Poland: Blocking Bank Account In Poland

Legal grounds - bank account blocking (funds freezing)

We can distinguish several legal grounds for bank account freezing in Poland by law enforcement agencies:

• blockade adjudicated under the Banking Law (hereinafter: "Banking Law") (Article 106a),
• blockade adjudicated under the Law on Anti-Money Laundering and Financing of Terrorism (hereinafter: "AML") (Article 86 - Article 95),
• blockade adjudicated under the Law on Capital Market Supervision (hereinafter: "UNRF") (Art.39).

Although the rationale and procedure of each of the aforementioned methods is different, the nature of the accounts freezing remains essentially the same.

Bank account blocking under Banking Law of Poland

In practice, majority of events of freezing bank accounts in Poland is based on the provision of Polish banking law. This regulation allows the bank to block / freeze the bank account if:

• there is a reasonable suspicion that the funds accumulated in the account are derived in whole or in part from a tax crime or a crime other than terrorist financing or money laundering,
• funds accumulated in the account in whole or in part are related to a fiscal crime or a crime other than terrorist financing or money laundering.

Who may block the bank account under Banking Law and for how long?

Bank account blocking under banking regulation - how does it work?

In practice the process of bank account blocking in Poland by the bank follows below presented usual scheme:

• the bank blocks the bank account for 72 hours,
• the bank notifies General Inspector of Financial Information (hereinafter: "GIIF")
• GIIF's request to suspend transactions or block the account for a period not exceeding 96 hours (see below - AML blocking procedure)
• GIIF notifies the prosecutor's office of a suspected crime in Poland
• Prosecutor's decides:
• • to suspends the transaction, or
  • block the account for a specified period of time, not exceeding 6 months with the possibility of extension for a further specified period of time, not exceeding another 6 months.

Bank account blocking under AML regulation in Poland

The second and alternative basis to block funds on the bank account is the regulation Chapter 8 of the AML Act of Poland. Article 86 (9-11) of the AML Act states that bank account freeze may be imposed only in the event of reasonable suspicion that a money laundering or terrorist financing offense has been committed.

In practice, the justifications for the orders most often point to the likelihood of committing the crime of money laundering under Article 299 of the Criminal Code.

Who may block the bank account under AML Law and for how long?

Bank account blocking for AML reasons - how does it work?

The mechanism in practice here is most often as follows:

• The obliged institution shall immediately notify the GIIF if it has a reasonable suspicion that a certain transaction or certain assets may be related to money laundering or terrorist financing,
• Notification by the GIIF to the prosecutor's office of a suspected crime,
• Blocking of the bank account by the bank for a maximum of 96 hours,
• upon receipt of the GIIF's notification, the prosecutor may by order suspend the transaction or block the account for a specified period, not exceeding 6 months, with the possibility of extension for a further specified period, not exceeding another 6 months,
• The prosecutor may issue the decision referred to in item 4 also without prior notification to the GIIF.

Account blocking - capital market regulation

The bank account freeze can applied on the basis of capital markets regulation only to situations where the following crime is suspected:

• unauthorized use of insider information regarding financial instruments,
• unauthorized recommendation or solicitation to purchase or sell financial instruments to which the confidential information relates,
• manipulation of financial instruments or entering into an agreement with another person with the purpose of manipulation (crimes under Articles 181-183 of the Law on Trading in Financial Instruments), and the transaction that has been made or is to be made may be related to the commission of such a crime.

Who may block the bank account under capital markets regulation and for how long?

The measure is mainly aimed at combating so-called stock market crimes.

Protection against bank account blocking

We can generally divide security measures into:

• measures taken prior to the application of the blockade, preventive, applied in the course of business,
• procedural measures to combat the already applied account blockade.

At the stage before the blockade is applied, measures should be taken in the company to minimize the risk of suspicious transactions in the chain by mainly verifying counterparties and collecting all documents related to the counterparty and the transactions, so that the actual nature of the transaction can be demonstrated if necessary. However, these measures are often either not applied at all or are insufficient.

Appeal against the decision to block the bank account

First of all, there must be service of the blocking order, which opens the possibility of judicial review of the prosecutor's decision.

It should be noted that, contrary to expectations, the content of the order and justification is very laconic. As a rule, no specific transactions that are considered suspicious are indicated, and in a vague manner, most often "the likelihood of a money laundering offense" is indicated without reference to any concretized circumstances.

To file an appeal the entitled person has 7 days from the date of delivery of the decision.

The prosecutor's decision to apply the blocking of funds in the account is immediately enforceable, and an appeal filed does not stop its execution. However, it is possible and worthwhile to include in the appeal a request to suspend enforcement of the blocking order until the appeal is heard.

