“Millions” flowed through a Maltese investment fund without “robust” controls to prevent money-laundering and terrorism financing being in place.
In a public notice, the Financial Intelligence Analysis Unit (FIAU) said Southern Cross Sicav had a “disregard” for its anti-money laundering obligations.
Although the fund is in the process of surrendering its MFSA licence, the FIAU nonetheless fined it €300,000 for the “serious” failures during its years in operation.
Southern Cross Sicav’s “lack of regard” towards its anti-money laundering obligations could have had an impact not only on its own operations, but also had repercussions on Malta, the FIAU notice said.
Malta was last year greylisted by the FATF, a global anti-money laundering body, over failures to adequately fight financial crime.
The FIAU found Southern Cross failed to adequately document its internal procedures to fight money laundering and did not properly screen its customers before accepting their money.
In one case, the unit discovered that the fund failed to question why one of its clients, a university, was investing its returns into the fund.
Although Southern Cross identified the high-risk nature of its relationship with the university, it failed to gather additional information and documentation to mitigate the potential risk of money laundering.
“This would include evidence to confirm that the university could in fact afford such involvement, that the source of wealth of the university is backed with the necessary evidence and that the rationale for the university investing its returns from tuition fees in aircraft leasing made economic sense for it”, the FIAU said.
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Southern Cross ran a sub-fund call AviaLease up until March 2019, when the sub-fund’s licence was voluntarily surrendered, according to an MFSA notice.
The FIAU further noted how Southern Cross only appeared to have obtained an excerpt of financial statements from the university after it had already invested money in the fund.
“Therefore, the company had entered a business relationship with this entity without having the necessary basic information, let alone having a comprehensive understanding of the source of wealth and expected source of funds of the university,” the FIAU said.
In an apparent reference to the same university, the FIAU said Southern Cross identified a rector and vice rector as the persons in control of the university but failed to identify or verify the rector’s details.
Expired passport as ID
In other files analysed by the FIAU, the unit found Southern Cross failed to verify the residential address of certain clients, and even accepted an expired passport as ID when it took on a particular client.
Failures were also found in Southern Cross’ measures to understand where their clients’ money was coming from.
For instance, the company did not obtain information in relation to the source wealth/investment capabilities of the customers for eight of the files reviewed.
“Furthermore, no details demonstrating the understanding from which activities these funds were generated were found,” the FIAU said.
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