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


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2005WARSAW02252 - Classification: UNCLASSIFIED