About AML
Money laundering is the process by which criminals attempt to conceal the true criminal origin and ownership of the proceeds of their criminal activities. It is the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin. If undertaken successfully, it allows criminals to maintain control over and to enjoy these proceeds.
The requirement to launder the proceeds of crime through the financial system and through other means is vital for the success of criminal operations. Those involved, seek to exploit the facilities of the world’s financial institutions if they are to benefit from the proceeds of their criminal activities. The increased integration of the world’s financial systems, the removal of barriers to the free movement of capital and technological developments have enhanced the ease with which criminal money can be laundered, thereby complicating the tracing process.
EU List of Prominent Public Functions
(1/5) EU List of Prominent Public Functions
Article 20a(3) of the revised Fourth Anti-Money Laundering Directive requires the EU Commission to assemble a single list of all public functions of each Member State which, according to national laws, regulations and administrative provisions, qualify as prominent public functions. Natural persons, who are, or have been entrusted with prominent public functions in or outside of Malta are, in terms of Regulation 2(1) of the Prevention of Money Laundering and Funding of Terrorism Regulations considered as politically exposed persons (PEPs).
On the 10th of November 2023, the above entioned list of prominent public functions at national level, at level of international organisations and at level of EU institutions and bodies has been published on the EU Official Journal: EUR-Lex – 52023XC00724.
Subject persons are reminded that the list of prominent public functions in Malta was published on the Government gazette on 6 April 2021and may be accessed via the FIAU Website.
Recent developments in Israel and the Gaza Strip have once more brought to the fore the issue of financing of terrorism (‘TF’). Terrorist organisations, networks and even lone actors need assets and funds to function and carry out their activities.
The Malta Financial Services Authority (‘MFSA’) and the Financial Intelligence Analysis Unit (‘FIAU’) are issuing this Guidance Note to remind subject persons of their obligations in relation to TF and to especially draw their attention to the potential risks emanating from the current situation in Israel and the Gaza Strip.
Specifically, the intention behind this Guidance Note is to remind all subject persons of their obligations under the National Interest (Enabling Powers) Act (‘NIA’) and of how sanctions may impact subject persons’ obligations under the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) and the FIAU Implementing Procedures.
In terms of the PMLA, the MFSA as supervisory authority is considered to be an agent of the FIAU and is required to extend assistance and cooperation to the FIAU in the fulfilment of its responsibilities under the PMLA.
As an agent of the FIAU, the MFSA acts on behalf of and jointly with the FIAU in conducting AML/CFT supervision of financial services licence holders on a risk-based approach. The main purpose of AML/CFT supervision conducted jointly by the MFSA and FIAU is to monitor compliance by financial services licence holders with the applicable AML/CFT laws, regulations and the Implementing Procedures issued by the FIAU, and where necessary to take appropriate action, including remedial, enforcement and sanctioning measures.
A Memorandum of Understanding is in place between the MFSA and the FIAU laying out the framework for cooperation between the two entities.
The Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United States.
As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called “Specially Designated Nationals” or “SDNs.” Their assets are blocked and U.S. persons are generally prohibited from dealing with them. View more information on Treasury’s Sanctions Programs.
AML
- Introduction
- Legislation
- FIAU Implementing Procedures
- National Risk Assessments (NRAs)
- Newsroom
- AML/CFT Supervision Strategy
Estimates for the amount of money laundered worldwide are quoted from time to time. However, in reality it is impossible to produce a reliable estimate of the amount of money laundered. The amount of money laundered each year amounts to billions of Euros and poses a significant concern for governments. As a result, governments and international bodies have undertaken efforts to prevent and apprehend money launderers.
Money laundering traditionally occurs in three steps: The first – placement – involves cash being introduced into the financial system by some means, the second – layering – involves carrying out complex financial transactions in order to camouflage the illegal source, and the final step – integration – entails acquiring wealth generated from the transactions of the illicit funds. This rather simplistic approach does not necessarily reflect every type of money laundering operation and depending on the circumstances of the particular case, one or more of the traditional steps may not take place. Indeed, the definition of money laundering focuses on the conversion, concealment, disguise, acquisition, possession, use and retention of property knowing or even suspecting that it is derived from criminal activity.
