How to avoid penalties provided for in the act on transparency of public life

The legislators are working on the final version of the act on transparency of public life in Poland, which may enter into force as early as March this year. The latest version of the act (dated 8 January 2018), includes amendments, taking into account some of the remarks and postulates indicated in the social and inter-ministerial consultations. On January 9th, 2018 the latest draft was submitted to the sitting of the Standing Committee of the Council of Ministers.

According to the recent draft, the medium and large entrepreneur will be required to use internal anti-corruption procedures to counter the cases of corruption crimes committed by persons acting on its behalf or for its benefit. According to the act, application of internal anti-corruption procedures means undertaking organizational, human and technical measures aimed at preventing creation of an environment conducive to criminal offenses by persons who act on behalf of or on behalf of an entrepreneur.

According to the provisions of the draft act, entrepreneurs face penalties of PLN 10,000 up to PLN 10 million for the failing to implement or ineffective use of anti-corruption procedures. Such penalties may be imposed if a person acting for the benefit or on behalf of an entrepreneur is charged with an offense of giving, promising or accepting financial gain.

However, the Act provides for the possibility of avoiding such fines. This will happen if the entrepreneur notifies the law enforcement authorities of reasonable suspicion of a crime and this will constitute basis for legal actions to be initiated. Therefore, in order to avoid penalties, an entrepreneur should implement anti-corruption procedures, including such that will serve to detect the symptoms of corruption and allow their further analysis.

Such solutions may include periodical transaction reviews and audits of the effectiveness of the implemented anti-corruption procedures. In the case of identification of suspicious transactions, further analysis should be conducted (evaluation of the suspicion justness). If suspicions persist, it may be advisable to conduct an internal investigation / audit aimed at determining the course of the proceedings, its participants and gathering evidence. Early detection of symptoms and examination of the legitimacy of suspicions arising from them should allow the entrepreneur to report it to the authorities before they start their own proceedings, and thus avoid the penalties.

The introduction of the new act will also be important in the context of mergers and acquisitions. The potential corruption in the acquired entity is a risk that can only appear after the acquisition process. In this case, the buyer, as the new owner, will suffer a loss in the event of penalties imposed on the acquired entity.

It may also be forced to implement the anti-corruption procedures required in the draft Act (additional implementation costs and costs of their functioning). It is also possible to imagine an extreme case in which the activity of the acquired entity was in fact dependent on the corruption of customers and after its elimination the acquired enterprise will not be able to operate on the market. Early proper identification of such risks (as part of due diligence processes) should allow to modify the terms of the takeover transaction (e.g. to reduce the price) or take a decision to withdraw from such transaction.

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