The Financial Intelligence and Analysis Unit is not planning to revise downwards any of the administrative fines it has imposed, despite a recent court ruling saying such penalties cannot be higher than 10 per cent of a business’ annual turnover.

It has also launched an internal exercise to propose changes to the law to have more clarity on the extent of the fines it issued in the future.

The unit answered questions from Times of Malta following a recent court decision, which reduced to €851,000 the record €3.7 million fine the unit had imposed on Satabank for money laundering breaches.

Other fines under appeal include more than €500,000 in the banking sector, €1.2 million in the financial sector, and €370,250 in the investment sector.

FIAU’s deputy director, Alfred Zammit, explained that although it respected the court’s decision, it disagreed with the judge’s conclusion based on an interpretation of the law.

Mr Justice Grazio Mercieca ruled that the fines had to be capped at 10 per cent of the turnover of the company or person being fined.

While acknowledging that the Prevention of Money Laundering and Funding of Terrorism Regulations allowed significant discretion on the size of the fine, the court said this must be within the threshold set by the same regulations.

The regulations state that the administrative penalty is capped at €5 million or not more than 10 per cent of a business’s total annual turnover, based on the latest available approved annual financial statements.

But Zammit told Times of Malta that the ruling did not set a legal precedent. He, however, admitted that it will feature highly in pending appeals of fines imposed by the unit.

“While the FIAU is conscious of the authoritative relevance of such a court decision, it retains that this does not necessarily set a legal precedent. It will be up to the Court of Appeal to consider and decide whether to take the same approach as that taken in the recent court ruling in the case of Satabank,” he said.

FIAU needed to ensure that the fines it imposes serve as a deterrent

He insisted that to be effective and drive anti-financial crime compliance, among other measures and initiatives, the FIAU needed to ensure that the fines it imposes serve as a deterrent while respecting the principle of proportionality.

Zammit said that the FIAU had been vindicated on its investigation into Satabank. The court upheld all its findings and confirmed the “serious and systematic breaches” committed by the bank, with the only divergence being the interpretation of the law with regard to the calculation of the fine.

“The bank had been found guilty of several serious and widespread breaches it committed over a period of time and the fine reflects the seriousness and nature of the bank’s failings,” Zammit said, insisting that the unit stood by the calculation of the fine it originally imposed.

Fines paid to FIAU deducted from budget

Zammit categorically denied that fines are being dished out because the unit is seeking to become financially independent. The primary objective of the FIAU, as Malta’s anti-money laundering regulator, is to ensure that people comply with their anti-money laundering obligations. Any fines paid to the FIAU are deducted from its annual allocated budget.

This allocation increased from €800,000 in 2015 to €1 million in 2017, and then to €9.5 million every year since 2018.

Likewise, the unit’s staff complement increased from a paltry 15 in 2013 to 100 at the end of 2020, with plans to take on an additional 58 by the end of the year.

The increase in staff was recommended by various authorities such as the European Banking Authority, the European Commission, the International Monetary Fund and Moneyval, so that the FIAU could fulfil its obligations effectively.

The increase in staff was coupled with other measures. Investment in IT, for example, went up from €132,000 in 2018, to €500,000 in 2019, and €1.8 million in 2020. 

The FIAU currently supervises around 2,400 people or entities who have to comply with anti-money laundering obligations. These include banks and financial institutions, investment firms, gaming companies, accountants, auditors, notaries and lawyers, as well as the newly-emerged virtual financial asset providers.

When asked whether the FIAU was liable for reputational damage caused to people it fined, Zammit explained that the unit has always acted in good faith and within the parameters of the law.

Moreover, the law precludes action against the FIAU if its work and that of its officers was bona fide and not done in bad faith.