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At CSB Group, our AML/CFT compliance specialists can support your business in your effort to build the necessary compliance capacity to fulfil your obligations and safely proceed with the attainment of their strategic objectives.
What constitutes a money laundering offence
Money laundering is described as the process by which illegally obtained money is concealed, in order to give the impression that said money is legitimate. This is considered as the most significant process in a monetary criminal activity as criminals must make sure not to attract any superfluous attention to their illegal principal activities.
A money laundering offence is done by disguising the sources, changing the form, or moving the money to places where it is less likely to attract any unwanted attention from the authorities. However, in the Prevention of Money Laundering Act, the definition of money laundering goes beyond this. In fact, it is implied that the passive possession of an illegally obtained property, even if one has just suspicions of any illegalities, tantamount to an offence under the abovementioned act.
Recent Anti Money Laundering Directives
One of the most fundamental AML directives ever transposed into our national laws is without any doubt – the 4th AML Directive. The latter, as per Legal Notice 372 of 2017, paved the way for the Money Laundering and Funding of Terrorism Regulations, 2017 (‘PMLFTR’) to be introduced.
The PMLFTR presented new regulations with a greater emphasis on a risk-based approach to fulfilling AML/CFT obligations. The latter mainly refers to the manner in which customer due diligence shall be carried out.
On the other hand, the most recent AML directives, i.e the 5th and 6th AML Directives, also brought about certain fundamental changes within our national laws regulating money laundering within the country.
On the 7th of February 2020, Act I of 2020 was published in the Government Gazette highlighting a number of amendments intended to transpose the 5th AML Directive into Maltese legislation which brought about significant changes, including but not limited to:
The power of the FIAU to enforce cash restrictions,
A shorter procedure before the Court of Appeal, and
The strengthening of criteria for the selection of FIAU officials and staff.
On the other hand, the 6th AML Directive, being the most recent of the series, is expected to lay down a uniform interpretation of the criminal offence of money laundering across the EU.
Some of the main changes being made as a consequence to the introduction of the above directive include:
Enhanced penalties for money laundering felonies,
Extension of criminal liability to legal persons such as companies and partnerships and persons acting on their behalf, and
That there should be a high level of cooperation when two or more jurisdictions claim jurisdiction for a money laundering offence. The jurisdictions shall liaise with each other and decide which of them will prosecute the alleged offenders.
AML/CFT Legislation in Malta
The legislations in Malta founded with the sole aim of combating the offences of money laundering and the funding of terrorism are mainly three:
Prevention of Money Laundering Act – Chapter 373 of the Laws of Malta,
Prevention of Money Laundering and Funding of Terrorism Regulations – Subsidiary legislation 373.01, and
Criminal Code – Chapter 9 of the Laws of Malta.
Penalties applicable to legal entities or/and individuals
According to the Prevention of Money Laundering Act, any person who is found guilty of an offence regarding money laundering by the criminal court, shall be liable to a punishment of imprisonment of not less than 4 years but not exceeding 18 years, or to a fine of not less than €50,000 but nor more than two million and €2,500,000.
On the other hand, if such conviction is given by the Court of Magistrates (both that of Malta and Gozo), after all the details provided by the attorney general with regards to the offender are evaluated, the term of imprisonment would vary from 12 months to 9 years and the fine cannot be less than €20,000 and not more than €250,000.
However, the above-mentioned periods of imprisonment and the amounts of fines only apply to general people and not to subject persons. In any case, where subject persons, fail to comply with any directive, order or request issued by the FIAU, they will be liable to a fine of not less than €1,000 but not more than €45,000 for every separate failure. However, one must mention the fact that in certain circumstances involving minor breaches of the regulation, the FIAU has the right to impose an administrative penalty of a lesser amount than that state above.
Nonetheless, this cannot be less than €250. Where a legal practitioner carries out a ‘relevant activity’ as defined in these regulations, said practitioner shall be liable, on conviction, to a fine of not more the €1,000,000 or where the benefit derived can be calculated, not more than double the amount derived. In the case that a legal practitioner carries out a ‘financial relevant activity’ as implied in these regulations, the administrative penalty, on conviction, cannot exceed €5,000,000 or not more than 10% of the benefit derived from that contravention.
