Financial Crime World

Malta Cracks Down on Financial Fraud: New Laws Target VAT Scams and Corruption

In a bid to strengthen its stance against financial fraud, Malta has introduced new laws aimed at combating VAT scams and corruption affecting the European Union’s financial interests.

Harmonizing Definitions and Sanctions

The amendments to the Criminal Code were made in accordance with EU Directive 2017/1371, which seeks to harmonize definitions and sanctions related to fraud offences. These changes aim to ensure that Malta is in line with EU standards and can effectively combat financial fraud.

Punishments for Serious VAT Offenses

Under the new provisions, serious VAT offenses that threaten the EU’s financial interests will be punishable by imprisonment terms ranging from four to eight years. These offenses include:

  • Carousel fraud
  • VAT fraud through missing traders
  • VAT fraud committed within a criminal organization

Other Types of Fraudulent Acts and Omissions

The new laws also cover other types of fraudulent acts and omissions affecting the Union budget, including:

  • Non-procurement related expenditure
  • Procurement-related expenditure
  • Revenue other than VAT own resources

Upon conviction, these offenses carry imprisonment punishments ranging from six months to four years. If the damage or advantage is over €100,000, the punishment increases to four to eight years.

Active and Passive Corruption

The amendments also criminalize active and passive corruption, as well as misappropriation of funds or assets by public officers.

  • Active corruption involves promising, offering, or giving advantages to a public officer for him to act or refrain from acting in accordance with his duties.
  • Passive corruption refers to when a public officer requests or receives advantages for himself or others in exchange for acting or refraining from acting in accordance with his duties.
  • Misappropriation occurs when a public officer commits or disburses funds or appropriates assets contrary to their intended purpose.

Upon conviction, these offenses carry imprisonment terms ranging from six months to four years. If the damage or advantage is considerable, the punishment increases to four to eight years.

Corporate Liability

The new laws also establish corporate liability for offenses affecting the Union budget, distinguishing between two types of corporate offenses:

  • Those committed by a person having a leading position within the legal entity
  • Those committed for lack of supervision or control by such a person

The penalty for corporate offenders is a fine ranging from €20,000 to €20 million.

Additional Penalties

Additional penalties include:

  • Exclusion from public benefits or aid
  • Temporary or permanent exclusion from public tender procedures
  • Suspension or revocation of licenses, permits, or other authorities
  • Judicial supervision

Jurisdiction and Ne Bis in Idem

In a significant move, the Maltese courts will have jurisdiction over these offenses even when there is only a partial link with Malta. However, this will be done in respect of the principle of ne bis in idem, which prohibits charging an individual twice for the same offense.

These new laws demonstrate Malta’s commitment to combating financial fraud and corruption, and its willingness to work closely with the EU to ensure that these offenses are effectively prosecuted.