A Sliema-based bank has been fined €310,000 for anti-money laundering transgressions.
In a public notice, the Financial Intelligence Analysis Unit (FIAU), Malta’s anti-money laundering unit, said ECCM Bank did not have adequate business and customer risk assessment measures in place.
Although the FIAU conceded that ECCM’s business model exposes it to fewer risks than other banks, the unit said the bank still has an obligation to carry out a comprehensive business risk assessment in a timely manner.
The FIAU noted that most of the bank’s customers were classified internally as being from moderate to low risk.
These risk ratings, the FIAU noted, do not reflect the actual money-laundering risks posed, particularly when taking into account some of the complex corporate structures held by some of its clients.
The FIAU said the risk ratings assigned by ECCM to its customers did not consider all the risk factors and, therefore, could have resulted in a “distorted” understanding of the risks involved and in the incorrect application of internal controls.
It was also found that the bank failed to carry out periodic reviews of the money-laundering risks posed by existing customers.
Furthermore, the FIAU found that ECCM was not collecting adequate and comprehensive information on the business activity of its customers.
The bank also relied on “generic” descriptions about the origins of certain clients’ funds. In one instance, a client’s source of funds was simply put down to “worldwide business activities”, without clearly indicating what the business activities consisted of.
ECCM’s monitoring of transactions was also found to have certain shortcomings, with the FIAU zooming in on one particular transaction of €100 million that did not receive sufficient scrutiny from the bank.
Following the compliance review, the bank provided the FIAU with a copy of minutes indicating that the €100 million was to be used for investments.
Besides noting that the minutes were only provided after its inspection, the FIAU said these minutes did not indicate where the €100 million came from but simply outlined what it was going to be used for.
The FIAU expressed its concern that ECCM was simply satisfied with knowing the flow of funds passing through it rather than obtaining the necessary information and documents to understand the source of these funds.
Apart from the fine, the FIAU also demanded that the bank takes the necessary remedial action to improve its anti-money laundering controls.
The FIAU said the bank must “substantially enhance” its transaction scrutiny measures to ensure that large, anomalous transactions are flagged, assessed and reviewed.
It said the bank must review, on a risk-sensitive basis, the information and documentation it has on its current customers and obtain updated information on them as necessary.
According to its website, ECCM Bank Plc was granted a banking licence in July 2014. It was bought from Raiffeisen Bank International AG the previous year.
The bank's CEO is accountant Anthony C Schembri and lawyer Patrick Galea is chairman of the board of directors.
Fines for late replies
A total of 119 entities regulated by the Financial Intelligence Analysis Unit, ranging from gambling companies to independent professionals including lawyers, fell foul of requirements to provide the unit with information in a timely manner.
The FIAU emphasised that requests for information sent by its intelligence section are “crucial and indispensable” for it to carry out its functions.
It said a failure to reply to its requests, or late replies, not only results in the regulated entity falling foul of its requirements but also has a detrimental impact on the FIAU’s analytical function.
The FIAU’s intelligence section is tasked with flagging potential financial crimes to the police for further investigation.
Fines totalling €304,000 were issued to 67 entities that failed to reply to the FIAU or replied late. Another 52 written reprimands were issued.
In 2020, the FIAU made over 31,000 requests for information to various entities, with the information being “indispensable” to aid investigations into financial crimes, both locally and internationally.