‘Subject Persons’ according to the PML/FTR
According to the Prevention of Money Laundering and Funding of Terrorism Regulations, the following shall be considered as ‘Subject Persons’:
auditors, external accountants and tax advisors and any other person that undertakes to provide, directly, or through other persons to whom he is related, material aid, assistance or advice on tax matters,
real estate agents, including when acting as intermediaries in relation to the letting of immovable property where the monthly rent amounts to €10,000 or more,
notaries and other independent legal professionals,
any natural or legal person trading in works of art or acting as an intermediary in the sale of works of art, including when this is carried out by art galleries, auctioneers and free ports, where the value of the transaction or a series of linked transactions amounts to €10,000 or more, and
free ports when storing works of art the value of which amounts to €10,000 or more, or when trading in works of art or acting as intermediaries in the sale of works of art.
Financial Institutions AML/CFT Compliance Obligations
A financial institution intending to provide any of the activities referred to in the Schedules included within the Financial Institutions Act (including, but not limited to: Lending, Financial Leasing, Venture or risk capital, Guarantees and commitments, Money broking and issuing of electronic money etc..) through an agent or, in the case of an electronic money institution intending to appoint a distributor to distribute or redeem electronic money, shall communicate a description of the internal control mechanisms that will be used by the agent in order to comply with the obligations in relation to money laundering and the funding of terrorism under any anti-money laundering and combating the funding of terrorism legislation.
If the competent authority has reasonable grounds to suspect that, through such branch, agent or distributor, money laundering or the funding of terrorism is being or has been committed or attempted, or that the engagement of a branch or agent could increase the risk of money laundering or the funding of terrorism, it shall inform the Member State in which the financial institution is established, and may refuse to register the branch or agent, or may withdraw the registration of the branch or agent.
Know Your Customer (KYC) and due diligence
According to the PML/FTR, every subject person shall duly conduct customer due diligence. This includes but is not limited to:
the identification of the customer, and the verification of the identity of the customer on the basis of documents, data or information obtained from a reliable and independent source,
the verification of the legal status of the customer and shall also identify all directors and, where the customer does not have directors, all such other persons vested with its administration and representation, in cases involving body corporate/persons or any other form of legal entity,
the identification, where applicable, of the beneficial owner,
conducting ongoing monitoring of the business relationship, and
ensuring that the documents, data or information held by the subject person are reviewed and kept up-to-date.
Subject Persons shall also ensure that the risk management procedures are duly maintained and carried out. Subject persons shall, as far as reasonably possible, examine the purpose and background of all transactions/activities that:
are unusually large;
are conducted in an unusual pattern;
have no apparent economic or lawful purpose; or
involve non-reputable jurisdictions.
Provided that in such cases subject persons shall increase the degree and nature of monitoring of the business relationship, to determine whether those transactions or activities are suspicious.
Record Keeping and Reporting Procedures and Obligations
Subject persons shall retain documents and information for the purposes of the prevention, detection, analysis and investigation of money laundering or funding of terrorism activities by the Financial Intelligence Analysis Unit, relevant supervisory authorities, or law enforcement agencies in accordance with the provisions of applicable law.
Our AML/CFT Compliance Services
CSB Group’s Compliance Team assists clients with their FIAU reporting requirements by focusing on the nature of the relevant activity being carried out and the context within which the subject person operates. For the Business Risk Assessment, a tailor-made evaluation of all relevant business risk areas faced by the company is prepared and clearly presented for the board to be informed and deliberate accordingly, before approval and submission to the FIAU.
A Risk Evaluation Questionnaires (REQs) submitted through the FIAU’s Compliance and Supervision Platform for Assessing Risk (CASPAR) is the Unit’s advanced monitoring system, utilised to assess regulatory compliance performance of subject persons. This requires the person/agent completing it to have intimate knowledge and access to all areas of the subject person’s business. CSB’s Compliance Team supports employees of subject persons tasked with the duty of collating the large volume of information in order to complete the REQ, by reviewing it before submission and providing clarity when and as may be needed.
CSB Group’s AML/CFT Services are further complemented by other compliance-related services such as:
designing and implementing compliance monitoring programmes;
drafting customised policies, manuals and procedures in line with regulations;
conducting investigations into regulatory or compliance breaches;
reviewing and assessing policies, manuals and procedures according to regulatory changes;
supporting with the anticipation of compliance impacts of regulatory change;
assisting and providing tailor-made training solutions in universal compliance topics, such as AML/CFT and GDPR
assisting with the preparation for and response to regulatory onsite inspections and drafting an action plan in this regard;
conducting client-specific or business-wide compliance reviews
supporting organisations with the drafting of Business Risk Assessments and Customer Risk Assessments.
CSB Group have been loyal partners to our development-stage medical technology company. CSB provides local oversight to our Malta subsidiary that is thorough and compliant. As a result, we have the confidence that a successful development project should yield maximum value for our shareholders.
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