While the Financial Intelligence Analysis Unit (FIAU) established under the Prevention of Money Laundering Act (Cap 373 of the Laws of Malta) (PMLA), is the national agency with the responsibility for prevention of money laundering and financing of terrorism and has the function to supervise compliance by all subject persons, including financial services operators with the anti-money laundering and combating financing of terrorism legislative provisions, the Malta Financial Services Authority (MFSA), as the financial services supervisory Authority has a vested regulatory interest to prevent the use and involvement of authorized persons in such crimes. The MFSA is strengthening its focus on this area and its contribution in preventing as much as possible the use and involvement of the financial sector in the commission of money laundering and other financial crime.
In terms of the PMLA, the MFSA as supervisory authority is considered to be an agent of the FIAU and is required to extend assistance and cooperation to the FIAU in the fulfilment of its responsibilities under the PMLA. Accordingly the FIAU may request the MFSA to provide it with information of which it may become aware during the course of its supervisory functions, including that a subject person may not be in compliance with the requirements of the PMLA or regulations made thereunder.
As an agent of the FIAU, the MFSA acts on behalf of and jointly with the FIAU in conducting AML/CFT supervision of financial services licence holders on a risk-based approach. Supervision is conducted by means of a dedicated team of AML/CFT supervisors within the the Financial Crime Compliance Unit. All phases of AML/CFT supervision, from the sectorial risk assessments to decisions on breaches and the imposition of sanctions, are coordinated and integrated in a joint supervisory approach.
The main purpose of AML/CFT supervision conducted jointly by the MFSA and FIAU is to monitor compliance by financial services licence holders with the applicable AML/CFT laws, regulations and the Implementing Procedures issued by the FIAU, and where necessary to take appropriate action, including remedial, enforcement and sanctioning measures.
A Memorandum of Understanding is in place between the MFSA and the FIAU laying out the framework for cooperation between the two entities.
Sanctions for AML/CFT breaches identified during AML/CFT supervisory work are imposed by the FIAU in terms of the Prevention of Money Laundering and Funding of Terrorism Regulations. The imposition of sanctions by the FIAU for non-compliance with AML/CFT requirements does not prejudice the taking of other appropriate regulatory action by the MFSA against the licence holder in question.
Money laundering is criminalized primarily by means of the Prevention of Money Laundering Act (Cap. 373) which has adopted an ‘all crimes’ approach. Drug-related money laundering is additionally criminalized through the Dangerous Drugs Ordinance (Cap. 101) and the Medical and Kindred Professions Ordinance (Cap. 31).
The Prevention of Money Laundering Act also establishes the Financial Intelligence Analysis Unit (FIAU).
The Prevention of Money Laundering Act and the Prevention of Money Laundering and Funding of Terrorism Regulations are supplemented by the Implementing Procedures issued by the FIAU. The Implementing Procedures provide an interpretation of the regulations and their purpose is to guide and assist subject persons in understanding and fulfilling their obligations under the regulations, thus ensuring effective implementation thereof. The Implementing Procedures are binding on subject persons and failure to comply is subject to an administrative penalty.
In terms of the PMLA, the MFSA as supervisory authority is considered to be an agent of the FIAU and is required to extend assistance and cooperation to the FIAU in the fulfilment of its responsibilities under the PMLA.
As an agent of the FIAU, the MFSA acts on behalf of and jointly with the FIAU in conducting AML/CFT supervision of financial services licence holders on a risk-based approach. The main purpose of AML/CFT supervision conducted jointly by the MFSA and FIAU is to monitor compliance by financial services licence holders with the applicable AML/CFT laws, regulations and the Implementing Procedures issued by the FIAU, and where necessary to take appropriate action, including remedial, enforcement and sanctioning measures.
