Principles of recording discrepancies between the information on the customer's beneficial owner disclosed in the CRRB and those established by the obligated institution

On 14^th January, 2022, on the website of the General Inspector of Financial Information ("GIFI"), an announcement No. 37 ("Announcement") was published, containing information on the AML/CFT regulations regarding the rules of recording by the obligated institution discrepancies between information on the client's beneficial owner, disclosed in the Central Register of Real Beneficiaries ("CRRB") and determined by this obligated institution.

We would like to remind you that on October 31^st , 2021, the amendment to the AML/CFT Act ("Amendment") entered into force, which - apart from the obligation to identify the customer's beneficial owners and the need to obtain relevant customer documents from CRRB - imposed on obligated institutions the obligation to record discrepancies between the data disclosed in the CRRB and those established by the obligated institution. Due to the need to inform the minister responsible for public finances about the recorded discrepancies, this obligation aroused numerous controversies.

Below, we present the most important information on how the obligated institution should act in the event of discrepancies regarding the data on actual beneficiaries, prepared on the basis of the GIFI Statement.

Identification of the customer's beneficial owners

The obligated institution, within the framework of applying financial security measures, is obliged to identify the beneficial owners of its clients. Measures that support this process are, among others CRRB and the data of customers and their beneficial owners disclosed therein, data disclosed in the relevant registers of entrepreneurs, or information resulting from the company's articles or articles of association.

In order to enforce the use of data disclosed in the CRRB by the obligated institutions, the Amendment imposed on the obligated institutions the obligation to obtain a confirmation of registration or an extract from the CRRB or another register kept in the relevant EU Member State. This obligation rests with the obligated institutions in every situation when they establish business relations or conduct occasional transactions with a client who is an entity subject to the obligation to be entered in the CRRB or other register kept in a relevant EU Member State.

Additional obligations related to recording discrepancies

Added under the Amendment, art. 61a paragraph. 1-2 and art. 50 sec. 2 point 10 of the AML/CFT Act, impose on obligated institutions additional obligations consisting of:

1. comparison of the customer's beneficial ownership data disclosed in the CRRB with the information on the customer's beneficial owner established by this institution,
2. noting any discrepancies between the above-mentioned data on the customer's beneficial owners; in the Communication, the GIFI formulated the following guidelines on how to record discrepancies:

1. one of the types of discrepancies is the client's failure to report information on beneficial owners to the CRRB - failure to report to the CRRB should be read as the client's declaration that a given person, identified by the obligated institution as the client's beneficial owner, is not the client's beneficial owner,
2. recording discrepancies should not rely on a mechanical comparison of information disclosed in the CRRB and the National Court Register - the obligated institution should take into account e.g. the time needed to disclose data in the National Court Register, potential gaps or errors in the data disclosed in the National Court Register, other documents, such as the company deed, statute or agreement for the sale of shares or stocks in the company,
3. recording discrepancies should only concern information about the customer's beneficial owners, therefore it does not apply to other data, such as, for example, data of the person submitting the report to the CRRB;

3. taking steps to explain the reasons for discrepancies between the data disclosed in the CRRB and the information determined by the obligated institution (the effect of these activities should be either confirmation or exclusion of the existence of such discrepancies); as indicated in the Communication, such activities may consist of contacting the client, explaining the method of determining the beneficial owner by the customer, explaining the method of establishing the ownership structure and control by the customer, explaining whether the method of identifying beneficial owners by the obligated institution was correct, explaining why the customer recognized the person as a beneficial owner, collecting additional information and documents,
4. providing the minister competent for public finances with verified information on discrepancies along with justification and documentation regarding the discrepancies - in the case of confirmation of the discrepancies noted by the obligated institution; the indicated obligation should give incentives to entities subject to the obligation to disclose data on beneficial owners to update these data on an ongoing basis in the CRRB,
5. regulating in the internal procedure of the obligated institution in the field of counteracting money laundering and terrorist financing the principles of recording discrepancies between the information collected in the CRRB and the information on the customer's beneficial owners established by that obligated institution.

It is also worth noting that failure to perform the above-mentioned obligations by the obligated institution may indicate its’ improper application of financial security measures. On the other hand, the fact that the GIFI receives information about such irregularities may be the reason for taking control actions towards such an obligated institution.

Principles of taking steps to clarify discrepancies

According to the GIFI Statement, identification of discrepancies between the data of the customer's beneficial owners disclosed in the CRRB and the information determined by the obligated institution should not lead to an automatic assumption that the client made a mistake when reporting data to the CRRB. On the contrary, obligated institutions should not assume in advance that the information disclosed in the CRRB is incorrect. The GIFI recommends that the starting point for examining the reasons for the recorded discrepancies should be the assumption that any error in identifying the actual beneficiaries was made by the obligated institution. For this reason, the obligated institution should analyse whether it:

1. correctly identified the customer's beneficial owner,
2. has taken sufficient and appropriate steps to verify the identity of the beneficial owner,
3. has taken sufficient and appropriate steps to establish the customer's ownership and control structure.

Subsequently, the obligated institution may request the client to submit additional information or documents, such as the company's articles or articles of association. In the Announcement, the GIFI draws attention to the fact that frequent reasons for the occurrence of discrepancies are the preference for shares or stocks as to voting rights, as well as the granting of special rights to a given partner or shareholder. Such circumstances may result in the fact that a given partner or shareholder actually exercises control over the client, even though he or she does not own at least 25% of shares or stocks. Such information results only from the content of the company's articles or articles of association, therefore, before their verification, the obligated institution might not have a full picture of the customer's ownership and control structure. Consequently, it should be emphasized that failure to take into account such rights may result in the lack of or incorrect determination of the customer's beneficial owners, and thus incorrect application of the financial security measure.

The result of taking the above actions should be confirmation or exclusion of the existence of actual discrepancies between the information on beneficial owners disclosed in the CRRB and the data determined by the obligated institution.

Catalogue of discrepancies not subject to notification to the minister competent for public finance

In the Announcement, the GIFI presented an exemplary catalogue of information on discrepancies, the reporting of which to the minister competent for public finance is undesirable and incorrect. Such information is:

1. information about minor spelling mistakes in CRRB, e.g. about typos,
2. information about inaccuracies in the excerpt from the National Court Register or other commercial registers of the client,
3. information about the lack of notification of information in the CRRB by entities not obliged to submit such reports, e.g. an ordinary association,
4. information about inaccuracies that do not affect the determination of the beneficial owner, e.g. the lack of the beneficiary's middle name,
5. unverified information about discrepancies,
6. information which are unjustified or with superficial justification.

Please contact us if you need professional legal advice in the field of AML/CFT. Our experts will:

• prepare a compliance strategy for your company,
• help you update and optimize the internal AML/CFT procedure of the obligated institution,
• prepare for you a notification or update of information on real beneficiaries in the CRRB.