Financial Crime World

Financial Institutions and DNFBPs Appeal Penalties Issued by FIAU

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). According to sources, the appeals will be heard behind closed doors, with no judgment or outcome publicly disclosed.

Anti-Money Laundering Requirements for Financial Institutions and DNFBPs

Malta’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regime is designed to prevent the misuse of financial systems by criminal organizations. The Financial Institutions Act and the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) impose strict obligations on financial institutions and DNFBPs, including:

  • Credit institutions
  • Payment service providers
  • Money brokers
  • Other designated businesses

Cryptocurrency Industry Under Scrutiny

The FIAU has also extended its AML/CFT requirements to the cryptocurrency industry. Virtual Financial Asset (VFA) service providers, issuers of VFAs, and VFA agents are all subject to these regulations. The sector-specific guidelines issued by the FIAU aim to prevent the misuse of cryptocurrencies for illicit activities.

NFTs Under the Microscope

Non-fungible tokens (NFTs) have also come under scrutiny in recent months. While NFTs may not be subject to AML requirements per se, their classification as VFAs or other financial instruments can trigger reporting obligations. Financial institutions and DNFBPs are advised to seek legal advice to determine whether an NFT falls within the scope of these regulations.

Compliance Programmes and Recordkeeping

Regulation 5(5) of the PMLFTR requires all financial institutions and DNFBPs to implement comprehensive compliance programmes, including:

  • Customer due diligence
  • Record keeping
  • Reporting
  • Risk management measures
  • Internal controls
  • Employee screening

These programmes must be regularly monitored and updated to ensure ongoing effectiveness.

Reporting Large Currency Transactions

The FIAU does not impose specific reporting requirements solely based on transaction size. However, financial institutions and DNFBPs are required to detect and report transactions that are unusually large or suspicious in nature.

As the AML/CFT landscape continues to evolve, financial institutions and DNFBPs must remain vigilant in their compliance efforts to avoid penalties and reputational damage. The outcome of these appeals will be closely watched by industry stakeholders, who hope for greater clarity on the FIAU’s expectations and enforcement priorities.