Financial crime and compliance in Poland: challenges and opportunities in the wake of the 2023 law reforms and investigations
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Publications: 10 January 2024
Law enforcement agencies focused on sanctions compliance, environmental protection matters, money laundering and bribery-related inquiries. Dawn raids were conducted primarily by the Office of Competition and Consumer Protection.
In-house legal teams were frequently involved in responding to cybersecurity incidents, data leaks and frauds.
Significant criminal law amendments were introduced in 2023, including tightening white collar crime laws. A new offence of ‘obstructing a private tender’ was introduced. Shareholders also gained a new right to report management action that has put a company at risk of financial loss and to request prosecution.
More investigations by the Polish Financial Supervision Authority are expected. Its new Criminal Matters Department focuses on market abuse, manipulation, and insider trading. It has declared fighting market abuse in particular to be a top priority.
Due to the upcoming government change in Poland, extensive investigations concerning state-owned entities and their counterparties on various projects and investments are imminent.
The EU Whistleblowing Directive will finally be implemented into the Polish legal system. Once this happens, an increased number of reports is expected which is likely to lead to more internal and governmental investigations.
Investigations – important trends or developments
The law enforcement agencies focused on sanctions compliance, environmental protection matters, money laundering and bribery-related inquiries. These were the main areas where in-house counsel were involved and had to provide explanations or depositions to the authorities.
The number of bank account blockades due to tax evasion and tax fraud investigations doubled. Tax controls often ended with criminal charges being pressed.
Dawn raids were conducted primely by the Office of Competition and Consumer Protection, only being assisted by the police.
In-house legal teams were frequently involved in responding to cybersecurity incidents, data leaks and frauds. These required reporting and liaising with law enforcement agencies, often after conducting internal investigations.
Important law reforms impacting corporate criminal liability
In 2023 some very significant amendments to the criminal law were introduced and penalties for all types of white-collar crimes were tightened. This concerns exposure to both imprisonment and fines.
A new type of offence, obstructing private tenders, was introduced. This includes, among other things, various types of collusion. The amendment creates an enormous challenge for in-house legal teams, which need to update their procurement procedures, provide training within their organisations, and create a new type of compliance environment. Conducting a pro-forma (mock) tender or similar that compromises transparency or fairness may now lead to criminal liability.
Shareholders also gained a new right to report a situation where management action has put the company at risk of financial loss, and to request prosecution by the prosecutor’s office. For example, this might be where the company did not suffer actual harm but was exposed. Previously, this could only be done by the management, which distorted the rationale of the regulation. We foresee such reports being made following notice of a regulatory investigation. Mere exposure to a financial penalty exceeding circa EUR45000 is enough to trigger the shareholder reporting right and a criminal investigation to be opened.
Internal investigations – key developments
Challenges from previous years remain unchanged. These include data/privacy protection during an investigation, issues regarding who should commission an internal investigation (often the management of the entity may have a conflict of interest) and how to protect whistleblowers.
Sectors targeted by law reforms or criminal enforcement action
Many investigations were opened in Poland due to alleged illegal advertising of alcoholic beverages, which affected producers, advertising agencies and retained influencers. These inquiries will most likely continue in 2024.
Also frequently targeted were financial brokers, on-line betting and gambling services. The main subject of inquiries was money laundering compliance, licences, and reporting. Companies/services were often added to watchdog lists. This trend should also continue in 2024.
Predictions for 2024
We expect more investigations to be initiated by the Polish Financial Supervision Authority (PFSA). In 2023, the PFSA established a Criminal Matters Department focusing on market abuse, manipulation, and insider trading. There are nearly 1000 listed companies in Poland that are subject to this department’s scrutiny, along with financial service providers, and institutional and individual investors. The PFSA declared detecting and combating financial irregularities on the market to be their top priority.
Due to the impending change of government in Poland, extensive investigations concerning state-owned entities are imminent. Some of these may affect public-private partnerships and transactions/projects involving companies controlled by the government and their counterparties. Many of the large, well-known investments, charities, sponsorships, and endeavours that failed will most likely be subject to criminal investigations.
On the horizon
We expect the EU Whistleblowing Directive to finally be implemented. Once this happens, in-house legal teams may expect more reports being made internally or externally by employees. Follow-up actions by the authorities will be imminent. Protecting the identity of whistleblowers and dealing with fake or unfounded reports will be the main challenge for internal compliance and legal departments.
This article is part of our Cross-Border White Collar Crime and Investigations Review. Please click here for our overviews and insights in other jurisdictions.
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