Referring to the latest announcement from the Polish Financial Supervision Authority (KNF), we would like to point out that the supervisor - delicately speaking - misrepresents the truth in a number of places. Here are some examples:
1. The KNF states that: "in the course of the proceedings, the KNF informed the Party of its rights under Articles 10 and 73 of the Code of Administrative Procedure, including to review the files of the proceedings; by the end of the proceedings, the Company had not exercised this right”.
Meanwhile, here are the facts:
- In a letter of 7.08.2024 (i.e. in the Notice of Initiation of Administrative Proceedings), the KNF instructs Conotoxia Sp. z o.o. on its right to review the case file, including after the conclusion of the proceedings;
- In a letter dated 12.08.2024 (i.e., at the very beginning of the proceedings, when practically nothing was in the file), the KNF set a deadline for Conotoxia Sp. z o.o. to review the case file — 3 working days from the date of delivery of that letter!
- In a letter dated 22.08.2024, Conotoxia Sp. z o.o. points out to the KNF that the deadline for reviewing the file is set at the end of the administrative proceedings, after the conclusion of the evidence proceedings. In accordance with Article 73 of the Code of Administrative Procedure, the Company requested to allow reviewing the file within 7 days after the conclusion of the evidence proceedings in the case.
- The KNF, in letters dated 26.08.2024 and 6.09.2024, confirms that it will allow the parties to review the file. The second letter again indicates a deadline of 3 working days from receipt of the letter to review the file, even though the evidentiary proceedings had not yet been completed (we were still presenting the case information to the KNF).
- 2.10.2024 Conotoxia Sp. z o.o. learns from the KNF's announcement on the KNF's website that a decision to revoke its authorisation had been issued.
- On 8.10.2024, the attorney of Conotoxia Sp. z o.o. applies in writing to the KNF (again) for a deadline to review the file.
- The Conotoxia Sp.z.o.o. attorney called the KNF twice until 15.10.2024 to ask when the deadline for reviewing the case file would be set. Each time, they were informed by phone that 'the file has to go through many organisational units of the KNF' and, therefore, it would take time.
- To this day, no date has been set for reviewing the file. The KNF has set a deadline for Conotoxia Sp. z o.o. to review the case file on 2 occasions, but this was before the closure of the proceedings (when there was no need to review the file as it was still incomplete), whereas currently, the KNF itself does not respect its own deadlines in this regard.
2. The KNF states that: "information about the decision taken by the KNF on 2 October 2024 was made public in the form of an announcement on the KNF's website pursuant to Article 15d of the Payment Services Act".
The facts:
- Article 15d of the Payment Services Act [Disclosure of information]: The KNF may publicly announce information on imposing an administrative sanction on the provider further to a breach of the provisions of the Act on the provision of payment services unless disclosure of such information could have threaten stability of the financial market or incommensurately harm the legal interest of the involved parties.
- The KNF apparently saw neither a threat to the stability of the financial market nor a disproportionate threat to Conotoxia Sp. z o.o. In fact - as we reported previously - the KNF announcement caused market panic among service users not only of Conotoxia Sp. z o.o., but also of Cinkciarz.pl Sp. z o.o., as the KNF's announcement uses both company names. The KNF was aware of the size of Conotoxia Sp. z o.o. 's business, and yet it is playing with the fate not only of the companies themselves but also of approximately 1,000,000 customers. Therefore, the KNF's decision to publish the announcement violates the provision that the KNF itself refers to.
3. The KNF claims that: "the legal grounds for the KNF's decision to revoke Conotoxia sp. z o.o. 's licence to provide payment services as a national payment institution was not Article 105 Payment Services Act. The premise for revoking the Company's licence to provide payment services as a national payment institution is set out in Article 69(1)(2) in conjunction with Article 64(1)(3) of the Payment Services Act. The KNF informed about this in its announcement".
The facts:
- Article 105 of the Payment Services Act [Powers of the KNF in case of identified irregularities].
1. If it is found that a national payment institution (...) when the activities of the national payment institution are performed in violation of the provisions of the Act, other Acts governing the provision of payment services and the issuance and re-purchase of electronic money and regulations issued on the basis thereof, as well as other directly applicable provisions of European Union law governing the provision of payment services and the issuance and re-purchase of electronic money or poses a threat to the interests of users or holders of electronic money, the KNF may:
1) apply to an authority of the domestic payment institution with a motion to dismiss the manager who is directly responsible for the established irregularities;
2) suspend performance of the functions of the manager referred to in Article 105.1, pending the adoption of a resolution by a domestic payment institution's authority at its next meeting on the motion for such manager's dismissal; suspension of performance of the functions means exclusion from making decisions on behalf of a domestic payment institution in the scope of its ownership rights and obligations;
3) limit the scope of activities of a domestic payment institution or of its organisational units;
4) impose a pecuniary penalty of up to 500,000 PLN on a person who, during the period in which the irregularities occurred, held the position of the manager directly responsible for the irregularities found or was a member of a statutory body directly responsible for supervising the area in which the irregularities were found;
5) impose on a domestic payment institution a financial penalty of up to 1,000,000 PLN;
6) revoke the authorisation referred to in Article 60.1. [payment services licence].
