FIAU slaps €300,000 fine on investment fund for breaching anti-money-laundering rules

The Financial Intelligence Analysis Unit (FIAU) has handed a €300,000 fine to a Maltese investment fund for failing to implement “robust” controls to prevent money-laundering and terrorism financing.

In a public notice, the FIAU said Southern Cross Sicav had disregarded its anti-money laundering obligations.

While the fund is in the process of giving up its Malta Financial Services Authority (MFSA) licence, the FIAU nonetheless decided to fine it for the “serious” failures during its years in operation.

The FIAU noted that Southern Cross Sicav's disregard towards its anti-money laundering obligations could have had an impact not only on its own operations, but also on Malta's reputation.

Malta was last year greylisted by the Financial Action Taskforce (FATF), a global anti-money laundering organisation, over failures to adequately fight financial crime.

Listing the fund's various shortcomings, the FIAU said South Cross had failed to adequately document its internal procedures to fight money laundering and did not properly screen its customers before accepting their money.

One particular case involved a university investing its returns into the fund, which the latter did not question or investigate.

“This would include evidence to confirm that the university could in fact afford such involvement, that the source of wealth of the university is backed with the necessary evidence and that the rationale for the university investing its returns from tuition fees in aircraft leasing made economic sense for it”, the FIAU said.

In other files analysed by the FIAU, the unit found South Cross failed to ascertain the residential address of certain clients, and even accepted an expired passport as ID when it took on a particular client.

Failures were also found in Southern Cross’ measures to understand where their clients’ money was coming from.

For instance, the company did not obtain information in relation to the source wealth and investment capabilities of the customers for eight of the files reviewed.

“Furthermore, no details demonstrating the understanding from which activities these funds were generated were found,” the FIAU said.