A payment service provider at risk of losing its MFSA licence has had a €156,000 fine for anti-money laundering failures slashed by a court of appeal.
Corporate & Commercial FX Services Limited had its licence withdrawn by the financial services watchdog (MFSA) in August 2020.
The withdrawal of its licence will only formally come into effect once an appeal filed by the company before the financial services tribunal has been decided.
In a separate court appeal over the FIAU fine, the court confirmed the anti-money laundering watchdog’s findings of inadequate internal controls by the company but slashed the fine imposed on it to €31,000 as the original sanction was deemed to be “too high”.
Court appeals against fines imposed by the secretive anti-money laundering unit are conducted behind closed doors, and the final judgement is never published by the court.
In a public notice, the FIAU said a 2018 review of the company’s operations found it was failing to assess the money-laundering risks posed by its clients before taking them on board.
While the company was not named by the FIAU, court registry documents show the appeal in question was filed by Corporate & Commercial FX Services.
Financial service providers are meant to carry out strict due diligence checks on potential clients, to prevent criminals from using Malta’s financial system to launder the proceeds of their illegal activities.
The FIAU found a “lack of knowledge” by the company’s designated money-laundering reporting officer about these legal obligations to carry out risk assessments on clients.
“Shortcomings” were also found in Corporate & Commercial FX Services requirements to carry out identification and verification of its clients, agents and the beneficial owners of companies it was servicing.
Apart from failures to carry out the relevant checks when clients were being taken on by the company, the FIAU discovered the purposes behind high-value transactions were not adequately scrutinised.
In one case, the anti-money laundering watchdog said the company “ignored” a £1 million transaction (€1.2 million) by a client, without seeking to understand the source and origin of funds behind the transaction.
Another client was discovered to have carried out over €2 million worth of transactions, despite having told Corporate & Commercial FX Services that turnover on that account would not exceed €50,000.
“Despite all these risk factors, the company failed to enquire and obtain information for the scrutiny of these transactions,” the FIAU said.
This led the FIAU to conclude that the company’s method of monitoring transactions was “inefficient, ineffective and certainly not adequate to
manage the company’s money-laundering and financing of terrorism risks”.
Throughout the compliance review, the FIAU said the provision of documents by Corporate & Commercial FX Services’ was “highly inefficient”.
Furthermore, the company was found to have operated for years without an approved anti-money laundering compliance manual.
In handing down the fine, the FIAU emphasised how any vulnerability in a company’s anti-money laundering checks increase the likelihood that both it and the financial system as a whole can be abused by criminals.
Malta was last year greylisted by the Financial Action Task Force (FATF) over concerns about the country’s will to fight financial crime.
Since then, the FATF has noted significant reforms have been carried out, with the government optimistic that Malta could be removed from the grey list by June.
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