The Financial Intelligence Analysis Unit has denied accusations of heavy-handedness by corporate service providers, insisting it has no wish to damage businesses or the economy.
The FIAU is the government agency responsible for the collection, collation, processing, analysis and dissemination of information to combat money laundering (AML) and the funding of terrorism (CFT).
Earlier this week, BusinessNow.mt reported that several CSPs – entities or individuals providing corporate services including formation of companies, directorship/company secretary services and the provision of registered office, business, or correspondence addresses – felt that the approach of the country’s financial watchdogs – among them the FIAU – had suddenly become over-zealous since the country was put on the Financial Action Task Force’s (FATF) grey list.
‘From anything goes to overkill’ and ‘Jew nejja jew maħruqa (either burned or raw)’ were some of the sentiments expressed.
Reacting to the comments, the FIAU denied ever having an ‘anything goes’ approach.
“Since its establishment, the FIAU has always been committed and determined to exercise its functions, powers and duties and has always acted to the best of its ability with the resources assigned to it,” a spokesperson for the agency said.
“The work carried out and the significant improvements made to its operations are not “overkill” or some form of persecution of subject persons [people who, by law, must follow AML/CFT rules]. It is an effort to improve, to address weaknesses identified by assessment bodies and to effectively implement the requirements and obligations arising from the law.”
Another common complaint of CSPs, in particular the smaller boutique firms, was that they were being disproportionately saddled with huge costs, such as the purchase of AML software and the hiring of specialised compliance staff. Firms also said they spent an excessive amount of time dealing with the FIAU’s queries and on-site inspections, which prevented them from operating properly.
But the agency said it did not, and could not, distinguish between small and large firms.
“It is not a question of proportionality – it is a question of risk. The FIAU also adopts a risk-based approach in carrying out its AML/CFT supervisory responsibilities, meaning, that our approach varies depending on the risk posed by subject persons.
“Being a small firm does not necessarily mean that it qualifies for low risk. Indeed, the FIAU’s comprehensive risk assessment methodology, supervisory experience and analysis carried out have demonstrated that small firms too may present higher risks. A small company taking on high risk business without the necessary mitigation measures in place will present a higher risk than a large firm that implements comprehensive processes and procedures to mitigate risks,” the spokesperson said, adding that while the agency understood that small firms had limited resources, this did not mean that it could allow them to fall short of their obligations at law, or to go unsupervised.
On the subject of the issuing of fines, which several operators said were dished out for replying to the authority’s queries even a day late, the spokesperson said:
“The FIAU does not impose administrative penalties lightly. The procedure is a thorough and sometimes lengthy one and follows the principle of due process. Subject persons who are in potential breach are informed of their compliance failures and are given the opportunity to provide representations prior to a decision being taken. As required both by the EU Anti-Money Laundering Directive and the FATF standards, penalties must not only be proportionate but also dissuasive and effective. Light slaps on the wrist, which were never justifiable in the first place, are a thing of the past.”
One particular CSP expressed their opinion that the authorities were trying to drive smaller operators out of businesses in an attempt to reduce their heavy workload. The agency strongly denied this was its policy.
“The FIAU has no wish whatsoever to damage businesses or the economy. Its main interests are to ensure Malta’s operators are not misused for money laundering purposes and to safeguard the country’s jurisdictional reputation, by promoting good practices and compliance. Indeed, it is the loss of reputation that would drive operators out of legitimate business,” the agency countered, while insisting it could cope with the workload due to a 23 per cent increase in staff over the past year.
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