A regulation imposing a 55% penalty whenever a traveller is caught carrying over €10,000 in cash has been declared unconstitutional since it “reduces the judicial process to a mechanical exercise.”

The declaration was made by the Constitutional Court when handing down judgment in a breach of rights case instituted by Igaale Ali Muuse, who was arrested at Malta Airport three years ago after being found in possession of €165,548 in cash.

That August day Muuse was about to board a flight to Istanbul when a customs sniffer dog alerted officials to the cash inside his suitcase already stored in the aircraft’s hold.

Muuse had declared that he had no cash over the €10,000 allowed in terms of law.

The day after that discovery, Muuse was arraigned and charged with breaching Cash Control Regulations by failing to declare the substantial amount of excess cash.

He pleaded not guilty.

Proceedings continued and when the prosecution wrapped up evidence, the accused changed his plea. In August 2022, he registered an admission, confirming his position after being given time to reconsider.

The Magistrates’ Court sentenced him to a fine totalling €85,601.

That sum represented a 55% penalty on the amount in excess of €10,000, plus an additional €50 fine.

Muuse appealed that judgment and requested a constitutional reference, challenging the current regulations which resulted in disproportionate punishment, legal arbitrariness and a lack of judicial discretion.

The First Hall, Civil Court in its constitutional jurisdiction threw out the applicant’s claim, stating that Muuse had suffered no breach of rights.

Muuse appealed and the matter landed before the Constitutional Court.

On Monday, Chief Justice Mark Chetcuti together with Justices Giannino Caruana Demajo and Anthony Ellul, upheld Muuse’s claims, declaring that Regulation 3(5)(b) of the subsidiary legislation on cash control presented a “disproportionate interference” in the applicant’s right to peaceful enjoyment of his private property.

Citing EU caselaw, the court observed that these cash control measures stemmed from EU directives aimed at setting up a system of controls to prevent money laundering and financing of terrorism throughout the EU.

However the EU left it to each member state to introduce a penalty that was “effective, proportionate and dissuasive.”

Malta had originally introduced a 25% penalty on the full amount of cash plus confiscation of any amount exceeding the €10,000 statutory limit.

The law was amended in 2020 so that nowadays there is a mandatory 55% penalty on the excess plus a €50 fine.

But when the accused is carrying more than €30,000, the excess sum is deposited by police with the Tax Commissioner for a maximum term of 90 days.

Meanwhile police investigate the source of funds and if any criminal activity is suspected, further criminal action is taken against the accused.

In Muuse’s case, the competent authorities had enough time to investigate but no further action was taken, observed the judges.

The State Advocate argued that cash control regulations were purposely formulated to avoid arbitrariness. Anyone caught with excess cash would know exactly what punishment he faced.

However the court did not agree with that argument.

Such a penalty was undoubtedly harsh when considering that this applied independently whenever a passenger travelling through the airport failed to declare extra cash.

It was meant to serve as a deterrent and punishment.

The accused could still face further criminal action if the cash was linked to some criminal activity.

Whilst voicing doubt about the source of Muuse’s money, the court said that the regulation “reduced the judicial process to a mechanical exercise” and totally did away with the court’s role of applying its discretion to the facts of the case.

Each case presented different circumstances and punishment should be meted out accordingly.

The court thus declared that the regulation interfered in a disproportionate manner with the applicant’s fundamental property rights.

A copy of the judgment is to be sent to the Court of Criminal Appeal and also to the Speaker in Parliament.

Lawyers Arthur Azzopardi, Franco Debono and Jacob Magri assisted Muuse.