Counteracting money laundering and terrorism financing - “money laundering and terrorism financing are perceived as a genuine and material risk in our business. This is a worldwide problem that gives rise to grave consequences on the financial market. For that reasons the PZU Group has been taking any and all legally permissible actions to prevent situations in which the transactions it executes would be used for money laundering or terrorism financing.”
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 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 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 SA. The regulations define specifically the Fraud Management Policy introduced by the Bank’s Management Board. The Official Instructions defines in particular:
- what a fraud is and what fraud categories may affect the Bank in the course of its activity;
- who (which organizational unit in the Bank and which employee of the unit) is obligated to take action in the event of fraud;
- how specifically should fraud be prevented (catalog of activities to be performed).
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 Group has implemented a procedure for preventing money laundering and financing of terrorism.
In 2018 in the Pekao Group and Alior Bank there were 5,226 pending fraud cases. The value of the proceedings amounted to over PLN 16 million.
KNF imposed 4 penalties on PZU in the total amount of PLN 3,350,000. All of the decisions involved imposition of a penalty on PZU for failure to pay claims by the deadlines prescribed by the Act on mandatory insurance, Insurance Indemnity Fund and the Polish Office of Motor Insurance Providers. The penalties were associated with claims handled in 2008-2015. 3 decisions, including 2 pertaining to one case, are not final. PZU filed a petition with KNF for reexamination of the case and subsequently KNF lodged a cassation appeal to the Supreme Administrative Court.
Among the historical claims inspected by KNF, there were cases handled by PZU during natural catastrophes, when the number of reported claims was very high. The current claims handling process in PZU is significantly different from the historical processes assessed by KNF, which are as much as 10 years old. During the recent storms in August 2017 PZU paid the claims within 7 days in over 90% of the cases. PZU constantly improves the claims handling processes and organization. In 2018 it implemented, among others, Internet services facilitating claims notification.
In PZU there were 3 court proceedings pertaining to behaviors breaching the freedom of competition or antitrust regulations in which the organization appears as a party to the proceedings. One of the proceedings ended on 28 August 2018 with a decision obligating the Company to rectify the effects of the alleged practices breaching collective consumer interests. No penalty was imposed. One proceeding is pending against PZU Życie.
As a result of the actions PZU has decided to change the practices in this regard through:
- accepting the termination of contracts by consumers reaching as much as three years back;
- refunding a proportional part of the premium collected when the consumer had a double TPL insurance;
- enabling consumers to terminate their contracts which were automatically extended when they have at the same time a TPL insurance from another insurer.
Act of 1 March 2018 on combating money laundering and financing terrorism (Journal of Laws 2018 Item 723) imposed new challenges 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 implement the new regulations, in 2018 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 the first place, the areas which required changes to comply with the assumptions of the Act were diagnosed. Legally required internal procedures were implemented, including a group procedure addressed to all Obligated Institutions2 in the PZU Group. As part of the exercise, the processes pertaining to conclusion of insurance contracts and handling of claims and liabilities were modeled. 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.
2 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.