Malta’s prevention of the money laundering regime is contained in two pieces of legislation, namely the Prevention of Money Laundering Act (Act XIX of 1994, as amended; Chapter 373 of the Laws of Malta) (PMLA) and the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR). The PMLA establishes the foundations for the legal framework by introducing basic legal definitions, laying down the procedures for the investigation and prosecution of money laundering offences, and establishing the Financial Intelligence Analysis Unit. The regulations, on the other hand, denote the substantive provisions relating to the offences, and clarify the systems and procedures to be adopted by subject persons in the course of their business activities.
By virtue of Legal Notice 464 of 2014, a significant number of amendments and additions were made to the Prevention of Money Laundering and Funding of Terrorism Regulations, 2008 (S.L. 373.01). The new amendments further clarify and supplement the provisions of the PMLFTR and introduce new powers for the FIAU whilst expanding the scope of the regulations.
The key changes made to such regulations are explained hereunder:
- The definition of “Case 2″ has been extended to include a transaction that involves property that may have been derived from, or constitutes the proceeds of, criminal activity.
- The definition of “Funding of Terrorism” has been amended to include Articles 328B and 328F to 328I of the Criminal Code relating to terrorist groups. The definition now includes any person who promotes, constitutes, organises, directs, finances, supplies information or materials to terrorist groups.
- The business of an electronic money institution and natural persons who are enrolled as intermediaries and act on behalf of another intermediary have been removed from the definition of “relevant financial business”.
- Private Trustees appointed in terms of article 43A of the Trusts and Trustees Act (Cap. 331 of the Laws of Malta) are now no longer treated as subject persons for the purposes of Anti Money Laundering – Combating the Funding of Terrorism (“AML-CFT”) law;
- Natural persons who are enrolled as intermediaries acting on behalf of another intermediary are likewise excluded as subject persons;
- The core obligations of subject persons are no longer pegged to ensuring that they do not ‘form a business relationship or carry out an occasional transaction with an applicant for business unless that subject person’ fulfils the said core obligations but it is now a mandatory obligation on subject persons to ‘ensure that it’ complies with such obligations;
- Subject persons will no longer be held criminally liable when it comes to taking appropriate measures from time to time to raise employee awareness in the subject person’s AML-CFT policies and procedures and the applicable provisions of the law, the obligation of training employees in the recognition and handling of suspect transactions, as well as the obligation to ensure that they have in place appropriate procedures for due diligence when hiring employees (under regulation 4(1)(d) and (e) and regulation 4(2)).
Regulation 7: Customer due diligence
The reference to regulation 7(3) when dealing with identifying the Ultimate Beneficial Owner (“UBO”) has been deleted. This will dispel any doubts there may have been that Customer Due Diligence (“CDD”) on the UBO was always required and not only when the applicant for business is acting as agent (or otherwise than as principal).
The obligation to establish CDD policies and procedure on a risk-sensitive basis under regulation 7(9) is not limited to situations of Politically Exposed Persons (“PEPs”) but has been extended to cover beneficial owners also and applies to situations where either of them may pose a higher risk of money laundering or funding of terrorism, including if one of them is a PEP. Now, the reference to PEPs is only by way of illustration of the provision that has a broader application.
Regulation 13: Record-keeping procedures
Immediately after the words “relationships and transactions therein”, the amendment adds the following paragraphs:
“(d) a record of any disclosures made to the Financial Intelligence Analysis Unit in accordance with regulation 15(6);
(e) a record of any internal reports made in accordance with regulation 15(4)(a);
(f) a record of any written determinations made in accordance with regulation 15(8);
(g) a record of any training provided in accordance with regulation 4(1)(e); and
(h) any other document, record or information which the Financial Intelligence Analysis Unit may require to be maintained in accord”
Regulation 15: Reporting procedures and obligations
An amendment was made to clarify that this obligation also arises where the subject person has “reasonable grounds to suspect that the funds are the proceeds of criminal activity”, thereby addressing MONEYVAL’s concern that the reporting obligation as previously drafted applied only to “suspicions of money laundering” instead of to “proceeds of criminal offences” generally, and that this might limit the scope of the reporting obligation.
Regulation 16: Prohibition of disclosure
This amendment adds further disclosures which shall not constitute a breach of to sub-regulation 1 of this article. These chiefly include the following and they are all subject to their own respective provisos:
(e) Disclosures by a subject person to a competent court, tribunal or other judicial authority in or outside Malta including disclosures made in any written pleadings or submissions, that the subject person refrained from carrying out a transaction as required by the proviso to article 28(1) of the Act.
(f) Disclosures by a subject person to a supervisory authority or professional body exercising supervision or regulatory oversight over that subject person that the subject person refrained from carrying out a transaction as required by the proviso to article 28(1) of the Act.
(g) Disclosures by a subject person to a competent court, tribunal or other judicial authority in or outside Malta, including disclosures made in any written pleadings or submissions, that the execution of a transaction had been suspended by the Financial Intelligence Analysis Unit in accordance with article 28 of the Act.
(h) Disclosures by a subject person to a supervisory authority or professional body exercising supervision or regulatory oversight over that subject person that the execution of a transaction had been suspended by the Financial Intelligence Analysis Unit in accordance with article 28 of the Act.
Regulation 18: Power to terminate a business relationship
Where the Financial Intelligence Analysis Unit knows or has reasonable grounds to suspect that, in connection with a business relationship established by a subject person, money laundering or funding of terrorism is taking place, has taken place or has been attempted, there is such risk the FIAU has the power to require such subject person to terminate that business relationship within a stipulated period of time.
Regulation 19: Periodical Reporting
The FIAU now also has the power to request periodical reporting from subject persons on the internal policies and procedures they maintain and these apply pursuant to regulation 4 and any other information or documents as the FIAU may consider necessary.
Regulation 20: Format of information
The new regulations cater for the possibility of electronic submission of information in a new regulation 20 that provides that “Where a subject person is required to provide information to the Financial Intelligence Analysis Unit under the Act, these regulations and any implementing procedures issued thereunder, the Financial Intelligence Analysis Unit may demand that the information is produced electronically and may establish the format within which the information is to be provided”.
Regulation 21: Penalties
The administrative offences that can be committed by body corporate have been broadened to refer to breaches not just of regulation 4 but of any regulations under the PMLFTR. The penalties for contraventions under the PMLFTR have been streamlined to a minimum of EUR 1,000 and a maximum of EUR 46,500. This provision states that the penalty could be imposed without recourse to a court hearing and either as a daily cumulative penalty until compliance is achieved or as a one-off penalty was deleted.