Here is the converted article in Markdown format:
Outsourcing Risk Management: A Must for Financial Institutions
Financial institutions have increasingly turned to outsourcing activities to streamline operations and reduce costs. However, this trend has also raised concerns about the potential risks associated with such arrangements.
According to a recent report, obliged institutions must identify, assess, and monitor any risks arising from outsourcing agreements to which they are or may be exposed. This includes taking into account the consequences of an organizational and legal nature resulting from the location of the service provider.
European Banking Authority Guidelines
The European Banking Authority (EBA) has issued guidelines requiring obligated institutions to notify or engage in a dialogue with supervisory authorities when planning to outsource critical or important functions, or where the function to be outsourced acquires such a character.
Additionally, contracts under which activities are entrusted should include an undertaking by the service provider to ensure the protection of confidential, personal, or other sensitive information and comply with all legal data protection requirements that apply to mandatory institutions.
Violation of the AML Act in Poland
Failure to comply with the Anti-Money Laundering (AML) Act in Poland can result in severe penalties. The General Inspector for Financial Information, the President of the National Bank of Poland, and the Polish Financial Supervision Authority are authorized to impose administrative penalties on obligated institutions that fail to meet their AML obligations.
Common grounds for imposing an administrative penalty include:
- Failure to prepare a risk assessment on money laundering and terrorist financing
- Failure to apply financial security measures
- Failure to implement an internal procedure for anonymous reporting of anti-money laundering and counter-terrorist financing violations
- Failure to provide notices of suspected money laundering or terrorist financing (SAR filings)
- Failure to comply with disclosure obligations
Administrative penalties can take the form of publication of information on the obligated institution, an order to stop certain actions, withdrawal of a concession or permit, prohibition from performing duties in a managerial position, and pecuniary penalties up to EUR 1,000,000.
New Provisions and Fines
The AML Act has introduced new provisions and fines for non-compliance. Obligated institutions must report information on beneficial owners and update such information within 7 days of entry into the National Court Register or change in data. Failure to do so can result in a fine up to PLN 1,000,000.
Beneficial owners who fail to provide necessary information and documents are subject to a fine of up to PLN 50,000. Entities conducting activities for companies or trusts without obtaining an appropriate entry in the register may be fined up to PLN 100,000.
Penalties for Management Functions
Individuals performing management functions in obligated institutions, including members of senior management and employees responsible for supervising compliance with regulations, may also face fines. These individuals can be fined up to PLN 1,000,000 if the institution they manage is found to have violated AML obligations.
Conclusion
As financial institutions continue to outsource activities, it is essential that they prioritize risk management and compliance with regulations to avoid severe penalties. Obligated institutions must take proactive steps to identify, assess, and monitor risks associated with outsourcing agreements and ensure that service providers comply with all legal requirements.
In Poland, failure to comply with the AML Act can result in significant fines and penalties. It is crucial that obligated institutions understand their obligations under the law and take steps to prevent non-compliance.
Footnotes
[1] World Bank: The World by Income and Region [2] CIA World Factbook: Poland