In addition, the complaint is worth focusing on:

• demonstrating the actual and lawful conduct of business, as well as specific transactions, if mentioned by the authority, in connection with which the blockade occurred,
• demonstrating the source of funds, e.g., from actual services rendered, trade in goods,
• questioning the rationale for the blockade and the lack of connection of the funds to the criminal act,
• demonstrating deficiencies in procedural law.

After the prosecutor has formally reviewed the appeal, he generally forwards the appeal to the court. Here the prosecutor is not bound by any deadline, which is often abused. The court should then schedule a hearing to hear the appeal, which involves waiting at least several months.

Conclusions – bank account blocking in Poland

In summary, the number of blockades based on banking law and AML is regularly increasing.

The use of a blockade of funds is very onerous, as it impedes the day-to-day operation of the business, leads to a weakening or loss of liquidity, and affects the image of the entity from the perspective of counterparties, as well as the loss of credibility and rating with financial service institutions.

In addition, it happens that the application of the blockade is only the beginning of the authorities' interference with the assets and resources of the entity in question, for at a later stage of the proceedings, property collateral often appears to the same extent.

Both account blocking and property collateral are institutions that severely impact the constitutional right of ownership.

Therefore, it is also important to control their application by the attorney in terms of constitutional standards and standards of human rights and freedoms and the proportionality and necessity of these measures.

Although the issue of blocking or securing assets is incidental to the entire main criminal proceedings, it is necessary to carefully prepare a defense at this stage and make a careful selection of the documents provided and made available to law enforcement, also taking into account the overall proceedings and possible criminal charges.

Bank account blocking in Poland - FAQ

Who is liable for damages resulting from illegal bank account blockade?

Under the Banking Law, the legislature exempts the bank from liability for any damage that may result from the good faith performance of duties related to the application of a block on a bank account. This is because according to Article 106a (10) of the Banking Law, if in the course of the proceedings it turns out that the implementation of the blockade was not related to a crime or the concealment of criminal activities, the State Treasury is liable for the damage resulting from the implementation of the blockade of funds in the account. The Treasury's liability is triggered when the following conditions are met: (i) damage has occurred, (ii) an order has been issued to block the account in connection with the suspected commission of a crime or concealment of criminal activities, (iii) an order of remission/ acquittal has been issued, and (iv) there is a causal connection between the damage and the execution of the account blockade.

It should be noted that the issue of liability is regulated differently in the AML. Article 91 of the AML clearly indicates that the performance by the obliged institution (bank) of the obligations indicated above (Articles 86, 87 and 89), does not give rise to disciplinary, civil, criminal or other liability as defined by separate regulations. This issue was resolved in a similar manner in the UNRF, where the exclusion of any liability of the blocking entity, the supervised entity and persons acting on its behalf was explicitly transposed.

Is the bank obligated to provide the account holder or the person executing the transaction with information about the blocking of the account and the authority that requested it?

At the request of the customer, the bank may provide such information, but there is no such statutory obligation. Thus, everything depends on the individual approach of the financial institution in question.

Is it possible to block freeze crypto on cryptocurrency accounts?

Yes. Increasingly, we can see the blocking of accounts / wallets where virtual currencies are deposited run by various cryptocurrency exchanges, such as binance, bittrex, coinbase, okx, among others. Polish law enforcement agencies also have their own dedicated cryptocurrency accounts where they store virtual currencies that have been secured from suspects.

What documents will be most useful in defending against account blocking?

Given the laconic nature of account blocking orders and their justifications, it is best to gather as many documents as possible to prove the legitimacy of the business and the legality of transactions (contracts with contractors, invoices, payment confirmations, etc.).

Does filing the appeal release the bank account blockade?

Unfortunately, no, filing appeal does not give grounds to release the blockade.

What is the time limit for hearing the appeal against bank account freezing?

Unfortunately, the regulations do not indicate a time limit for processing the appeal. However, the attorney can issue official reminders to the authority in this regard.

Will the funds be returned after the blockade is cancelled or after the maximum period?

In principle, the funds should then be returned, but in practice, most often the blockages are "transformed" into other measures - seizure of physical evidence (which are also funds in the account) or property collateral, with the result that the funds remain frozen and at the disposal of law enforcement.

Is an account blockade the same as a property collateral?

No, these are other institutions for the application of which separate prerequisites are provided. Property collateral, however, is often the next step applied after the maximum time to apply the account blockade has expired. Property collateral is subject to a separate appeal. Property collateral is generally applied to the person charged with criminal charges, while this is not a requirement for the application of an account blockade.

In which industries is the use of bank account blocking most frequently noted?

The blockade can affect not only the trader who conducts illegal activities, but most often affects the trader who unknowingly appeared in the whole chain of transactions considered suspicious. We can observe that the use of blockades most often appears against entrepreneurs in the wholesale trade, including international trade, especially in the trade of metals, mineral raw materials, oil, waste, tobacco products, electronics.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.