In the past years, the FIAU has been thrust into the limelight. Being an intelligence agency, the FIAU was always inclined to stay in the shadows. Confidentiality and secrecy are a must in the world of intelligence, to safeguard both the success of operations and the security of the officers involved. However, a number of events that have justifiably generated public interest, have brought the FIAU very much into focus.
A lot has been written, said, and commented about what the FIAU does and doesn’t do, and misconceptions are rife. The lack of publicly available case-specific information is often wrongly interpreted as a failure by the FIAU to take action. However, the fact that the FIAU’s work is confidential does not mean it is not carried out. On some occasions the FIAU sought to clarify its position but on many others, it chose to stay away from public debate. Nevertheless, the FIAU believes the general public should know more about the work it carries out.
The FIAU has two main functions: it is a financial intelligence agency and a supervisory authority. Two additional responsibilities were assigned to it recently – the Centralised Bank Account Registry (CBAR) and the oversight of the new Use of Cash (Restriction) Regulations.
The intelligence analysis function is where utmost secrecy is required, not only by Maltese law but also by international standards applicable to all financial intelligence units. Behind the financial information collected and analysed by the FIAU hide those who have made money out of drugs, people or arms trafficking, fraud, corruption, extortion and other serious crimes. Fighting money laundering (ML) is fighting crime, often including dangerous criminal groups. However, as an intelligence agency the FIAU does not have the power to conduct criminal investigations and prosecutions. Its role is to receive, collect and analyse intelligence and forward this to the police for criminal investigation. The information held by the FIAU is not evidence, but once given to the police it helps them find the evidence required for a prosecution.
Dirty money that needs to be washed stems from crimes where the victims are real
For many, ML is a white collar and ‘clean’ crime that does not affect them directly. This is a far cry from reality. Dirty money that needs to be washed stems from crimes where the victims are real. It could be a member of your family, a friend or colleague. Think for example drugs sold to your son, a fraudulent investment through which you lose your life savings, profits made by a corrupt individual to the detriment of your business. The apparently impersonal crime of ML cleans the money made from these crimes, of which you may be the victim.
It is time for each of us to understand that ML undermines society and the economy, in the end you suffer. Less investment in Malta due to ML means less jobs, more crime means more victims and a society that is no longer safe. The FIAU plays its part and strives to prevent this from happening, not only through intelligence analysis but also through its supervisory function. This is the supervision of the so-called subject persons – financial operators and other non-financial businesses and professions subject to anti-money laundering and counter terrorist financing (AML/CFT) requirements.
International standards and EU Directives set out rules that must be in place and applicable to subject persons to prevent ML/FT. Maltese law must fully comply and the FIAU applies these rules .
At times the FIAU is accused of applying the rules disproportionately and of over burdening subject persons and economic activity. This is not the case. The FIAU applies the law in line with international standards and recommendations made by MONEYVAL, the IMF, the EBA and the European Commission. This is done to ensure subject persons are not intentionally or unintentionally involved in ML/FT. It is no small task with over 2,300 subject persons to be examined regularly. The frequency, type, and depth of supervisory examinations depend on the level of risk of the business and can take from a few days to weeks or months depending on the entity/case. The FIAU is constantly engaging with subject persons to assist them understand their legal obligations and the importance and value of compliance.
Notwithstanding the laws in place, guidance and training provided, sometimes subject persons fail to comply with the law and their obligations to safeguard themselves and Malta as a jurisdiction from the risks of ML/FT. When this happens, the FIAU is obliged to take the necessary measures to ensure compliance. This is done in three ways; through a written reprimand for less serious issues, a directive to take remedial action to correct the deficiencies in systems and procedures, and imposing an administrative fine. The fine should be proportionate (to the subject person and seriousness of the breaches), effective and dissuasive. When the failures are serious, repeated, and systemic, then it is critical that the fine reflects this.
A recent addition to the FIAU’s responsibilities is the management of CBAR. This is an automated system for the collection and retrieval of data on bank and payment accounts, safe custody services and safe deposit boxes provided by banks and financial institutions. It supports the FIAU’s Intelligence Section and other key authorities to access bank account information instantly, and is a powerful tool to identify ill-gotten gains from crime hidden in bank accounts or for example, precious metals and stones stashed away in a safety deposit box.
The Use of Cash (Restriction) Regulations published last March, the implementation of which has been assigned to the FIAU, are another tool to fight ML. This new law is certainly not aimed at legitimate business or the use of legitimately earned money. It is aimed at reducing the risk of ML through the purchasing of high value goods in cash, since this is a common way of laundering money by criminals. A limit of €9,999.99 was therefore introduced for payments in cash for seacraft, motor vehicles, jewellery including watches, precious metals, precious stones including pearls and immovable property.
The introduction of a cash restriction law was one of Moneyval’s recommendations for consideration. This law is useful not only in the fight against ML but also against tax evasion and criminal activity in general. Several EU countries already have similar laws, with limits ranging from €15,000 to as low as €500.
The FIAU is entrusted with being Malta’s AML/CFT watchdog, with the aim of keeping Malta a clean and safe jurisdiction for future generations. It is with this in mind that suspicious transaction reports and financial intelligence are analysed and intelligence reports forwarded to the police, that supervisory examinations take place, compliance is enforced and where necessary, fines imposed. This is the role of the FIAU, carried out without looking at faces. As acknowledged in the MONEYVAL report: “The FIAU officers perform their functions freely and objectively without undue influence.”
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