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Malta’s Financial Intelligence Analysis Unit has “no power“ to pursue criminal AML probes
Last changed: July 22 2024 14:20
The head of Malta’s FIU has said it has “no power” to pursue formal legal action on money laundering following a string of court decisions throwing out fines imposed by the organisation.
Alfred Zammit, Director of Malta's Financial Intelligence Analysis Unit (FIAU), has reported that the FIAU’s suspicion reporting system is performing effectively, as evidenced by the steadily increasing number of Suspicious Transaction Reports (STRs) received. “It’s important to clarify that the FIAU does not have the authority to conduct criminal investigations or prosecute individuals for money laundering. Our role is to ensure compliance and provide intelligence; the police are responsible for criminal investigations and prosecutions,” Zammit emphasizes.
Six months into his role, Zammit outlines the FIAU's mandate to deliver timely, high-quality financial intelligence to law enforcement agencies. “We work closely with government bodies, national authorities, the National Coordinating Committee on the Prevention of Money Laundering and Funding of Terrorism, as well as both national and international counterparts to monitor compliance with anti-money laundering (AML) and counter-financing of terrorism (CFT) regulations.
“One of my primary goals is to implement the FIAU Strategy, focusing on leveraging technology to enhance our ability to prevent and detect money laundering,” Zammit adds.
The recent National Risk Assessment report indicates a reduction in residual money laundering risk across various industries due to improved mitigating measures, although some sectors continue to pose medium to high risks.
“Our supervision is entirely risk-based. We perform annual risk assessments using a wide range of sources, including the National Risk Assessment, information from subject persons, other supervisory bodies, FIAU intelligence, and European Supranational Risk Assessment data.
“Our risk assessment is dynamic, updated in real-time, with more intensive supervision applied to higher-risk areas. We also provide targeted training and outreach to high-risk operators and regularly update guidelines, as reflected on the newly revamped FIAU website,” Zammit explains.
Recently, the Constitutional Court has overturned several fines imposed by the FIAU, with some judges criticizing the fines as “convoluted, opaque, and Byzantine.”
“While we respect the court’s rulings, we have concerns about aspects of these decisions that have made enforcement less effective. We have appealed these decisions to seek final judgments from Malta’s highest court,” Zammit notes.
Data from earlier this year indicates a notable drop in the number of individuals prosecuted for money laundering following Malta’s removal from the FATF grey list in 2022.
“The FIAU’s work in intelligence and report submission to the police has remained unchanged despite Malta’s exit from the FATF grey list. There has been no reduction in our supervisory or enforcement activities,” Zammit asserts. He emphasizes the distinction between the FIAU’s administrative functions and the criminal investigations and prosecutions handled by the police and Attorney General.
“It’s crucial to understand that the FIAU is not involved in criminal investigations or legal proceedings related to money laundering,” Zammit reiterates.
Zammit also highlights the importance of strong corporate governance in combating money laundering. “Effective corporate governance fosters a robust AML/CFT culture, particularly for entities with statutory obligations. It is in every subject person’s interest to comply with AML/CFT requirements and prevent misuse of their services for money laundering.”
Amidst international media claims that Malta is a hub for money laundering by the Italian mafia, Zammit dismisses these as sensationalist. “Malta’s AML regime is robust, as demonstrated by the stringent measures banks now employ during customer onboarding. While no system can entirely prevent mafia infiltration, the suspicion reporting system is working well, as shown by the increasing number of STRs. Moreover, the FIAU has significantly strengthened its collaboration with Italian authorities,” he says.
Post-grey-listing, Zammit acknowledges a heightened collective effort to combat financial crime. “There is increased awareness of the need for a strong AML framework, with notable improvements in compliance, engagement with the FIAU, training, and expertise. The number of suspicious transaction reports has risen, and processes and procedures have been enhanced.
“We are actively participating in EU-level discussions on the new AML package, including the establishment of the Anti-Money Laundering Authority (AMLA) and related legislation. Our legal and operational teams are fully aligned with these developments, and our internal resources have been bolstered significantly,” Zammit concludes.
Malta has a robust framework for anti-money laundering (AML) and combating the financing of terrorism (CFT), designed to comply with international standards and directives. Here's an overview of the key aspects of Malta's AML/CFT regulations:
1. Regulatory Framework
1.1. Primary Legislation
- Prevention of Money Laundering Act (PMLA) 1994: This is the cornerstone of Malta's AML legislation. It establishes the legal basis for AML measures and outlines the responsibilities of reporting entities. - Terrorism (Suppression of Financing) Act (TSFA) 2001: This act deals with the financing of terrorism, complementing the PMLA by addressing terrorist financing specifically.
1.2. Relevant Regulations and Directives
- Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) Regulations: These regulations, including those from 2018 (LN 372/2018) and updates to comply with EU directives, detail the practical requirements for AML/CFT compliance.
- EU Directives: Malta aligns its laws with EU directives such as the 4th, 5th, and 6th Anti-Money Laundering Directives (AMLDs). These directives set out minimum requirements for AML/CFT measures across member states.
2. Key Regulatory Authorities
2.1. Financial Intelligence Analysis Unit (FIAU)
- The FIAU is the central body responsible for receiving, analyzing, and disseminating suspicious transaction reports. It also oversees compliance with AML/CFT regulations and can impose penalties for non-compliance. 2.2. Malta Financial Services Authority (MFSA)
- The MFSA regulates financial institutions and ensures that they comply with AML/CFT requirements. It also plays a role in supervising entities under its jurisdiction and enforcing AML/CFT laws.
3. AML/CFT Compliance Requirements
3.1. Customer Due Diligence (CDD)
- Entities must perform thorough CDD measures to verify the identity of their customers. This includes collecting and verifying identification documents and, where applicable, understanding the nature and purpose of the business relationship.
3.2. Risk-Based Approach
- Entities are required to adopt a risk-based approach to AML/CFT, meaning they must assess and manage the risk of money laundering and terrorist financing associated with their customers and transactions.
3.3. Record Keeping - Entities must maintain records of transactions and customer identification for a minimum period, usually five years, to facilitate audits and investigations.
3.4. Reporting Obligations
- Entities must report suspicious transactions and activities to the FIAU. This includes any transaction that raises concerns about money laundering or terrorist financing.
3.5. Internal Controls and Training
- Entities are required to establish internal policies, procedures, and controls to prevent money laundering and terrorist financing. Regular training for employees is also mandatory to ensure they understand their AML/CFT obligations.
4. Enforcement and Penalties
4.1. Enforcement Actions
- The FIAU has the authority to conduct inspections, issue fines, and take other enforcement actions against entities that fail to comply with AML/CFT regulations.
4.2. Penalties
- Non-compliance can result in significant penalties, including financial fines, restrictions on business operations, and, in severe cases, criminal charges against individuals responsible for breaches.
5. International Cooperation
Malta collaborates with international bodies such as the Financial Action Task Force (FATF) and participates in international efforts to combat money laundering and terrorist financing. The country also engages in mutual evaluations to ensure its AML/CFT regime meets global standards.
6. Recent Developments
- Malta continuously updates its AML/CFT framework to align with evolving international standards and EU regulations. This includes amendments to existing laws and the introduction of new measures to address emerging risks and challenges.
For the most current and detailed information, it's advisable to consult the FIAU, MFSA, or legal professionals specializing in Maltese financial regulations.
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