A Memorandum of Understanding is in place between the MFSA and the FIAU laying out the framework for cooperation between the two entities.
Implementing Procedures, Part I
Implementing Procedures, Part II – Virtual Financial Assets
Implementing Procedures, Part II – Banking Sector (Repealed)
Implementing Procedures, Part II – Remote Gaming Sector
Implementing Procedures, Part II – Land-Based Casinos
Implementing Procedures, Part II – Company Service Providers
Sanctions
General
International sanctions, also known as restrictive measures, are primarily issued by the United Nations Security Council and by the European Union. There are different types of sanctions, the most common of which are diplomatic sanctions, economic sanctions (which include financial sanctions) and military sanctions.
International sanctions may have different purposes. Some are designed to force a country, regime or organisation to comply with international law while the scope of others may be to contain a threat to regional or global peace. Sanctions may also condemn the actions or policy of a particular government. Sanctions are therefore issued for a number of reasons. These may include the situation in certain countries (often relating to deteriorating political situations, serious threats to democracy, illegitimate or totalitarian regimes, violation of constitutional and human rights, repression and the use of force against civilians), to combat terrorism and terrorist groups such as Al Qaida, to impose measures against the Taliban, and to control the proliferation of weapons of mass destruction.
Sanctions normally put in place various restrictive measures affecting the countries concerned and often target specific individuals, companies, other entities and organisations which are identified as being involved or connected with the situation or activities triggering the sanctions. Sanctions may include restrictions on trade affecting the purchase and supply of specified goods, products and materials, restrictions on travel, restrictions on the provision of financial services, the requirement to freeze funds, assets and economic resources and restrictions on making available funds and economic resources. Sanctions may also impose arms embargos, no fly zones, naval blockades and even military intervention.
Implementation of Sanctions in Malta
In Malta sanctions are implemented in terms of the National Interest (Enabling Powers) Act (the Act). The Act provides that United Nations Security Council Resolutions imposing sanctions are immediately and directly applicable and enforceable in Malta. EU Council and Commission Regulations concerning restrictive measures are directly applicable in Malta as a Member State of the European Union. Furthermore, implementation regulations, regulations for the imposition of penalties and regulations imposing national sanctions may also be made under the National Interest (Enabling Powers) Act. Acting in contravention of sanctions is a criminal offence and is punishable by imprisonment and, or a fine.
The Sanctions Monitoring Board is established by the National Interest (Enabling Powers) Act. The Board has a number of functions and has the overall function of monitoring the implementation and operation of sanctions legislation in Malta. The Board may propose persons or entities to be designated by the United Nations Security Council or by the Council of the European Union; propose the delisting of any designated person or entity; propose the unfreezing of property of any person or entity; receive, consider and make recommendations on applications from designated persons or entities for delisting or unfreezing of property and from persons or entities who have been erroneously or inadvertently designated; authorize access to frozen funds or other assets which the Board determines to be necessary for basic expenses, the payment of reasonable costs and fees for legal, medical, professional or other essential services, or for documented extraordinary expenses. The Board is also empowered to give a ruling on whether any action falls to be prohibited by any regulation made under the Act, or by any Regulation of the Council of the European Union, or by any United Nations Security Council Resolution. The Board is also empowered to request from any person, physical or legal, and any authority or entity, any information it deems necessary, relevant and useful for the purpose of pursuing its functions under the Act.
When regulations are made under the Act or when a United Nations Security Council Resolution or a Regulation of the Council of the European Union is published imposing freezing measures on property of a person or entity, such measures shall immediately upon publication become a freezing order having the force of law in Malta. Any person that freezes funds, assets or economic resources in accordance with the requirements of any sanctions is required to notify the Sanctions Monitoring Board in writing. MFSA Licence Holders are also required to notify the MFSA of any action taken and any freezing made.
