List of the KNF's public warnings and money laundering

Despite the fact that more and more people start acknowledging the presence of cryptocurrencies in the modern world, many still doubt whether the activities carried out on cryptocurrency exchanges are legitimate. It is worth pointing out that, in spite of the decentralization of these institutions, they must meet the applicable legal requirements in a given country. In Poland, for instance, all suspicions regarding the lawfulness of the actions undertaken by financial institutions are reported to the Polish Financial Supervision Authority (KNF), which is obliged to create a list of public warnings.

What exactly is the list of the KNF’s public warnings?

The Polish Financial Supervision Authority is a body that ensures the orderly functioning of  financial institutions including electronic money institutions operating in Poland.

With users’ safety in mind, the Authority has introduced a list of public warnings commonly referred to as the “KNF’s blacklist”. The main idea behind  the creation of this list was to build trust to both the financial sector and the Supervision Authority itself.

Each consumer can find a list of public warnings on the KNF’s website. It comprises financial market entities for which the suspicion of committing a criminal offense was reported. The list mainly includes cases related to performing activities unauthorized by the Polish Financial Supervision Authority.

Until the high-profile scandal related to putting Amber Gold, a non-bank financial intermediary, on the list of public warnings, the list was managed by the officials of the Polish Financial Supervision Authority. They were responsible for detecting dangerous activities and subsequently registering them on said list. However, after the fraud scandal involving Amber Gold, the law was tightened up. Consequently, also the method of selecting suspicious enterprises had to change – from then on the Supervision Authority has been obliged to list all entities suspected of committing a crime.Such entry on the list may be made by means of the notification by the Supervision Authority or by a person who reports a case to the prosecutor’s office.

The standard procedure after putting an entity on the list of warnings is to notify the relevant authorities, i.e. the prosecutor’s office, of a suspected crime. This entails the initiation of criminal proceedings and the associated risk of financial penalties (even multi-million) or even imprisonment of individuals responsible for running the business.

List of the KNF’s public warnings – does it have anything to do with counteracting money laundering?

Money laundering is a process used by criminals who want to “clean” their money by separating it from their illegal sources of income so that it appears to have been obtained from the legitimate financial gains.

Among other things, the AML (Anti Money Laundering) Act is meant to ensure that people do not avoid paying taxes which, in turn, leads to the reduction of money laundering. It has a threshold for converting fiat currencies into digital currencies of 1,000 euros, beyond which user verification is required. Illegal sources generate higher revenue, so laundering money through cryptocurrencies can be even more difficult for potential criminals than through the banks.

It is worth to keep in mind that the AML Act does not interfere with the KNF’s list of warnings. Institutions that have been (or are still involved) in money laundering or are under the suspicion of committing this crime are not entered on the KNF’s list. It is due to the fact that the entry on the list of warnings does not qualify as a notification on suspicion of committing a crime of money laundering – this is dealt with by the General Inspector of Financial Information (GIFI).

When analyzing the cases of activities put on the list of the Supervisory Commission, it can be noticed that the entry itself constitutes merely the information for the general public, not a tool for combatting money laundering itself. There have already been cases of companies  being recorded in the list without any official justification from the Commission whatsoever. The actual level of crime and social harm in these vary from case to case and yet they are all treated in the same way. Without any clear information regarding  the allegations, it is difficult to respond to the situation or take any substantive action. As for the cryptocurrency institutions, the notification from the Polish Financial Supervision Authority  leads to changes in their respective business activities, so that they comply with the applicable legal provisions. In order to avoidany doubts regarding the activities of cryptocurrency exchanges in Poland, the concrete, pertinent regulations must be enacted in the first place.

Zuzanna Kwiecień
for Kanga Exchange