requires that all EU member countries implement the FATF Recommendations.

Poland's financial intelligence unit is the General Inspectorate of Financial Information (Generalny Inspektor Informacji Finansowej, or GIIF) and it is located within the Ministry of Finance (Ministerstwo Finansów, or MoF). The GIIF is tasked with collecting and analyzing cash and suspicious transactions and is an active member of the Egmont group. In 2006, according to the DoS report, the GIIF received 48,229 suspicious transaction reports (STRs) related to money laundering and terrorist financing, but 68% of these were ruled erroneous. As a result, only 15,061 STRs were valid for further analysis, and of these, the GIIF sent only 198 notifications to the Prosecutor's Office for further investigation. Of these 198, only two cases ultimately reached the court. So far, no terrorist financing prosecutions have been undertaken or cases brought before a court in Poland. According to the DoS report, the vast majority of notifications to the GIIF are through Poland's electronic reporting system, and GIIF is currently designing a specialized IT program to help support complex data analysis and to improve the FIU's efficiency in handling an ever-increasing load of reports. Other law enforcement agencies tasked with supervising AML/CFT measures in Poland are the Prosecutor's Office (which conducts initial money laundering investigations), the General Investigative Bureau (a police unit), the Internal Security Agency (Agencja Bezpieczeństwa Wewnętrznego, or ABW) (which investigates the most serious ML cases), and the Central Anti-Corruption Office (Centralne Biuro Antykorupcyjne, or CBA). Financial sector supervision in Poland falls under the unified banking, insurance and securities regulator, the Polish Financial Supervisory Authority (Komisja Nadzoru Finansowego, or PFSA).

The GIIF cooperates with numerous domestic and international bodies to bolster Poland's AML/CFT regime, and, according to the 2008 U.S. DoS report, such cooperation has improved recently. The GIIF and the Prosecutor's Office are creating a computer-based system to facilitate information-exchange between the two bodies. And the international alliances range from Mutual Legal Assistance Treaties (MLAs) with numerous Western nations to 36 Memoranda of Understanding MOUs with various competent international authorities.

The Principles

1. Legal Systems and Related Institutional Measures

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The 2007 CDPC & MONEYVAL report noted that Poland was "largely compliant" with Recommendation (R) 1 relating to the "money laundering offense" and largely compliant with R2 on "mental element and corporate liability." The report attributed this slightly less than perfect rating to the fact that some legislative provisions need further clarification on the physical aspects of money laundering. The report also cited as problematic the insufficient emphasis Poland places on third party laundering and on the clarification of evidence needed to determine the predicate criminality in autonomous prosecutions. On R2, the report notes that the provision on criminal liability of legal persons has yet to be applied, and that it is unclear if the intentional element can be inferred from objective facts and circumstances.

The 2008 U.S. DoS International Narcotics Control Strategy Report notes that Poland further strengthened its AML/CFT regime by passing the 2000 AML Act. The act increased penalties for money laundering and broadened the definition of money laundering to include assets derived from illegal or undisclosed sources. Nevertheless, Poland has failed to incorporate the EU's Third Money Laundering Directive (to prevent usage of financial systems for money laundering and terrorist financing) into Polish legislation, despite an attempt as recent as December 2007. The 2000 AML Act brought Poland into compliance with the United Nations (UN) Drug Convention and the UN Convention Against Transnational Organized Crime.

