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FIAU issues Consultation Document on the Revision of the PMLFTR

The Financial Intelligence Analysis Unit (‘FIAU’) has issued for consultation a revised version of the Prevention of Money Laundering and the Funding of Terrorism Regulations (PMLFTR). The amendments seek to transpose the provisions of the fourth Anti-Money Laundering Directive (‘4th AMLD’) to bring the current Maltese legislation in line with EU and international standards in combating money laundering and the funding of terrorism (‘ML/FT’).


Widening of the definition of ‘subject person’


There will be an increase in the activities which can result in a natural or legal person being considered as a ‘subject person’.


Of particular importance is the addition of providers of gaming services within the definition which may be contrasted with the current version that solely included casino licensees amongst other persons as subject persons.


Moreover, there has been the addition of safe custody services and the provision of advice to undertakings on capital structure, industrial strategy as well as services related to mergers and the purchase of undertakings by persons other than banks and investment service providers in the definition of ‘relevant financial business’. Persons or entities acting as qualified persons in terms of the Trusts and Trustees Act will also be subject to AML/CFT requirements.


The threshold for any payments made in cash which would lead a trader in goods to fall within the definition of a subject person, has also been decreased from €15,000 to €10,000.


Extension of definition of ‘beneficial owner’


There has also been a revision and extension of the definition of ‘beneficial owner’.  


The initial section of the definition of the term ‘beneficial owner’ strongly reflects the law which is applicable today. However, as things presently stand, it is possible that there may be no beneficial owner where no person holds the required percentage of shares or voting rights or where no one else is deemed to be exercising control.


Moreover, the second part of the definition of ‘beneficial owner’ introduces an aspect of subjectivity, whereby a shareholding of 25% + 1 share or more, or the holding of an ownership interest or voting rights of more than 25% in the customer shall be an indication of direct ownership when held directly by a natural person and of indirect ownership when held either by a natural person through one or more bodies corporate or through a trust or similar legal arrangement.


The term ‘indication’ is of paramount importance, as in the case where no person holds the required percentage of shares or voting rights, or where it seems that no person is exercising control, a subject person will be required to identify the individuals who occupy senior management positions within the corporate entity concerned.


In the case of trusts, any beneficiary, irrespective of the beneficial interest held in the trust, will be considered as a beneficial owner.


Adoption of a risk-based approach


A risk-based approach to customer due diligence amongst other AML/CFT controls will become compulsory.


Subject persons will be obliged to carry out a risk assessment to identify money laundering and financing of terrorism risks which they would be exposed to, and model their controls on the basis of such risk assessments and ensuring that their application in each individual case is also risk-based.


Enhanced Customer Due Diligence


Another significant proposal relates to the Enhanced Customer Due Diligence measures (EDD) which will be applicable to both domestic and foreign Politically Exposed Persons (‘PEPs’).


In this case, subject persons will not only be required to identify and apply EDD on customers and, where applicable, beneficial owners, who are foreign PEPs (residing in another EU member state or are third country nationals), but must also identify and apply EDD on domestic PEPs.


Sanctions


The FIAU has also proposed the application of a more rigorous sanctioning regime in the case of breaches of AML/CFT obligations. For example, Regulation 21 relating to penalties for breaches of lawful requirements, order or directives by the FIAU shall be further enhanced and will cater for serious, repeated and systematic breaches, allowing the FIAU to impose more effective penalties in such circumstances.


It is of paramount importance to note that the above points are merely indicative of the main changes proposed.


In view of this Consultation Document, the FIAU has launched a general request for feedback, questions and requests for clarification by an interested party or any other entities requiring further information. Such queries and requests for clarifications may be sent by email to legal@fiumalta.org until the 1st of September, 2017.