Maltese FIAU Fines Fund For AML Failures

January 12, 2022
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Malta’s Financial Intelligence Analysis Unit (FIAU) rounded off 2021 by fining financial firm Southern Cross Sicav €300,000 for anti-money laundering (AML) failings.

Malta’s Financial Intelligence Analysis Unit (FIAU) rounded off 2021 by fining financial firm Southern Cross Sicav €300,000 for anti-money laundering (AML) failings.

In a public notice, the country’s FIAU called out the company’s “disregard” for AML compliance.

According to the regulator, a lack of robust controls meant that “millions” was able to flow through the company.

The FIAU has also revealed in the public notice that the company is in the process of surrendering its licence with the Maltese Financial Services Authority, meaning the fine will not be able to be made up for in future revenue.

Despite the closure of the business, which had been operating on the island nation since 2015, it was not enough to prevent a hefty fine from the regulator.

The FIAU found Southern Cross failed to adequately document its internal procedures to fight money laundering and did not properly screen its customers before accepting their money.

“The company’s lack of regard towards its AML/CFT obligations could have had an impact not only on its own operations but also had repercussions towards the local jurisdiction,” the FIAU said.

Rebuilding its reputation

2021 was not a great year for Malta in terms of its AML enforcement, with the country becoming the first in the EU to be greylisted by global standards setter the Financial Action Task Force.

Such a move was a setback for the country, which has begun to build itself a strategic base for crypto, gaming and e-money firms in the EU.

FATF’s ruling could have negative consequences for the country. An International Monetary Fund (IMF) working paper on the impacts of a FATF greylisting warns that such a move typically results in a “significant negative impact on a country’s capital flows".

To get off of the greylist, Malta will need to implement the recommendations set out by FATF. This means:

  • Demonstrating that beneficial ownership information is accurate.
  • That the appropriate sanctions are applied to persons if the information provided is inaccurate.
  • That gatekeepers who do not obtain accurate and up-to-date beneficial ownership information are also appropriately sanctioned.
  • Enhancing the use of financial intelligence to support authorities pursuing criminal tax and related money laundering cases, including by clarifying the roles and responsibilities of the Commissioner for Revenue and the FIAU.
  • Increasing the focus of the FIAU’s analysis on the above offences, to produce intelligence that helps Maltese law enforcement detect and investigate cases in line with Malta’s identified money laundering risks related to tax evasion.

So far, the country has made some progress with FATF’s recommendations, including strengthening the risk-based approach to supervision of financial and non-financial institutions, and resourcing the police and empowering prosecutors to investigate and charge complex money laundering in line with Malta’s risk profile. It has also enhanced its preventative measures to deal with terrorist financing.

The latest fine shows that FIAU is further heading in the right direction in terms of demonstrating its commitment to fighting money laundering.

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