Money laundering is the legalization process of revenues from criminal activities. Money laundering poses important threats to the whole world. With the income they earn from crimes, criminals can have a greater potential to commit more significant crimes. The consequences can be unpredictably harmful, such as the financing of terrorism. Due to the significant threats of money laundering, countries and organizations across the globe have taken various measures. Regulatory organizations aim to fight financial crimes with various AML compliance policies effectively. Among these countries, Malta aims to prevent financial crimes with the measures it takes.
History of AML in the Netherlands
In 1994, Malta enacted the Prevention of Money Laundering Act (PMLA) to be initiated as the primary law against money laundering. With this law, the Financial Intelligence Analysis Unit (FIAU) is established as the national institution responsible for preventing money laundering and terrorist financing. FIAU is responsible for collecting and investigating information about financial crime. If the unit examines a suspicious transaction report and detects a crime transaction, the relevant action is initiated as soon as possible.
Alongside PMLA, the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) is enacted to reinforce several issues concerning AML compliance, such as guiding and assisting subject persons in implementing AML compliance in the best way possible.
In 2021, the Proceeds of Crime Act (POCA) was enacted to enhance the identification and confiscation of proceeds from criminal activities, including laundered assets. This legislative measure aims to improve the process of identifying and seizing unlawfully acquired assets. Through its wide scope, POCA has further increased the effectiveness of AML measures and policies alongside the likes of PMLA and PMLFTR.
The Financial Regulators
To ensure the effectiveness and fairness of regulation procedures, the Malta Financial Services Authority (MFSA) was established as a public institution that regulates and supervises financial institutions. The institution's task is to regulate banks, credit institutions, electronic money institutions, investment companies, and all other financial institutions and ensure economic stability. MFSA and FIAU jointly conduct the AML/CFT audit in Malta.
As an extension of the MFSA, the AML/CFT Co-Ordination Committee has been established with the primary objective of preventing money laundering and terrorist financing. Through the Committee’s work, MFSA publishes AML regulations and guidelines that support the Maltese legislation.
The Fight Against Money Laundering in Malta
Malta's commitment to countering money laundering and terrorist financing has resulted in significant strides, as revealed in a recent MONEYVAL report. After an evaluation in 2019 identified compliance gaps, Malta adopted stringent measures and has now been upgraded from "partially compliant" to "largely compliant" and "compliant" in nine FATF Recommendations.
Furthermore, Malta's proactive approach to regulating virtual assets, including prominent cryptocurrencies, has led to an elevation from "partially compliant" to "largely compliant" status in this area. The nation has notably achieved full compliance with twelve out of the 40 FATF Recommendations, signifying adherence to international AML/CFT standards. While minor deficiencies remain in the implementation of twenty-eight other Recommendations, Malta no longer holds "non-compliant" or "partially compliant" ratings. MONEYVAL's follow-up report assesses institutional reforms without gauging their effectiveness.
Acknowledging Malta's progress, MONEYVAL has determined that the country will continue to be subject to enhanced follow-up, necessitating a subsequent report on advancing AML/CFT measures in two years.
Offshore Financial Hub’s Impact on AML Requirements
The Maltese AML regulations have been created to be compatible with the Financial Action Task Force (FATF) and the European Union (EU) regulations. Financial institutions in Malta must comply with the Maltese AML regulations, as implemented through PMLA, PMLFTR, and POCA. Organizations must meet Customer Due Diligence (CDD) requirements and report suspicious transactions to authorized units. Moreover, the compliant organizations in Malta must employ a Money Laundering Reporting Officer.
Money Laundering Penalties in Malta
FIAU is responsible for issuing penalties to non-compliant organizations and individuals who get involved in financial crimes. In 2022, FIAU issued more than €3.1 million in fines to the entities that had breached PMLA. Most cases were due to the lack of business risk assessments, as identified by FIAU.
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