Company sees €150k FIAU fine slashed to €30k by Appeals Court

Malta’s Court of Appeal has decided to reduce a penalty imposed by the Financial Intelligence Analysis Unit (FIAU) on an unnamed payment service provider, understood to be Corporate & Commercial FX Services Limited, from €156,202 to €31,240.

The decision was reached on 6th April 2022, and while the court upheld all decisions taken by the FIAU’s compliance Monitoring Committee in the case, it regarded the administrative penalty imposed to be too high.

The case was recounted in a recently released Publication Notice from the FAIU, which described how at the very end of 2019, it imposed the administrative penalty under Regulation 21 of Malta’s Prevention of Money Laundering and Funding of Terrorism Regulations.

However, the company was not named in the FIAU notice, but BusinessNow.mt was able to deduce its name by tallying the date of judgement cited by the FIAU with an appeals court sitting that was terminated on the same date, between the FAIU and Corporate & Commercial FX Services Limited.

It found that as a result of an on-site compliance review carried out in 2018, a number of significant breaches of regulations were found.

Notably, at the time of the compliance review, the company did not have a Business Risk Assessment (BRA) in place, and its Money Laundering Reporting Officer (MLRO) demonstrated a lack of knowledge during meetings, claiming that the company did not need to carry out a BRA.

Additionally, the FIAU found that none of the customers serviced by the company were risk assessed prior to the start of the business relationship, but that it made an effort to conduct limited risk assessments after being notified of its inspection.

When imposing the administrative fine, the FIAU says it considered the level of cooperation exhibited by the company during the compliance review, the size of the company’s operations, and the appropriate administrative measures to impose.

Amongst key takeaways cited by the unit is the importance of the BRA for formulating a risk assessment, and of the completion of a customer risk assessment and comprehensive customer profiles.

The company launched its appeal against the decision in January 2020, claiming that the FIAU had “made a wrong appreciation of the facts at hand.”

It stated that following receipt of the compliance review report, it suspended its operations for three months and that this fact should have been taken into consideration by the FIAU before imposing the fine, and pointed to more perceived misjudgements by the unit.

The Court of Appeal has, however, ruled that the fact that the company decided to suspend its operations after receiving the findings of the FIAU does not change the fact that when the review was performed, it was allegedly in breach of its obligations.

In addition, the court noted that the company never formally suspended its licence issued by the Malta Financial Services Authority.

“Therefore, unlike what the company alleged, it is considered a subject person even to this day,” the court decided.

It also held that any subsequent actions, even where the company would not be considered any longer as a subject person, would not nullify previous wrongdoings.

The court reiterated that the nature of the breaches, including that these were carried forward for a number of years, show a serious lack of diligence and responsibility on the company’s part in the fulfilment of its obligations.