Financial crime, money laundering and financing of terrorism are the challenges that bring about serious consequences for the financial markets across the globe. For many years the PZU Group has been taking legally required actions to prevent situations in which its transactions are used for unlawful purposes.
The Act of 1 March 2018 on combating money laundering and financing terrorism (Journal of Laws of 2018, item 723) imposed new duties on PZU. One of the basic obligations following from the new Act is the multi-dimensional assessment of the money laundering and financing of terrorism risk in PZU Życie, taking into account internal and external factors, including clients, countries or geographical areas, products, services, transactions, supply channels, business partners and Group entities. To comply with the new regulations, the company launched an AML project aimed at developing solutions allowing for implementation of the provisions of the act in business and operational processes in 2018.
In the first place, the areas which required changes were identified. Legally required internal procedures were also implemented, including a group procedure addressed to all obligated institutions1 in the PZU Group. As part of the works, the processes pertaining to conclusion of insurance contracts and handling of claims and liabilities were remodeled. The changes pertained to 147 products offered or disbursed by PZU Życie.
Adaptation of PZU Życie to the requirements of the Act resulted in, among others, new or optimized procedures for identification and verification of clients with an enhanced money laundering risk. In addition, new representations were introduced for persons on exposed political positions, and the PZU Życie agents and employees have been trained on the new legal regulations.
1 Obligated institutions in the PZU Group are institutions from the Group subject to the AML Act. PZU is not an obligated institution, hence it is not subject to the AML Act regime, but being the parent company in the PZU Group, it adopts a group procedure for the Group entities which are obligated institutions. The group procedure defines the standards prevailing in the PZU Group and the rules for exchange and protection of information for the needs of performance of AML activities.
The PZU Group has in place special security procedures in the crime prevention area. In TUW PZUW the procedure formalizes the process of identification, management and securing of the company against crime, in particular insurance crime and fraud.
TFI PZU has implemented Rules and Regulations for Counteracting and Disclosing Manipulations in Financial Instruments in the company’s activity.
In 2019, there were 371 incidents involving insurance fraud reported to law enforcement authorities in the Group, 79% of which concerned PZU, 12% – PZU Życie, and the remaining cases – LINK4 and foreign companies.
In Bank Pekao and five other Group companies, internal fraud management procedures have been implemented. Bank Pekao has in place a Fraud Management Process regulation which introduces an Official Instruction entitled Fraud Management Process in Bank Polska Kasa Opieki. The regulations define specifically the “Fraud Management Policy” introduced by the bank’s Management Board. The Official Instruction defines in particular:
In addition, there are defined obligations and powers of the Financial Security Office in the bank’s Security Department, which performs the tasks associated with central coordination of prevention of financial crime in the bank.
The Fraud Management Process and the Official Instruction imposed on each bank employee the obligations and powers associated with prevention of financial crime threatening the organization and the bank’s clients.
The Alior Bank Group has implemented a procedure for preventing money laundering and financing of terrorism.
In 2018 in the Pekao Group and Alior Bank Group there were 5,226 pending fraud cases. The value of the proceedings amounted to over PLN 16 million. In 2019, in the Pekao Group and the Alior Bank Group, there were 4,245 pending fraud cases. The value of the proceedings amounted to less than PLN 10 million.
In 2019, the Polish Financial Supervision Authority imposed on PZU 5 penalties in the amount of slightly more than PLN 6 million, including 2 penalties (with the total value of PLN 1.2 million) that are not final. The penalties pertained to, among others, breach of Article 14 sec. 1-3 of the Act on Compulsory Insurance, the Insurance Indemnity Fund and the Polish Motor Insurers’ Bureau, in connection with identified delays in award and disbursement of compensations and failure to fulfill disclosure obligations.
In 2019, there was one court proceeding pending against PZU and one against PZU Życie.
In January 2019, the Appellate Court in Warsaw dismissed the appeal lodged by the President of the Office of Competition and Consumer Protection and thus relieved PZU of the allegation of illegal market division with Maximus Broker and a sanction in the amount of PLN 56.6 million. PZU was accused of allegedly concluding an illegal sales agreement with Toruń’s insurance intermediary Maximus Broker, involving division of the market of group accident insurance for education centers in the Kujawsko-Pomorskie Voivodship. The trial lasted a few years.
With the judgment of 24 October 2019, the Supreme Court dismissed the cassation appeal filed by PZU Życie. The Company has not received a justification of the judgment so far. PZU Życie was accused by the President of the Office of Competition and Consumer Protection of abusing its dominant position in the Polish market since 2001 and breach of EU regulations in 2004-2007.
The cassation appeal filed by PZU Życie was dismissed by the Supreme Court with the judgment of 24 October 2019. PZU Życie has not received a justification of the judgment so far. On 23 January 2019, in turn, the Appellate Court in Warsaw dismissed the appeal of the President of the Office of Competition and Consumer Protection and thus relieved PZU of the allegation of illegal market division with Maximus Broker and a sanction in the amount of PLN 56.6 million.
In the case of Alior Bank, there were two cases.
In 2006, the Office of Competition and Consumer Protection, following a long-lasting investigation, imposed on 20 banks operating in Poland, including Bank BPH, Alior Bank’s legal predecessor, a penalty of PLN 164 million, for unlawful, in the Office’s opinion, agreeing upon the interchange fee between themselves. In 2017, the Supreme Court subscribed to the position of some of the banks according to which the court of the lower instance should not have issued a decision imposing high penalties on the banks without exercising utmost diligence, involving, in this case, an in-depth analysis of the requests for evidence submitted during the lawsuit. The case pertained to the level of the interchange fee, which was allegedly set on an excessively high level in relation to the normal costs of operation of the transaction system. The Office of Competition and Consumer Protection has concluded that the interchange fee in Poland was excessively high (as much as 2% of the transaction value) and, additionally, its value was set by banks themselves, which had the features of prohibited price-setting to the clients’ detriment. Currently, the case is pending before the Appellate Court in Warsaw.
On 30 May 2018, the President of the Office of Competition and Consumer Protection issued a final decision for Alior Bank no. RBG 6/2018 pertaining to practices breaching consumers’ collective interests. The allegations pertained to introduction of amendments to the agreement during its term, without providing consumers with the legal basis and the circumstances that have contributed to the modification of the terms and conditions of the agreement. Alior Bank executed the decision within the prescribed deadline. With the letter of 5 July 2019, supplemented by the letter of 29 August 2019 Alior Bank submitted to the President of the Office of Competition and Consumer Protection a report on the execution of the said decision.
In 2018, there was one court proceeding pending against Bank Pekao. It pertained to a complaint lodged in 2001 by the President of the Office of Competition and Consumer Protection on the request of the Polish Trade and Distribution Organization. The allegations pertained to application of practices restricting competition, involving conclusion of price arrangements and joint setting of the interchange fee and coordination of actions in order to restrict entrepreneurs’ access to the acquiring service market. The proceeding lasted a few years and Bank Pekao appealed against the court’s judgment. In 2017, the bank lodged a cassation appeal, which was accepted by the Supreme Court. In the judgment of 25 October 2017, the Supreme Court overturned the appealed judgment of the Appellate Court and remanded the case to this court for re-examination. The President of the Office of Competition and Consumer Protection refunded the penalty of PLN 16.6 million to the bank. Currently, the proceeding is pending before the Appellate Court.