The Financial Intelligence and Analysis Unit (FIAU) has changed its system of administrative fines after a court ruled that they could no longer impose fines higher than 10 per cent of a business’s annual turnover.

Published recently in The Malta Government Gazette, the legal notice introduced a series of amendments to the Prevention of Money Laundering and Funding of Terrorism Regulations. The new fine structure now caps the fine at €5 million in cases of serious, repeated or systematic breaches of any of the requirements.

However, the FIAU may add an administrative penalty of not more than 10 per cent of the turnover if this is deemed not to be effective and dissuasive in view of the serious, systemic and repeated nature of the contraventions committed.

The previous regulations laid down that the administrative penalty is capped at €5 million or not more than 10 per cent of a business’s total annual turnover.

This percentage capping applied only to relevant financial business, leading to a barrage of appeals by those fined by the FIAU. 

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.

There are also a number of constitutional court cases against the FIAU where it is being accused of being judge, jury and executioner. The FIAU has also been sued for discrimination and disproportionality.

It should be highlighted that Malta transposes its laws from EU directives

The FIAU has tried to stop any constitutional proceedings, arguing that the appeals should be decided prior to the hearing of the constitutional cases. However, the constitutional court ruled that the cases should go ahead and decided, without waiting for the outcome of the appeals, in view of claims of human rights breaches.

Last December, Mr Justice Grazio Mercieca reduced a €3.7 million fine imposed by the FIAU on Satabank to €851,000 after ruling that the fines had to be capped at 10 per cent of the bank’s turnover.

The FIAU disagreed with the interpretation of the law and sought to clarify the law itself.

A spokesperson for the FIAU argued that the decision to reduce the fine was related to one particular case “with a very specific set of circumstances” and did not rule to cap the fines across the board in the future.

The “very specific set of circumstances” were not explained by FIAU.

“It should be highlighted that Malta transposes its laws from EU directives and the decision made to amend the law was made to better reflect the spirit of the EU directives,” she said.

“The legislative review process to better align Maltese legislation with EU directives and international standards is an ongoing one.”

On the pending appeals, the spokesperson said it will be up to the appeals court to decide if to take the same approach as that taken in the Satabank case.

She pointed out that, in another case decided by the court following the Satabank case  and where the FIAU had imposed a penalty that exceeded 10 per cent of the entity’s annual turnover, the court did not rule that the penalty should not have exceeded it.

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