Financial Crime World

FIAU Upholds Penalties Against Financial Institutions and DNFBPs in Malta

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Recent developments in Malta have seen several financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) exercise their right to appeal penalties issued by the Financial Intelligence Analysis Unit (FIAU). The appeals are being held behind closed doors, with the outcome not publicly disclosed.

Anti-Money Laundering Requirements for Financial Institutions and DNFBPs

Malta has implemented stringent anti-money laundering (AML) requirements for financial institutions and DNFBPs operating within its borders. These entities must:

  • Undertake risk assessments
  • Conduct customer due diligence
  • Maintain policies and procedures for record-keeping, training, and reporting suspicious activity

The FIAU defines a Significant Person (SP) as any natural or legal person carrying out either a “relevant financial business” or a “relevant activity”. Relevant financial businesses include:

  • Credit institutions
  • Insurance companies
  • Investment service providers
  • And others

Relevant activities encompass:

  • Auditors
  • External accountants
  • Tax advisors
  • Lawyers
  • Notaries
  • Trust and company service providers
  • And others

Cryptocurrency Industry Under AML Scrutiny

The Maltese authorities have extended AML/CFT obligations to the cryptocurrency industry. Virtual Financial Asset (VFA) service providers, issuers of VFAs, and VFA agents are required to comply with these regulations. The FIAU has issued sector-specific guidelines to assist entities in ensuring compliance.

NFTs Subject to AML Requirements

Non-fungible tokens (NFTs) may be subject to AML requirements on a case-by-case basis. If an NFT falls within the definition of a VFA, it would be subject to AML regulations. Entities are advised to seek legal advice to determine whether their NFT qualifies as a VFA.

Compliance Programs for Financial Institutions and DNFBPs

Regulation 5(5) of the Prevention of Money Laundering Act requires financial institutions and DNFBPs to maintain specific procedures, including:

  • Customer due diligence
  • Record-keeping
  • Reporting
  • Risk management measures
  • Internal controls
  • Compliance management
  • Communications
  • Employee screening
  • Training
  • Awareness

Recordkeeping and Reporting Requirements

Malta does not impose additional reporting requirements solely based on the size of a transaction. However, financial institutions and DNFBPs are required to:

  • Detect unusually large transactions
  • Assess their legitimacy
  • Report suspicious activity to the FIAU

The article highlights the importance of AML compliance in Malta, emphasizing the need for financial institutions and DNFBPs to maintain robust procedures to prevent money laundering and terrorist financing.