Daniel Bilocca, compliance and risk director at NOUV, gives an overview of what legislative instruments have strengthened AML compliance in Malta. 

2020 shall be remembered by Malta’s AML compliance experts for the numerous key legal amendments that have started turning the method of AML compliance enforcement over its head: the result of the publication of different acts and legal notices.

Malta’s initial step was to bolster its competent authority, the Financial Intelligence Analysis Unit (FIAU) to safeguard its transparency. Malta’s very first legislative Act of the year implemented the following measures:

i. The FIAU was granted the right to establish, manage and administer a central bank account registry for Malta which as per Legal Notice 401 of 2020 (the Centralised Bank Account Register Regulations), shall contain ‘data and information on accounts identified by IBAN held by credit and financial institutions and on safe custody services provided by credit institutions’.

ii. The FIAU was vested with the power to oversee the enforcement of any future legislative measures on cash restrictions. Malta further solidified its stance in this respect through Legal Notice 285 of 2020, when the Cash Control Regulations were enacted, clarifying that the FIAU was to be informed when a person entering, leaving or transiting through Malta, has his/her cash detained due to it surpassing the €10,000 threshold.

iii. FIAU’s functions for cooperation and the exchange of information between authorities within and outside Malta was reinforced.

iv. By law, FIAU director’s appointment can now solely be decided following a public call for applications.

v. The Office of the Attorney General was removed from the FIAU’s Board of Governors, and two new members added namely a representative from the Malta Gaming Authority and one from the Commissioner for Revenue.

A few months later, Legal Notice 214 of 2020 introduced amendments to improve upon the practises conducted by Malta’s AML subject persons and to reinforce even furtherly the FIAU. Some key measures included:

i. Clarification that when a subject person is compelled by law:

• not to carry out of a transaction through the account;

• not to establish the business relationship or

• not to carry out any occasional transaction due to the failure in obtaining the required customer due diligence, and refrainment in such manner ‘would likely tip-off the customer about … a potential money laundering or funding of terrorism analysis or investigation, that business shall proceed on condition that a disclosure is immediately lodged with the Financial Intelligence Analysis Unit’.

ii. The period within which suspicious transaction reports (hereinafter referred to as “STRs”) have to be submitted by subject persons and supervisory authorities respectively was revised. The previous 5 working-day submission period for both subject persons as well as supervisory authorities was replaced with the obligation to make prompt submissions of STRs to the FIAU.

Numerous key legal amendments

iii. The FIAU was vested with the power to lay down administrative sanctions on:

• individuals who have a senior executive management function within a subject person.

• directors or officers holding similar functions and responsibilities within a subject person.

• reporting officer of a subject person.

• individuals appointed to monitor the day-to-day implementation of the measures, policies, controls, and procedures of a subject person.

In order to be sanctioned, these individuals must have been found to be responsible (thus who have caused or contributed to) for AML/CFT breaches committed by that subject person. This can take place either through an act or omission of the individual, which has to be intentional or occasioned through gross negligence (including through the lack of proper oversight of subordinates). The administrative penalties could amount to a figure of not less than €1,000 and not more than €250,000.

iv. Through the amendments, it was expressly stated within the law, that any administrative penalty imposed by the FIAU has to be effective, proportionate, and dissuasive.

By virtue of Act No. LII of 2020, Malta increased penalties for the financing of terrorism from being a term not exceeding four years or a fine not exceeding €11,646.87 or both to a punishment of imprisonment for a term of not less than four years but not exceeding 20 years or to a fine not exceeding €2,500,000 or to both such fine and imprisonment.

The penalty for the use and possession of money or other property for the purposes of terrorist activities was also changed from ‘punishment of imprisonment not exceeding 12 years’ to ‘imprisonment from seven years to life.’ Lastly, the criminal penalty for a body corporate which is found guilty of terrorism, its funding and ancillary offences has been changed from being not less than €11,646.87 and not more than €2,329,373.40 to being a fine not exceeding €5,000,000.

Another legislative measure which is currently being debated in Parliament is the Legal Profession (Reform) Bill which shall address Moneyval’s concern that currently, there exist no proactive checks on lawyers in Malta. The Bill’s wording seeks to vest the Commission for the Administration of Justice with the authority to assess lawyers giving the Commission the right to disable perpetually or temporarily an advocate who:

i. has failed the fitness and properness test; or

ii. ‘has seriously, repeatedly or systematically failed to satisfy his obligations under the Prevention of Money Laundering Act or the Prevention of Money Laundering and Funding of Terrorism Regulations’; or

iii. ‘has been found guilty by a court of law of a crime affecting public trust or theft or of fraud or of knowingly receiving property obtained by theft or fraud or of any crime punishable by a term of imprisonment exceeding one (1) year with the exception of involuntary offences.’

While 2020 was a remarkable year for AML Compliance legislative efforts in Malta, other measures are expected in the future namely the entry in force of the new Corporate Service Providers (CSP) Act, to regulate further the activity of CSPs and ensure their compliance with established requirements. The message is clear: no deficiencies shall be tolerated when it comes to AML practices, and any illicit practice shall face the hefty penalties they deserve.

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