‘Court decision on fines renders AML enforcement ineffective’ – FIAU Director

The FIAU’s suspicion reporting regime is functioning well as is evident by the ever-increasing number of STRs received by the FIAU. “I want to stress this: the law gives no power to the FIAU to conduct criminal investigations or take people to court on money laundering charges. We only ensure compliance and provide intelligence; it is only the police that conduct criminal investigations leading to prosecutions,” says Alfred Zammit, Director of the FIAU.

Six months into his tenure as Director of Malta’s Financial Intelligence Analysis Unit, Alfred Zammit explains how the FIAU’s remit is to provide timely, quality and useful financial intelligence to the police.

“We collaborate with government entities, national authorities, the National Coordinating Committee on the Prevention of Money Laundering and Funding of Terrorism, foreign counterparts and national and international competent authorities while monitoring AML/CFT compliance.

“But one of my main priorities remains the implementation of the FIAU Strategy particularly by exploring an optimised use of technology, to improve the Unit’s capability of preventing and detecting money laundering,” explains Zammit.

The recent National Risk Assessment report on Malta shows a decrease in the residual risk level for money laundering in several industries due to enhanced mitigating measures. Nonetheless, certain sectors still exhibit a medium to high-risk level.

“Our supervisory work is entirely risk-based where we annually assess risk in a very comprehensive manner, using not only the results of the National Risk Assessment but several other sources of information, including from subject persons themselves, other supervisory authorities, intelligence available to the FIAU, information from other public and non-public sources and the European Supranational Risk Assessment.

“Our risk assessment is not static but updated in real-time and we focus more intensive supervisory engagement where there is higher risk. We also provide focused training and outreach to operators who are exposed to higher risks and regularly issue guidelines to address identified risks, as is evidenced on the recently revamped FIAU website,” explains Zammit.

Lately, the Constitutional Court has cancelled many fines imposed by the Authority with one judge describing the FIAU fines as “convoluted, opaque and byzantine”.

“We respect the court’s decisions but we are concerned with various aspects of these decisions, which have rendered the enforcement process ineffective. We have appealed these constitutional decisions to seek final decisions from the highest court in Malta.”

A look at data presented earlier this year in Parliament revealed a significant decrease in the number of individuals brought to court on charges related to money laundering following Malta’s exit from the FATF grey list in 2022.

“Malta’s exit from the FATF grey list did not affect the FIAU’s intelligence work or the number of reports sent to the police for investigation, nor did it result in any decrease in the FIAU’s supervisory and enforcement work with subject persons.

Good corporate governance supports strong AML/CFT culture

“An important distinction therefore needs to be made between the administrative work of the FIAU and the criminal investigation and prosecution of financial crime including money laundering by the Police and the Attorney General. The FIAU’s job is to gather and share intelligence with Police and other national authorities, to supervise and to ensure compliance to AML/CFT obligations.

“It needs to be clarified once and for all, that the FIAU has no power to conduct criminal investigations nor to take people to court on money laundering charges,” he added.

Zammit noted the correlation between corporate governance and a strengthened fight against anti-money laundering.

“Good corporate governance supports strong AML/CFT culture and action within an organisation especially when the entity has statutory AML/CFT obligations. It is in the interest of any subject person to ensure proper compliance with AML/CFT obligations and to ensure that the services it provides are not abused for ML purposes.”

International news media have described Malta as a base for the laundering of money by the Italian mafia but Zammit diminishes this assertion to sensationalism.

“With ample tools to prevent, identify and act against criminal activity, Malta’s AML regime is very strong and this is amply clear from how rigorous banks have become when onboarding customers.

“Of course, no guarantee can be given against mafia infiltration given how well shielded this can be by apparent legitimate business. But the suspicion reporting regime is functioning well as is evident by the ever-increasing number of STRs received by the FIAU. And while we constantly publish guidance that helps identify money laundering and other criminal activity, over the years, the FIAU has also strengthened its relations with Italian authorities considerably.”

Zammit admits that post-grey-listing there is a bigger effort from all stakeholders to truly step up the fight against financial crime.

“There is more awareness of the importance of a robust and effective AML regime, compliance has improved a lot, there is more engagement with the FIAU, more training and better AML/CFT expertise, an increase in suspicious transaction reports, and improvements in processes and procedures.

“From our end, we have been following closely, participating in and contributing to all meetings and discussions at EU level on the new AML package, including the setting up of AMLA and other relevant legislation.

“Today, both legal and operational teams are fully up to date with these developments and our internal structure is significantly strengthened with human and technical resources.”

This interview was first published in The Corporate Times.