A Legal Notice (L.N. 199 of 2021) was published on the 30th April 2021 providing a number of amendments to the principal regulations, the Prevention of Money Laundering and Funding of Terrorism Regulations (hereinafter the ‘PMLFTR’).
Subject persons and interested parties should take stock of the below amendments made to the PMLFTR by virtue of the Legal Notice:
Amendment to Regulation 2 of the PMLFTR – By means of the Legal Notice, the definition of “Supervisory Authority” provided in the principal regulation has been somewhat broadened. The list of Authorities considered as Supervisory Authorities in terms of the PMLFTR now includes the Malta Business Registry (MBR), the Licensing Board established under the Real Estate Agents, Property Brokers and Property Consultants Act and the Trade Licensing Unit (limited to its licensing function in relation to dealers in precious metals and stones). The incorporation of the abovementioned Authorities within the list provided in Regulation shall provide clarity to the potential cooperation and collaboration that there may be between the FIAU and these new bodies.
The definition of “Trust and Company Service Provider” has also been amended via the Legal Notice. The Company Service Providers (CSP) Act has witnessed major changes, with both existing and prospective Service Providers now requiring authorisation by the Malta Financial Services Authority (MFSA) rather than merely being registered with the MFSA or having notified the FIAU. By means of the Legal Notice, the term ‘authorised’ has been included within paragraph (b) of this definition to make sure there is no uncertainty. Therefore, anyone authorised in terms of the CSP Act as amended will still be considered as carrying out relevant activity and is thus a subject person for the purposes of the PMLFTR.
Amendments carried out to Regulation 4 and 13 of the PMLFTR – The European Commission had pointed out that, following the transposition of Directive (EU) 2015/849 (the ‘Directive’) into Maltese law, some of the provisions of the PMLFTR were not exactly in line with the requirements of the Directive. Therefore, the Legal Notice provides further amendments to the PMLFTR so as to reflect the requirements of the Directive when it comes to possible exemptions from AML/CFT requirements and to subject persons’ recordkeeping obligations:
Amendment to Regulation 4 of the PMLFTR: According to Regulation 4(1) of the PMLFTR, the FIAU may determine that legal and natural persons who engage in a financial activity on an occasional or very limited basis and where there is little risk of money laundering or the funding of terrorism occurring, are not to be considered as subject persons for the purposes of the PMLFTR. The Legal Notice added the following proviso to this sub-regulation:
“Provided that the Financial Intelligence Analysis Unit may not make any determination as is referred to hereabove in relation to a person who engages in the remittance and transfer of money.”
Amendments to Regulation 13 of the PMLFTR: In terms of the record keeping obligations of subject persons, if the date when the business relationship ends or when the occasional transaction is carried out, and where the formalities necessary to end a business relationship could not be observed, the date on which the last transaction in the course of that business relationship was carried out will be considered as a commencement date of record keeping in relation to the supporting evidence and records necessary to reconstruct all transactions carried out by that person in the course of a business relationship or any occasional transaction. Another important amendment is that made to the second proviso to Regulation 13(2) of the PMLFTR relating to the retention of documents which may be extended for a period of up to ten years. By virtue of the Legal Notice, the second proviso has been amended to read as follows:
“Provided further that the period of five years may be further extended, up to a maximum retention period of ten years, where, after a thorough assessment of the necessity and proportionality of such further extension, it is concluded that the extension is justified as necessary for the purposes of the prevention, detection, analysis and investigation of money laundering or funding of terrorism activities by the FIAU, relevant supervisory authorities or law enforcement agencies.”
Amendment to Regulations 11(11) of the PMLTR – Regulation 11(11) previously set out the obligations that had to be abided by subject persons when carrying out occasional transactions, establishing business relationships or carrying out transactions within the context of a business relationship involving non-reputable jurisdictions in respect of which there is an international call for countermeasures. This provision also, prior to these amendments, previously listed the powers that the FIAU had in such cases. Following the amendments, Regulation 11(11) is now limited to setting out the obligations of subject persons, and a new sub-regulation was introduced setting out the powers of the FIAU in such cases.Following amendments to Regulation 11(11), subject persons shall inform in writing the FIAU, and shall apply one or more of the following enhanced customer due diligence measures, where occasional transactions or business relationships or transactions involve non-reputable jurisdictions in respect of which there is an international call for counter-measures:
(a) carry out additional customer due diligence measures;
(b) introduce enhanced reporting mechanisms or systemic reporting of transactions;
(c) limit occasional transactions or business relationships involving such non-reputable jurisdictions.
In this context, the FIAU or the relevant supervisory authority may apply one or more of the following counter-measures:
(a) refuse the establishment in Malta of branches, representative offices or subsidiaries of persons or entities undertaking activities equivalent to relevant financial business or relevant activity which are situated in such non-reputable jurisdictions, or otherwise take into account the fact that that person or entity is situated in a non-reputable jurisdiction that has deficiencies in its anti-money laundering and counter funding of terrorism regime;
(b) prohibit subject persons from establishing branches or representative offices in such a non-reputable jurisdiction or otherwise take into account the fact that the branch or representative office would be situated in a non-reputable jurisdiction that has deficiencies in its anti-money laundering and counter funding of terrorism regime;
(c) carry out increased compliance monitoring or require increased external audit requirements on branches and subsidiaries, of persons and entities, which are involved with non-reputable jurisdictions, established in Malta;
(d) require external audit requirements on subject persons forming part of a group in respect of their branches or subsidiaries in such non-reputable jurisdictions; and
(e) require subject persons carrying out relevant financial business to review, amend or terminate correspondent relationships with respondent institutions established in such non-reputable jurisdiction.
Amendment to Regulation 21 of the PMLFTR – The Legal Notice has carried out amendments to article 21(4)(b)(ii) in order to clarify the powers of the FIAU in relation to the issuing of administrative penalties on subject persons which carry out relevant financial business. Following such amendments to the PMLFTR, it now ensures that the FIAU is empowered to impose an administrative penalty of not more than five million euro (€5,000,000) in the case of serious, repeated, or systematic breaches of any of the requirements which arise from the PMLFTR. If the breaches being considered are so serious that five million euro (€5,000,000) is not deemed sufficient, the FIAU can take into account the subject person’s turnover and impose an administrative penalty of not more than ten percent (10%) of the turnover, as long as this results in an administrative penalty that is higher than five million euro (€5,000,000) in value.