As the 2007 CDPC & MONEYVAL evaluation indicates, Poland is "non-compliant" with Special Recommendation (SR) 2 regarding the criminalization of terrorist financing. The current criminalization of terrorist financing is inadequate to combat the "provision or collection of funds for a terrorist organization for any purposes including legitimate activities" (p. 153). According to the U.S. DoS report, Poland argues that terrorist activities are already illegal and serve as predicate offenses for money laundering and terrorist financing investigations. For this reason it does not criminalize terrorist financing as mandated by United Nations Security Council Resolution 1373, a post 9/11 measure designed to place barriers on the movement, organization, and fund-raising activities of terrorist groups. According to the DoS report, it is unclear how Poland intends to prosecute funding of a terrorist or terrorist organization. In 2007, the Poland Ministry of Justice (MoJ) attempted an amendment to the criminal code that would criminalize terrorist financing, but this initiative failed. Nevertheless, the DoS reports that the Polish government recently created a counter-terrorism operations unit within the National Police, and also created its own terrorist watch list. As for SR3, regarding the freezing of terrorist-financing related assets, the 2007 mutual evaluation assessed Poland as "partially complaint," noting that there were no clear mechanisms covering designations in Poland. The report also notes that the definition of funds, derived from the European Commission Regulations, does not include funds controlled by a designated person. Also, according to the CDPC & MONEYVAL report, the legal basis for assessing compliance levels with aspects of the AML Act covering terrorist financing is unclear. However, Poland's criminal code does permit authorities to suspend suspicious transactions and accounts, should they discover a possible terrorist link.

Regarding confiscation and provisional measures (R3), the 2007 mutual evaluation rated Poland as "partially compliant." The CDPC & MONEYVAL report attributed this unimpressive rating to three main shortcomings: (1) the Polish confiscation regime lacks a clear provision for confiscating instrumentalities transferred to third parties; (2) Poland's limited ability to confiscate criminal proceeds in terrorism financing; and (3) Poland's questionable legal framework due to a lack of statistics on provisional measures and confiscation. The DoS report notes the 2000 AML law gives Poland's GIIF the authority to put a suspicious transaction on hold for up to 48 hours. The Public Prosecutor can then suspend the transaction for an additional three months. Article 45 of the Polish criminal code sets the burden of proof so that a suspect must prove assets have legal source; otherwise assets are presumed illegal and can then be seized. Despite such strong measures, the DoS report notes that Polish political sensitivities often hamper the approval of tough asset-seizure laws.

In terms of the Financial Intelligence Unit and its functions, the 2007 CDPC & MONEVAL report rates Poland as "compliant" on R26; "largely compliant" on R30 regarding resources, integrity and training; and "partially compliant" with R32 on statistics keeping. The evaluation attributes the R30 assessment to a paucity of financial investigation resources, AML/CFT experts and focused money laundering training. It attributes the R32 assessment to insufficient statistics on a wide range of areas, such as information exchange by supervisory bodies and the nature of money laundering investigations.

According to the DoS report, the 2000 AML law mandated Poland's financial intelligence unit, the GIIF. Located within the Ministry of Finance, the GIIF is tasked with collecting and analyzing suspicious transactions. The GIIF then submits its findings to the Prosecutor's Office, and all such submissions result in initial investigative proceedings. The DoS report also notes that the GIIF is understaffed, and this hampers the efficient handling of the large number of reports it receives. The DoS report notes that the information-sharing between the GIIF and other domestic law enforcement agencies (i.e. the Prosecutor's Office, Internal Security Agency and the Central Anti-corruption Office) has improved. The GIIF also exchanges information with foreign partners, including the United States, the UK, and Ukraine. Finally, the DoS report notes that in 2006, the GIIF completed a study on the effectiveness of Poland's anti-money laundering reporting system. The study identified three major threats to the system's efficiency: delays in prosecutorial handling of GIIF reports; uneven reporting by Poland's 16 provinces; and insufficient use of the GIIF by local agencies in Poland. On R30 regarding resources and training, the DoS report points out that the GIIF conducts training for cooperating institutions. However, the DoS also notes that the Polish government ought to promote additional training at the private sector level, and finds the GIIF to be somewhat understaffed.

