FIAU Appeals: Financial Institutions and DNFBPs Challenge Penalty Decisions

In a recent development, several financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) in Malta have exercised their right to appeal penalties issued by the Financial Intelligence Analysis Unit (FIAU). The appeals are being heard behind closed doors, with the outcome not publicly disclosed. The FIAU is required to update its website with the status of the appeals and the eventual outcome.

Anti-Money Laundering (AML) Requirements

The Maltese authorities have been reinforcing AML requirements for financial institutions and DNFBPs. These obligations apply to a wide range of entities, including:

Credit institutions
Payment service providers
Money brokers
Companies involved in virtual financial assets

Cryptocurrency Industry Under Scrutiny

The FIAU has imposed AML/CFT obligations on entities operating in the cryptocurrency industry, including:

Virtual Financial Asset (VFA) service providers
Issuers and agents
Companies offering VFAs to the public in or from Malta

The European Union’s Markets in Crypto Assets Regulation is expected to further tighten AML/CFT requirements for cryptocurrency businesses.

Non-Fungible Tokens (NFTs)

While NFTs are not explicitly mentioned in Maltese AML regulations, they may still be subject to AML requirements depending on their characteristics. Financial institutions and DNFBPs are advised to seek legal advice to determine whether an NFT qualifies as a VFA.

Compliance Programs Mandatory

Regulation 5(5) of the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) requires financial institutions and DNFBPs to establish and implement compliance programs, including:

Customer due diligence
Record keeping
Reporting
Risk management measures
Internal controls

Record Keeping and Reporting Requirements

While there are no specific requirements for reporting large currency transactions, SPs are required to detect unusually large transactions and assess their legitimacy. A reporting obligation arises only where the SP is not satisfied with the explanations provided or has reasonable grounds for suspicion of money laundering or terrorist financing.

Conclusion

The FIAU’s strict AML/CFT regulations aim to prevent financial crimes and protect the integrity of the financial system in Malta. As the industry continues to evolve, it remains essential for financial institutions and DNFBPs to remain vigilant and compliant with these regulations.