A Maltese “digital bank” has been fined by the Financial Intelligence Analysis Unit, months after one of its directors was sanctioned by the United States over his links with Russia.
The €279,000 fine for anti-money laundering failures was announced by the FIAU on June 1, two years after it carried out its compliance visit on Papaya Limited.
Frederic Villa, one of Papaya’s directors, was among dozens of individuals and companies sanctioned by the US in February, as part of an effort to target industries that support Russia’s war against Ukraine. He resigned from Papaya’s board that same month.
No sanctions were imposed on Papaya.
Villa, a Swiss-Italian who resides in Malta, is the founder of Integritas Group, a Maltese corporate services firm that promotes citizenship by investment. Integritas has publicly severed ties with Villa, following his sanctioning.
According to the FIAU’s findings, Papaya failed to properly assess the financial crime risks posed by some of its clients. It highlighted one instance where Papaya held source of wealth information on a client that was “not in a language that could be understood”.
Furthermore, it was noted that even if the transaction descriptions were in a “language which could be understood”, they were all withdrawals and, therefore, could not be indicative of the customer’s source of wealth.
Documents collected to support transactions taking place were deemed “inadequate” and, at times, created “more doubts rather than clarifications” regarding the transactions taking place at Papaya, the FIAU said.
In one example, the FIAU noted how a loan agreement between two Papaya customers for €700,000 was “updated” to €7 million. The FIAU said the loan agreements in place shed little light on the purpose of the loans. It said Papaya failed to scrutinise loan documents and the transactions taking place, in breach of its legal obligations.
It explained that, although widely used and legal by their nature, loan agreements can also serve as a means to facilitate money laundering.
In handing down the €279,000 fine, the FIAU noted Papaya’s “minimal” regard towards its anti-money-laundering obligations.
The FIAU has ordered Papaya to carry out remedial action to ensure that adequate anti-money-laundering controls are put in place.
Papaya director Tonio Fenech said the company’s management team have recommended that the findings as well as the penalty imposed by the FIAU be appealed. “The board of directors is conferring with legal advisors on this basis.”
Fenech said Villa resigned from Papaya’s board in late February 2023.