The 2007 CDPC & MONEYVAL report observes that Poland is "partially compliant" with R 27 on law enforcement authorities and "compliant" with R 28 on the powers of competent authorities. The deficiency noted was that the pertinent authorities placed inadequate focus on money laundering cases. This was evident from the fact that there were relatively few prosecutions and convictions for money laundering. The DoS report recommends that the Code of Criminal Procedure be amended to permit the use of Special Investigative Measures (as part of their ML investigations GIIF) to help law enforcement reach a better record of prosecutions and convictions. As noted in the CDPC & MONEYVAL report, Poland is "largely compliant" with SR9 on the function of cash couriers. The report attributed this assessment to insufficient targeted co-operative enquiries and inadequate sensitization to terrorist financing. The DoS report notes that EU Regulation No. 1889/2005 relating to controls of cash entering and leaving the EU addresses SR 9 on cross border declaration and disclosure, and cash couriers. Under the regulation, all movements of cash €10,000 or more must be declared in writing. Customs law in Poland also requires travelers to complete a currency declaration if transporting €10,000 or more.

2. Preventive Measures - Financial Institutions

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The 2007 CDPC & MONEYVAL report finds Poland "non-compliant" with R 5 relating to customer due diligence (CDD), R 6 relating to politically exposed persons and R 7 relating to correspondent banking. Regarding new technologies and non face-to-face business (R8), Poland was ranked "partially compliant," and Poland was rated N/A on R 9 relating to third parties and introducers. Regarding R5 on CDD, the report attributes its noncompliance rating to the fact that the AML Act does not cover the following customer identification requirements: (1) upon commencing a business relationship; (2) when carrying out wire transfer transactions; and (3) when the financial institution has doubts about the veracity of previously obtained data. The 2007 report attributes its assessment on R6 and R7 to Poland's failure to implement any AML/CFT measures concerning either the establishment of customer relationships with politically exposed persons (PEPs) or the establishment of cross-border banking relationships. The DoS report also notes this problem, concluding that Poland must strengthen its AML regulations to include measures on politically exposed persons and cross-border correspondent banking. On R8 relating to new technologies and non-face-to-face business, the main shortcoming is the lack of a direct requirement that financial institutions institute policies to prevent the misuse of technological developments in money laundering and terrorist financing. Nevertheless, according to the DoS report, the Polish government is working on several technological developments to help advance its AML/CFT programs, such as a specialized IT program to support complex data analysis and a computer-based system to facilitate information exchange between the GIIF and the National Prosecutor's Office. Regarding R9, Polish legislation outlaws reliance on third parties and introduced business and as such this recommendation is inapplicable in the Polish context.

According to the 2007 CDPC & MONEYVAL report, Poland is "compliant" with R4 regarding financial institution secrecy or confidentiality. Also, Poland was assessed "partially compliant" with R 10 on record keeping, and "non-compliant" with SR 7 on wire transfer rules. On the R10 assessment, the 2007 mutual evaluation notes the main shortcoming is that there is no explicit requirement in Polish law to keep records for at least five years. The report also notes that Poland is "non-compliant" with SR.VII. In fact, Poland has yet to directly implement any SR. VII provisions even though some aspects of it exist in practice. The report further assessed Poland as "partially compliant" with R11 relating to monitoring of unusual transactions and "non-compliant" with R21 pertaining to special attention for higher risk countries. On R11, the report cites as the main shortcoming the fact that Polish law only indirectly covers R11. Finally, the report attributes its R21 assessment to the fact that no obligation in Polish law exists to scrutinize any country that inadequately adheres to FATF recommendation.

As for R 13 relating to suspicious transaction reporting, the CDPC & MONEYVAL report found Poland to be "partially compliant," and cited inadequate coverage of attempted transactions and terrorism financing within the AML Act. On R14 regarding protection and no tipping-off, the same report found Poland "largely compliant," citing lack of clarification that all civil and criminal liability is comprehensively covered. On R19 regarding other forms of reporting, Poland is assessed as "compliant," and as "largely compliant" with R25 on guidelines and feedback. The report attributes its R25 assessment to inadequate attention paid to case-specific feedback and to a lack of sector-specific AML/CFT guidance issued by financial advisors. The report also assessed Poland as partially compliant with SR 4 relating to suspicious transactions reporting on terrorism financing. In addition, the CDPC & MONEYVAL report found Poland "largely compliant" with R 15 relating to internal controls, compliance and audit. The main shortcomings were that not all financial institutions in Poland are required to perform an internal audit function, and that Poland does not legally require financial institutions to set-up screening procedures to ensure high employment and hiring standards. On R 22 relating to foreign branches and subsidiaries, Poland was found to be "non-compliant" due to Poland not having explicit obligations for foreign branches and subsidiaries to observe AML/CFT measures commensurate with Polish requirements and the FATF recommendations to the extent that host country's laws and regulations permit. Also, there is no requirement that special attention has to be paid to branches and subsidiaries in countries which insufficiently (or do not) apply FATF recommendations. On R18 pertaining to shell banks, Poland was rated "partially compliant." This was attributed to Poland's lack of a legally binding ban on financial institutions entering correspondent banking relationships with shell banks. Also contributing to this low assessment is that Poland does not require local financial institutions to check whether or not a respondent financial institution in a foreign country is allowing its accounts to be used by shell banks.

