The FIAU has no plans to change the way it imposes its administrative penalties, described by the court on several occasions as unconstitutional.

The anti-money laundering watchdog is waiting for courts of appeal to have a final say on its penalties before considering any changes to its methods. 

Financial Intelligence Analysis Unit (FIAU) acting director Alfred Zammit said these court decisions were not final so it will continue to operate within the framework of the present laws until the appeals are heard and decided. 

“The judgments have been appealed. We need to make sure we have a robust and technically solid system so the appeals will give us clarity. In the meantime, we will continue issuing fines based on the law that is still in place,” Zammit said.

He was asked to comment on several constitutional court judgments that declared as unconstitutional the way the FIAU issued administrative penalties against those found to be breaching antimoney laundering rules.

In the latest such court ruling, handed down last month, a judge denounced the “dangerous” system adopted by the FIAU in the imposition of its fines which breached people’s fundamental right to a fair hearing and the right to be tried by an independent court, since the unit was acting as prosecutor, judge, and juror in the cases it investigates.

FIAU formula remains under wraps

"It’s in no one’s interest to have a system that’s not functioning well. On the contrary, we always want to finetune the overall framework,” Zammit said as he noted that in all cases the courts were confirming the breaches found by the FIAU.

He acknowledged that the courts were not agreeing with the amount of the fines it was imposing, which he clarified was the result of a “sophisticated tool”.

When asked, he said the unit did not plan to publish this formula, although he said this could be done in the future in its effort to be more transparent.

Zammit was speaking during a presentation of the unit’s annual report for 2022 where it was revealed that it had issued more than €3.3 million in administrative fines and penalties in 2022.

Those penalties came in 33 cases of enforcement action for non-compliance with anti-money laundering requirements.

Suspicious transaction reports up 19 per cent

According to the report, which was tabled in parliament by Finance Minister Clyde Caruana on Wednesday, the unit once again saw an increase in suspicious transactions reports with a 19 per cent increase over 2021. In real terms the unit received 8,740 reports in 2022 – 1,417 reports more than 2021.

Zammit explained how the top reporting sector remained the remote gaming sector, with more than 5,000 of these reports coming from remote gaming companies.

Almost 1,000 reports came from virtual asset operators, who manage cryptocurrencies, and another 1,000 came from credit institutions.

FIAU-generated reports grew from a measly 35 in 2019 to 154 last year.

Investigations by the FIAU did not manage to confirm the underlying criminal offence of money laundering in 65 per cent of the cases, despite strong red flags. Fraud and tax evasion continued to be the most common offences.

Zammit said that following various training initiatives and support, the unit noted an increase in reporting across most sectors.

He said the FIAU continued to foster collaborative partnerships with local and international stakeholders, making almost 8,000 contacts and information exchanges with foreign counterparts. Locally, it shared intelligence with the police in 343 cases and with the commissioner for revenue in just over 400 cases.

Zammit said the unit carried out 138 inspections last year, with more than a quarter of them closed immediately and another half slapped with a warning along with a list of items they needed to address.

Concurrently, the unit organised many information sessions and outreach programmes, including one which is targeting schoolchildren.

Staff from across the unit took part in 70 training initiatives by participating in panels, giving presentations and knowledge sharing. Of these, 16 were FIAU-led initiatives.

“The message is that we are not out to get you, but we want to increase the drive towards more compliance, and we are seeing results,” Zammit said.

He said 2022 was a challenging year for the unit which worked hard to address grey areas identified by the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, to get the country off its grey list within a year from when it was placed on the list.

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