- The KNF is trying to blur the picture of the situation presented by Conotoxia Sp. z o.o. We have previously described how the KNF had a choice of six supervisory measures and applied a measure of last resort to an administratively unsanctioned company immediately, without any warning. Among other things, the KNF could have demanded changes to the management of Conotoxia Sp. z o.o. (since it had comments on the Company's management) or impose a fine. The KNF's citation of other provisions (Article 69(1)(2) in conjunction with Article 64(1)(3) of the Payment Services Act) is only intended to distract the reader's attention from the matter we have raised.
4. The KNF states that: "the KNF has not received an application to "merge into a bank" formulated by the Conotoxia "Holding Companies" or any other application to obtain a banking licence".
Here are the facts:
- During the course of the inspection, in meetings lasting many hours, the KNF inspectors were repeatedly informed of the intention to convert the Conotoxia Holding companies into a bank (back in 2023). The suggestion to transform the holding companies into banks was, moreover, made during the inspection by the KNF inspectors, who noted that this would be a rational solution due to the business size.
- Information about the intention to transform Conotoxia Sp. z o.o. into a bank was also provided during meetings with the KNF in the period July to September 2024. Some of the meetings were recorded by the KNF.
- The KNF, with the formulation that it did not receive an application for a banking licence, can therefore not defend itself against the fact that it did not know about such intentions; on the contrary, the employees of the KNF themselves suggested such an action.
5. The KNF states that: "In the case of the banks, the allegations formulated by Cinkciarz.pl/Conotoxia are said to relate to "bank collusion", "obstruction of exchange business" or "manifestations of violation of fair competition conditions". The KNF is not a party to, nor is it competent to resolve, the allegations made by the Company against the banking sector.
Here are the facts:
- The KNF was already informed of the problems with the banks during the 2023 audit and administrative proceedings (in the course of providing explanations during meetings) and in writing in the objections to the post-inspection protocol, i.e., in the letter of 21.02.2024. However, because the KNF ignored this information, we requested intervention in the case by letter dated 23.09.2024.
- We would like to point out that according to the Act on Financial Market Supervision (Article 2(1)), the Polish Financial Supervision Authority (KNF) plays an important role in supervising the banking sector and in ensuring the stability, security and compliance of banks' activities with the law. The KNF's remit also includes monitoring compliance with the principles of fair competition in the financial sector, which includes counteracting practices that may infringe the interests of consumers and other entities in the market, as the KNF ensures compliance of banks' activities with the entirety of the Banking Law, from which the obligation to manage legal risks in banks stems (Article 9). Moreover, the KNF has itself issued a document on this subject entitled 'Principles of Corporate Governance'. Accordingly, allegations of potential 'bank collusion', 'obstruction of exchange business' and 'manifestations of violations of the conditions of fair competition' are within the duty of supervision of the KNF as a supervisory authority responsible for ensuring transparency and fairness in the financial market, particularly in the context of protecting consumer interests and countering monopolistic practices.
- To this day, the KNF has not responded to the request to intervene.
6. The KNF claims that: "what must be corrected, however, is that Conotoxia sp. z o.o. refers to an alleged recommendation by the KNF to conclude a guarantee agreement. The Company has not received a recommendation from the KNF to conclude such an agreement".
The facts:
- The post-audit recommendations issued by the KNF to Conotoxia Sp. z o. o. show the need to transfer funds secured by one of Conotoxia Sp. z o.o. 's service providers (in respect of payment cards) to an account at a national bank. In order to do so, the service provider requested other security - the only possible one was a bank guarantee. Therefore, the necessity to do so arose from the post-audit recommendations of the KNF.
7. The KNF states that: "Cinkciarz.pl, whose functioning as an online exchange office is not regulated and is not subject to the supervision of the Polish Financial Supervision Authority, can continue to provide currency exchange services, which is its main area of activity. However, following the KNF's decision to revoke the licence of Conotoxia sp. z o.o. to provide payment services as a domestic payment institution, it will no longer be able to offer the Company's services consisting in the transfer of funds to a recipient other than the customer of the exchange office (e.g. to the account of its foreign counterparty or to a mortgage payment account in a bank), which was made possible by the fact of being Conotoxia's agent. However, this does not exclude the possibility of Cinkciarz.pl concluding an analogous agreement with another payment service provider authorised to provide such services.".
The facts:
- Already in its letter of 22.08.2024, Conotoxia Sp. z o.o. informed the KNF in administrative proceedings that the withdrawal of Conotoxia Sp. z o.o's authorisation to provide payment services would cause significant difficulties for the business operation of several companies. Such an action would be an interruption of the business model, which is a kind of 'interconnected vessel' and will measurably affect both the companies themselves, their customers and their numerous counterparties.
- Entering into an agreement with another provider involves enormous costs, time and manpower, of which the KNF is unlikely to be aware.
We are still awaiting the publication of the full announcement of the KNF meeting of 2.10.2024. Earlier announcements, i.e. e.g. of 13.09.2024 and 27.09.2024, as well as later announcements, i.e. of 11.10.2024, are already posted on the KNF website. There is not even a trace of the communication from the meeting in our case.
We have presented hard facts supported by specific documents and legal provisions. As for the documents from the proceedings, we are ready to make them public. In the near future, we also intend to share further reliable information on the case: we intend, for example, to make public the irregularities in the course of the KNF's inspection itself, the gaps in the evidence procedure or further examples of violations of the law by the KNF in our case.
Therefore, we leave it to you to assess who is manipulating the information - Conotoxia Sp. z o.o. or the KNF.