On R17 regarding sanctions, the CDPC & MONEYVAL report rated Poland "partially compliant," and this assessment was due to three main shortcomings: (1) at the time of the assessment very few sanctions were actually imposed thereby questioning the effectiveness of Poland's sanctioning system; (2) Poland's sanction regime disproportionally targets minor cases, thus undermining its effectiveness; and (3) not all Polish supervisory authorities are cognizant of their reporting obligations regarding AML Act violations by obliged bodies to prosecution authorities. On R23 relating to regulation, supervision and monitoring, the report rates Poland as "partially compliant." The report attributes this assessment to numerous issues including: no sector-specific regulation issued by financial supervisors; natural and legal persons providing money transfer services are not licensed and as such are not subject to effective monitoring for AML/CFT compliance; and the present registration system for Cooperative Savings and Credit Unions is not consistent with the Basel Core Principles licensing requirements. On R29 regarding supervisors, the report views Poland as "largely compliant," and attributes this to Poland's lack of in-depth AML/CFT on-site inspections, such as a review of policies and sample testing, particularly in the securities sector. On SR6 regarding AML requirements for money/value transfer services, the report found Poland to be "non-compliant." The main shortcomings include: no system to register or sanctions applicable to Money/Value Transfer (MVT) service operators; MVT service operators are not subject to applicable FATF recommendations; and there are no system in place to directly monitor their compliance with FATF recommendations.

3. Preventive Measures - Designated non-Financial Business and Professions

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The 2007 CDPC & MONEYVAL report found that Poland was "non-compliant" with R12 on CDD and record keeping obligations for Designated Non-Financial Business and Professions (DNFBP). This was attributed to the fact that Poland's CDD requirements do not apply to accountants, real estate agents and counsel. With regards to R16 on the paucity of STRs by DNFBPs, Poland is also rated "non-compliant" due to some institutions and fields (i.e. casinos) feeling unperturbed by money laundering and terrorist financing dangers, and thus less compelled to track STRs. Also contributing to this problem is that lawyers, tax advisors and auditors do not accept STR obligations. The DoS report chronicles the history behind the latter challenge. According to the DoS report, the Polish parliament passed numerous amendments to the 2000 AML Act, broadening the list of institutions mandated to meet STR requirements. Claiming that the revised AML Act violates attorney-client confidentiality privileges, lawyers vehemently opposed the amendments. According to the CDPC & MONEYVAL evaluation, Poland is "compliant" with R20 regarding other DNFBP and secure transaction techniques. On R24 regarding DNFBP regulation, supervision and monitoring, the 2007 mutual evaluation finds Poland "partially compliant," attributing the incomplete assessment to room for more controls and resources to ensure compliance of DNFBP with AML/CFT requirements. According to the DoS report, another function of the new AML Act amendments is the expansion of the entities subject to the reporting requirements to include such non-financial institutions as post offices, auction houses, antique shops, casinos, leasing firms, real estate agencies, notaries public, lawyers, auditors, and charities.