Financial Sanctions
International sanctions, particularly financial sanctions, are relevant primarily to the financial services sector. However, they are also binding on any person, company or entity, including practitioners such as lawyers and accountants and individual citizens, who may hold funds, financial assets and economic resources affected by the sanctions. In most cases financial sanctions impose the duty to freeze the funds, financial assets and economic resources belonging to, owned, held or controlled by designated individuals and entities, or by individuals or entities acting on their behalf or at their direction, or by entities owned or controlled by them; and prohibit the making available of funds, financial assets or economic resources to or for the benefit of designated individuals and entities. Financial sanctions may also prohibit the provision of certain financial services and certain financial transactions or the provision of financial assistance to designated individuals and entities.
Obligations of MFSA Licence Holders
The MFSA requires its Licence Holders to take note of all international sanctions as issued from time to time (including new designations of individuals and entities) and to exercise caution and vigilance in order to ensure that they do not in any way support activities, individuals or entities which are subject to sanctions or other restrictive measures. Licence Holders have a legal obligation to comply with international sanctions and to take all steps as may be required for their immediate implementation. They are therefore required to monitor their business relationships and to verify their records on an on-going basis for any information or transactions known or suspected to be connected or related in any manner whatsoever with designated individuals and entities and to identify and freeze any funds, financial assets and economic resources in accordance with the requirements of the sanctions.
Licence Holders are required to report the findings of their verifications to the Sanctions Monitoring Board and to the MFSA and to inform the MFSA of any action taken. In particular, Licence Holders are to report and give all relevant details to the Board and the MFSA about any funds, financial assets and economic resources which they have identified as belonging to, owned, held or controlled by designated individuals and entities and which they have frozen in terms of sanctions.
Obligations related to Reporting in terms of Council Regulation (EU) No 267/2012 (Iran) and Reporting in terms of Council Regulations (EU) 208/2014 (Ukraine), 101/2011 (Tunisia) and 270/201 (Egypt)
The Authority is hereby informing all Credit Institutions on developments pertaining to reporting in terms of Council Regulation (EU) No 267/2012, concerning restrictive measures against Iran and Council Regulations (EU) 208/2014 (Ukraine), 101/2011 (Tunisia) and 270/201 (Egypt). The above-mentioned Regulations requires the submission of information relating to entities and/or individuals which are subject to restrictive measures imposed by the respective sanctions. The collation and transmission of this information is entirely coordinated by the Sanctions Monitoring Board and not the Authority as previously mandated.
US Sanctions
Sanctions and restrictive measures on a number of countries, individuals and entities (as in the case of Iran) are also in effect as a result of unilateral action by the United States of America. Unlike United Nations and European Union sanctions. MFSA Licence Holders and the public in general are encouraged to take US sanctions into consideration when conducting business activities in view of the wide ranging applicability of these measures and the risk of significant financial actions which may have serious implications on their business activities.
US sanctions legislation provides for various types of action that can be taken by the US Government and contains a number of very significant financial provisions. These include measures targeted at foreign persons or entities, including banks that knowingly carry out transactions in breach of US sanctions laws and regulations. The US Treasury Department, through the Office of Foreign Assets Control (OFAC) may impose measures against any non-US bank which it determines having engaged in prohibited transactions such as providing financial services to designated persons or entities. Such measures include directing US banks to terminate US correspondent banking relations with non-US banks and blocking their access to the US financial system.
As stated above, the Sanctions Monitoring Board is the Competent Authority for sanctions related matters, information on international sanctions is available via their website.
The information provided by the MFSA aims to assist Licence Holders and other interested persons to be aware of and to comply with international sanctions. Licence Holders and interested persons are urged to consult the appropriate Sanctions Monitoring Board, United Nations and EU websites for complete and up-to-date information and to seek professional advice as may be necessary to ensure that they do not in any way support activities, individuals or entities which are subject to sanctions or become unwittingly involved and possibly implicated in the violation of sanctions.
