ABUSE OF INVESTMENT FUNDS BY MONEY LAUNDERING

At the beginning of the paper, the author presents the nature of money laundering processes. It is stressed that this type of illegal activity is international in its nature. In order to achieve the desired effect, launderers have to transfer funds from one country to another where the process takes place. As a consequence, the fight against money laundering has to have an international scope. Secondly, in order to fight this phenomenon, the range of institutions involved should constantly widen. The reason for this is that the criminals move away from the banking sector towards other financial and non-financial businesses, including investment funds. It is therefore fully reasonable that they have been categorized as so-called „obliged institutions” by the Polish anti-money laundering regulations established by the Act of 16th November, 2000. These institutions are required to fulfil certain obligations with the purpose of fighting money laundering. In this context, the author also discusses the new Forty Recommendations of Financial Action Task Force on Money Laundering. In the second part of the paper, the author presents the character of investment funds (trust funds) as collective investment schemes according to Polish regulations. There are two types of these funds that are particularly vulnerable to criminal activities: venture capital and funds investing in real estate. Moreover, the potential methods of abusing these institutions by launderers are discussed. Those include situations when the investment accounts are used to collect „dirty money” originating from different illegal sources, or when gathered funds are distributed further to other institutions, bank accounts, etc. Investment fund units cannot be bought or sold, however, they can be pledged. This allows transferring collected funds from one person to another, following e.g. court’s decision which gives a perfect appearance of legitimacy. Other threats are linked to the use of on-line services and to the distribution of units of investment funds by agents. One of the obligations imposed on appropriate institutions is to prevent the use of funds coming from illegal or undisclosed sources. In some cases, the fulfilment of these obligations may be very complicated when it comes to following the ‘Know Your Customer’ procedure. The author proposes some possible changes regarding Polish anti-money laundering policies. In the last part of the paper two theses are presented. The first one reflects the author’s opinion that investment funds should be included in the list of obliged institutions, as it is the case at present. The second one stresses the need for cooperation between the General Inspector for Financial Information (Polish Financial Intelligence Unit) and the Polish Securities and Exchange Commission (Komisja Papierów Wartościowych i Gield) as supervising institutions, in order to help investment funds follow anti-money laundering regulations