Preventing Financial Crimes in Malta: The Importance of Internal Controls

Financial crimes continue to evolve, posing significant risks to organisations in Malta. To mitigate these risks, it is essential for businesses to establish effective internal controls and financial crime compliance programs.

Main Pillars of Sound Financial Crime Compliance

1. Instil a Culture of Compliance

Embedding a culture of compliance within an organisation is crucial for the ongoing development and implementation of an effective financial crime compliance (FCC) program. The tone from the top is key in ensuring that employees adhere to the highest standards of compliance.

2. Enterprise Risk Assessments

Each organisation is exposed to different risks based on its business model, services, products, customers, suppliers, and geographical exposures. Through risk assessments, senior management should identify, measure, and monitor the risk exposures of the organisation.

3. Internal Policies, Procedures, Systems, and Controls

Internal policies, procedures, systems, and controls are the backbone of a complete FCC program. These act as a blueprint outlining how an organisation adheres to its regulatory requirements and mitigates financial crime risks.

4. Risk-Based Due Diligence

Customer, counterparty, and asset risk assessments have become crucial in managing sanctions risks. Establishing risk-based procedures to assess one’s customers, counterparties, and assets relating to investments is essential.

5. Employee Training and Awareness Programme

Well-trained employees with strong analytical skills are key in ensuring that financial crime risk is managed appropriately. Effective training programs should include legislative and regulatory changes, as well as the organisation’s policies, procedures, systems, and controls.

6. Designated Compliance Function

A compliance function ensures that an organisation operates in line with applicable laws and regulations. The adoption of a risk-based compliance monitoring plan is the cornerstone of an effective compliance function.

7. Independent Testing of the Financial Crime Compliance Program

Internal audits should be carried out by a sufficiently qualified internal auditor to ensure that the FCC program is implemented in line with the organisation’s policies and follows relevant regulatory requirements.

Conclusion

Malta’s organisations must prioritise financial crime compliance, as it is no longer limited to regulated entities. A dedicated management team, robust internal risk assessments, systems, policies, and procedures, and knowledgeable and competent employees are essential for navigating the ever-changing landscape of financial crime. By implementing these measures, businesses can effectively prevent financial crimes and ensure their operations are secure and compliant with regulatory requirements.