Polish Finance Ministry Releases Annual Report on

UNCLAS WARSAW 002252 SIPDIS SENSITIVE STATE FOR EUR/NCE TARA ERATH AND MICHAEL SESSUMS USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON TREASURY FOR OASIA MATTHEW GAERTNER FRANKFURT FOR TREASURY JIM WALLAR E.O. 12958: N/A TAGS: EFIN ECON PREL PL SUBJECT: Polish Finance Ministry Releases Annual Report on Anti-Money Laundering and Terrorist Finance Activities REF: (A) Warsaw 791 (B) 2004 Warsaw 5558 (U) This cable is sensitive, but unclassified, and NOT for Internet distribution. ¶1. (SBU) Summary and Introduction: The Polish Ministry of Finance's Financial Intelligence Unit (the General Inspectorate for Financial Information, or GIIF),released an annual report in April on its activities in 2004 to combat money laundering and terrorism finance. The Polish Government has made combating these scourges a top political priority, based on which GIIF has set up Europe's most comprehensive financial reporting requirements. As of last July 1, all transactions (not just cash) worth 15,000 Euro or more must be reported. GIIF's main achievement in 2004 was setting up a sophisticated computer system to store and track all of these reports. As it expands its staff, GIIF hopes to send more cases to prosecutors for prosecution. In 2004, the largest number of money laundering cases GIIF found involved fuel smuggling, closely followed by trade in scrap metal. GIIF noted its concern that the Polish Government has difficulty tracking large amounts of cash which individuals from CIS countries and Asia declare at entry points. GIIF singled out cooperation with the United States for special mention in its report. End Summary and Introduction. ¶2. (SBU) The 2004 report notes that GIIF's most important achievement in 2004 was getting its Information Technology system up and running to handle requirements which went into effect on July 1 that a wide range of financial institutions in Poland ("obligated institutions") report all transactions worth 15,000 Euro or more. This requirement covers not just cash transactions, but all transactions. In the six months since this requirement went into effect, GIIF has received an average of 1.5 million reports a month, necessitating a very powerful computer system to receive and store the reports. The EU provided assistance which helped GIIF procure the necessary hardware. As part of our bilateral INL program with Poland, the U.S. provided analytical software in early 2003 which will allow GIIF to begin tracing relationships between these transactions to better identify potential sources of money laundering or terrorism finance. ¶3. (SBU) GIIF worked very hard in 2004 to provide training to the obligated institutions to educate them about their responsibilities under the new system, as well as to instruct them how to submit reports electronically. GIIF published and distributed 10,000 copies of an anti-money laundering guide for these institutions, including typologies of common money laundering schemes. GIIF also set up an e-learning program on its web site to train compliance officers at obligated institutions. GIIF conducted more intense training for compliance officers four times in 2004, as well as providing training for Polish Government officials in the tax, customs and betting offices. GIIF also set up direct secure computer links with the Justice and Interior Ministries which has allowed them to accelerate coordination and response to investigative queries. This focus on technology has obliged GIIF to become one of the most advanced technological institutions in Poland; GIIF was the first to use electronic signature authority nationally. ¶4. (SBU) GIIF is pleased with the response of obligated institutions to date. As these institutions have become more familiar with their responsibilities and with the potential threats, they have submitted a greater number of suspicious transaction reports (STR). In 2004, 1,397 STR's were submitted, a significant increase over 2003's 965 and 2002's 614. While more than 60% of the STR's in 2004 came from obligated institutions (mainly banks),there was a sharp increase in the number of reports filed by cooperating institutions such as tax and customs inspectors. Based on these STR's, GIIF opened 643 investigations, which in turn enabled them to send 148 notifications to the state prosecutor of a possible crime. After proper judicial review, GIIF stopped 5 financial transactions worth 2.6 million Zloty (approximately $750,000) and blocked 13 accounts worth 12 million Zloty (approximately $3.4 million). Of the reports filed by tax and customs authorities, many involved entities under or over-estimating the value of declared goods. GIIF noted that 10% of the STR's filed came from insurance and stock brokers, currency exchanges and notaries. ¶5. (SBU) The 2004 report notes several trends. Sixty of the 148 cases GIIF sent to the prosecutors involved fuel imports worth 717 million Zloty (approximately $205 million). In many cases, GIIF found that criminals set up companies for a very short duration to import crude oil or refined products as home heating oil, taking advantage of lower excise taxes for the latter and reselling the product in Poland. As the police increasingly cracked down on this trade, GIIF noticed a trend to apply the same methodology to import scrap metal. GIIF also noted a growing number of cases involving trade in securities. Most of these cases involved companies from the Commonwealth of Independent States (CIS) buying shares from individuals or small companies in Poland. GIIF noted that, in several cases, the ultimate source of the money from the CIS entity was not clear. GIIF also noticed a trend for Russians, Ukrainians and Byelorussians to declare the importation of large amounts of cash which could not subsequently be traced in the Polish banking system. Often, the addresses or firm names supplied on the currency declarations proves to be false. GIIF noted similar concerns with some Asian individuals resident in Poland (with fake addresses) filling out currency declarations. GIIF is also concerned about a growing trend of imports and exports from tax haven countries. ¶6. (SBU) GIIF noted that several methodologies were commonly employed to launder money, including declaring fictitious loans or donations to charities, blending of legal and illegal revenues, setting up fake accounts, over or under- pricing of assets and breaking deposits down into amounts below the reporting threshold. ¶7. (SBU) GIIF increased its enforcement efforts in 2004, conducting 12 inspections of obligated institutions (9 banks, and one each foreign exchange facility, insurance broker and casino),identifying a number of problems which GIIF inspectors later monitored. Based on these inspections, GIIF altered its training and outreach activities. As GIIF increases its staff, it expects to be able to conduct more enforcement inspections, as well as to analyze more cases for submission to prosecutors. ¶8. (SBU) Based on its performance, the EU selected GIIF as one of a handful of model institutions to include on a study tour for Indonesian authorities. GIIF officials report that several EU FIU's have asked to tour their facilities to pick up tips on converting their systems from paper to electronic submissions. ¶9. (SBU) The GIIF report also noted the importance of international cooperation. GIIF currently has agreements with 27 other countries on money laundering. Thirteen of these agreements also contain clauses on cooperating against terrorism finance. GIIF is in the process of negotiating with the other 14 countries to include similar counter- terrorism finance language in the existing agreements. GIIF is an active member of a number of international organizations, including Money Val, BALTCOM and Egmont. Poland also works closely with the EU under the PHARE program to provide assistance to other countries in these fields. GIIF concluded its report with a special section on cooperation with the United States, noting that it enjoys particularly close cooperation with U.S. authorities. Comment: - - - - - ¶10. (SBU) In four short years, GIIF has come a long way, and Poland now boasts the most comprehensive financial reporting requirements in Europe. This progress reflects the priority the Polish Government has placed on combating both money laundering and terrorism finance. Even though it has been challenging at times to put this system in place, GIIF officials tell us they are determined to begin processing these reports, and send more cases to prosecutors. The Ministry of Finance is also counting on this reporting system to reduce the scope of the gray, or undeclared economy. We are particularly gratified that GIIF singled out cooperation with the United States for special mention in its (first ever) annual report. Munter NNNN 2005WARSAW02252 - Classification: UNCLASSIFIED