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Network News • 11-05-2021

Legal Notice 199 of 2021

LN 199 of 2021 was published on 30 April 2021.

  1. 1. Wider definition of supervisory authority

The LN has widened the definition of supervisory authority under the PMLFTR to include the Malta Business Registry/Registrar of Companies acting under Articles 403-423 of the Companies Act. These articles deal with the investigative powers of the Registrar of Companies The LN envisages co-operation between the FIAU and the MBR.

In fact, under Article 15 (7) of the amended PMLFTR where a supervisory authority discovers facts or obtains any information that is related to funds which are known or suspected to be related to proceeds of criminal activity or the funding of terrorism, or to a person who may have been, is or may be connected with money laundering or the funding of terrorism, or to an attempt to carry out a transaction or activity related to proceeds of criminal activity or funding of terrorism,  that supervisory authority shall, promptly, disclose those facts or that information, supported by the relevant documentation that may be available,  to the  Financial Intelligence Analysis Unit.

This effectively makes the Registrar of Companies another watchdog against money laundering.

  1. 2. Amended definition of a company service provider

The LN also amends the definition of Trust and Company Service Provider so that under the PMLFTR trust and company service providers are considered as subject persons whenever they act as a CSP whether they are registered with or notified to the MFSA or required to be registered or notified in terms of the Company Services Providers Act.

  1. 3. Wider FIAU powers

Regulation 11 of the PMLFTR deals with subject persons’ obligations when carrying out occasional transactions or carry out transactions involving non-reputable jurisdictions.

It provides that where occasional transactions or business relationships or transactions involve non-reputable jurisdictions in respect of which there is an international call for counter-measures, subject persons shall inform in writing the FIAU and apply one or more of the following enhanced customer due diligence measures: (a) carry out additional customer due diligence measures; (b) introduce enhanced reporting mechanisms or systemic reporting of transactions; (c) limit occasional transactions or business relationships involving such non-reputable jurisdictions.

Under the revised PMLFTR the FIAU or the supervisory authority which includes the MBR  shall in the above scenarios apply any one of the following counter-measures:

  • refuse the establishment in Malta of branches, representative offices or subsidiaries of persons or entities undertaking activities equivalent to relevant financial business or relevant activity which are situated in such non-reputable jurisdictions,
  • prohibit subject persons from establishing branches or representative offices in such a non-reputable jurisdiction
  • carry out increased compliance monitoring or require increased external audit requirements on branches and subsidiaries, of persons and entities, referred to above and
  • require subject persons carrying out relevant financial business to review, amend or terminate correspondent relationships with respondent institutions established in such non-reputable jurisdiction.”; and
  1. 4. Heftier penalties.

Finally, the amended Regulations raise the penalties which the FIAU may levy to a maximum of 5 million Euro or 10% of the annual turnover of the subject-person (whichever is the higher) carrying out relevant financial business such as banks or insurance companies. This hefty fine would only be applied in the case of serious, repeated or systematic breaches of the PMLFTR or guidance issued thereunder in terms of Regulation 17.

Also, it does not apply to subject persons carrying out relevant financial activity such as trust or company service providers, and auditors or for which the maximum penalty remains that of one million Euro.

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