4. Legal Person and Arrangements & Non-Profit Organizations

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According to the 2007 mutual evaluation, Poland was "partially compliant" with R33 relating to legal persons and beneficial owners. The report attributes this rating to the inadequacies of Polish law; particularly that it does not require sufficient transparency regarding beneficial ownership and control of legal persons. The report also notes that access to information concerning beneficial ownership and control of legal persons is not timely. R34 regarding legal arrangements and beneficial owners is not applicable to Poland per the 2007 mutual evaluation due to the fact that the Polish system does not permit the establishment of foreign or domestic trusts. The 2007 CDPC & MONEYVAL mutual evaluation found Poland "non-compliant" with SR8 relating to non-profit organizations (NPOs), citing the Polish government's failure to conduct special reviews of public sector risks. The report also attributes this assessment to inadequate government oversight, financial transparency, and reporting structures relating to nonprofits in Poland. The report especially underlines the importance of Poland creating an effective and proportionate oversight of the public sector.

5. National and International Co-operation

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According to the 2007 CDPC & MONEYVAL mutual evaluation, Poland was "partially compliant" with R 31 on national cooperation, and "partially compliant" with R 32 on statistics. Regarding the rating assigned to R31, the 2007 mutual evaluation notes that existing coordination measures among the main AML/CFT players are not completely effective, and calls for more coordination amongst these parties. The DoS report indicates that perhaps such elevated levels of cooperation might be in the offing. It notes that coordination and information exchange between the GIIF and law enforcement entities has improved, and that the main AML/CFT players are currently developing a new computer-based system to improve cooperation. The 2007 mutual evaluation found Poland "partially compliant" with R35 regarding the ratification of international conventions, and "partially compliant" with SR1 on implementing UN instruments. The R35 rating was due to the fact that though Poland was a party to the relevant conventions, it has failed to "make their non-self-executing provisions part of domestic law" (p. 152). On the SR1 assessment, the 2007 mutual evaluation notes that, while Poland has ratified the Terrorist Financing Convention, it has not implemented many of its provisions, including an important terrorist financing offence. The report also recommends that EU freezing mechanisms under UNSC Resolutions be supplemented by domestic procedures for European internals. According to the DoS report, Poland is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime, and the UN Convention against Corruption. Poland is also a member of MONEYVAL, a FATF-style regional body in Europe.

The 2007 mutual evaluation found that Poland was "largely compliant" with R36 regarding Mutual Legal Assistance (MLA). The report notes that while Poland provides a broad range of MLA, the lack of statistics hampers effectiveness. The DoS report informs that, since 1999, Poland has an MLA treaty with the United States. In addition, Poland has entered into bilateral MLA treaties with Sweden, Finland, Ukraine, Lithuania, Latvia, Estonia, Germany, Greece, and Hungary. The 2007 mutual evaluation found Poland "largely compliant" with R37 on dual criminality; "largely compliant" on R38 regarding MLA on confiscation and freezing; and also "largely compliant" on R39 relating to extraditions. The report also rated Poland "largely compliant" on R40 relating to other forms of cooperation, and "partially compliant" with SR5 regarding international cooperation. The R37 assessment was due to Poland lacking statistical data to make effective its policy of taking a wide view of dual criminality. Also, since terrorist financing is not an autonomous crime, "the requirement of dual criminality for extradition means that for non-EU countries, not all kinds of financing of terrorism offences are extraditable" (CDPC & MONEYVAL 2007, p. 153). The 2007 mutual evaluation attributes its R38 assessment to a lack of statistical data, which undermines the effectiveness of MLAs pertaining to freezing, seizing and confiscation. On its R39 assessment, the report also cites the absence of statistics to effectively determine whether extradition requests are handled in a timely fashion. The R40 assessment was due to a lack of data on information exchange between supervisory bodies despite a solid exchange reach by the FIU and other supervisory bodies. Regarding SR5, the 2007 CDPC & MONEYVAL mutual evaluation notes that Poland's main shortcoming is that, since terrorist financing is not an autonomous crime in Poland, it is impossible to prosecute offences requested by foreign countries, and also this lack of criminality could be used as an excuse to deny MLA. Poland's paucity of data on supervisory information exchange also undermines international cooperation.