A judge ruled on Thursday that the administrative penalties imposed by the Financial Intelligence and Analysis Unit are unconstitutional and in breach of the rights of subject persons to be tried by an independent court.
The landmark judgment was handed down in a case brought by a payment processing company fined by the financial services watchdog for alleged regulatory breaches, claiming that its rights to a fair hearing had been breached.
Phoenix Payments Ltd challenged the FIAU’s power to act as investigator, prosecutor and judge when it slapped it with a €435,000 fine in 2021.
While the company appealed the actual decision, it argued in court that aggrieved parties have no effective remedy to the FIAU’s decisions and administrative penalties.
Phoenix told Madam Justice Audrey Demicoli that it had been denied a fair hearing before an impartial and independent tribunal, as guaranteed by the European Convention of Human Rights and the constitution.
Phoenix had been slapped with a €435,576 fine by the FIAU for a series of anti-money laundering breaches linked to cryptocurrency.
The company’s directors are Francesc Xavier Alabart Lopez, a Spanish national, Keith Farrugia, a Maltese national, and Marco Lavanna, an Italian residing in Switzerland.
When imposing its fine, the FIAU had said it found shortcomings in the way the business collected information on customers’ business and occupation and their source of wealth and source of funds.
The same was true when it came to ensuring it properly understood the anticipated level and nature of transactions, including the expected value and frequency of payments.
But Phoenix argued in a case before the First Hall of the Civil Courts in its constitutional jurisdiction that the FIAU’s power to investigate and impose exorbitant administrative fines when it was not a court in its classical definition, was in breach of its rights to a fair hearing.
Madam Justice Demicoli upheld this argument, ruling that the FIAU did not classify as a court as prescribed by law and that its power to impose administrative penalties on the basis of an article on the Prevention of Money Laundering Act, was unconstitutional and therefore in breach of the European Convention of Human Rights.
According to this law, the FIAU may impose administrative penalties not exceeding €5 million or twice the amount of the benefit derived from the contravention, breach or failure to comply, where this can be determined or 10 per cent of the total annual turnover according to the latest approved available financial statements.
Madam Justice Demicoli ruled that this power granted to the FIAU through this law was anti-constitutional and ordered that the judgment be passed on to the House of Representatives to take action on the matter.
As a remedy for the breach, the court said it was declaring as null the FIAU’s decision in its regard as well as the administrative penalty it had imposed.
The judge also ordered that the FIAU is not forced to pay court fees because it was simply relying on a law that gave it power to impose its penalties. Instead, it ordered that the fees are borne solely by the State Advocate.
Times of Malta is informed that there at least 18 other similar cases filed against the FIAU by people or companies which were on the receiving end of an administrative fine.
Lawyers Kristina Rapa Manche` and Edward Fenech Adami appeared for the company while lawyers John Refalo and Ingrid Bianco represented the FIAU. Lawyer Fiorella Fenech Vella appeared for the State Advocate.