Who are we
1.3
Our Purpose
In the 2020 annual report, we discussed the purpose of our work from the perspective of combating crime and ensuring a better and safer society. The emphasis was on highlighting the fact that the victims of money laundering (ML) ultimately are normal people and society at large. For this purpose, we mentioned several crimes that underly ML (predicate offences) and produce the dirty money that needs to be laundered.
These crimes have victims and that is why we always stress that ML is not a victimless crime. Awareness is the key to understanding the consequences of ML. Here is a reminder of some of the main predicate crimes from which criminals make money to the detriment of individuals and society in general:
- Drug trafficking
- Trafficking of human beings for sexual exploitation, forced labour or organ harvesting
- Illicit arms trading
- Fraud and misappropriation
- Bribery and corruption
- Environmental crimes
- Counterfeiting of currencies
- Tax evasion
Main Functions
2.1
Intelligence
Analysis
In line with Recommendation 29 of the Financial Action Task Force (FATF), countries are required to establish a Financial Intelligence Unit (FIU) with the principal functions being:
- Receipt and analysis of Suspicious Transaction Reports (STRs).
- Receipt and analysis of any other information that is relevant to Money Laundering (ML), associated predicate offences and Funding of Terrorism (FT).
- The dissemination of intelligence to domestic competent authorities and foreign counterparts, spontaneously and on request
2.2
Supervision
The Supervision Section is empowered to fulfil its function by law through Article 16(1)(c) of the Prevention of Money Laundering Act (PMLA), and its functions mainly revolve around monitoring compliance by subject persons (SPs) with Anti-Money Laundering and Combating the Funding of Terrorism (AML/CFT) obligations. To fulfil this function, the Supervision Section is responsible for a number of roles, as demonstrated in the diagram opposite.
Full Scope Examinations
Cover the entire spectrum of risks and activities of the SP from an AML/CFT perspective, producing a holistic view of its AML/CFT framework at a point in time.
Thematic Examinations
Are a particular type of targeted examination, which focus on a particular theme (e.g., types of transactions) in a group of peer institutions, which allows for better understanding of particular typologies.
Targeted Examinations
Are carried out with the aim of reviewing one or more specific aspects of the AML/CFT framework of an SP, thereby gaining a better understanding of the aspects under review.
Follow up
Are aimed at assessing the progress in implementing remedial actions or corrective measures prescribed by the FIAU further to a previous examination.
Full Scope Examinations
Cover the entire spectrum of risks and activities of the SP from an AML/CFT perspective, producing a holistic view of its AML/CFT framework at a point in time.
Targeted Examinations
Are carried out with the aim of reviewing one or more specific aspects of the AML/CFT framework of an SP, thereby gaining a better understanding of the aspects under review.
Thematic Examinations
Are a particular type of targeted examination, which focus on a particular theme (e.g., types of transactions) in a group of peer institutions, which allows for better understanding of particular typologies.
Targeted Examinations
Are aimed at assessing the progress in implementing remedial actions or corrective measures prescribed by the FIAU further to a previous examination.
Supervision carried out in 2021
Compliance examinations carried out
| Sector | 2019 | 2020 | 2021 |
|---|---|---|---|
| Credit Institutions | 8 | 8 | 2 |
| Financial Institutions | 7 | 10 | 7 |
| Investiments | 4 | 42 | 39 |
| Insurance | 0 | 1 | 2 |
| VFAs | 0 | 0 | 8 |
| Gaming Operators | 6 | 58 | 14 |
| TCSPs | 10 | 70 | 64 |
| Other DNFBPs | 6 | 17 | 16 |
Queries replied to by sector
Reports sent to the Sanctions Monitoring Board
| Sector | 2019 | 2020 | 2021 |
|---|---|---|---|
| Credit Institutions | 4 | 8 | 3 |
| Financial Institutions | 1 | 11 | 7 |
| Investments | 1 | 39 | 33 |
| Insurance | 0 | 0 | 2 |
| VFAs | 0 | 0 | 3 |
| Gaming Operators | 0 | 6 | 17 |
| TCSPs | 4 | 55 | 35 |
| Other DNFBPs | 1 | 15 | 13 |
2.3
Enforcement
What we do
The role of the Enforcement Section is to ensure that, following the identification of potential breaches of SPs’ obligations in terms of local AML/CFT legislation, Implementing Procedures (IPs) and other guidance notes issued by the FIAU, the case is brought forward before the CMC for its consideration and concluding decision on both breaches committed and consequent enforcement measures necessary. Furthermore, the Enforcement Section ensures that, following any decisions taken by the CMC, SPs adhere to any directive imposed and take remedial actions. In addition the Section follows up with the SPs to ensure that there is concrete enhancement to one’s risk understanding and to the necessary control frameworks. This ensures that the administrative measure is effective.
Enforcement Measures
As per FATF recommendations enforcement measures taken by the FIAU need to be:
Proportionate
The term proportionate refers to a range of enforceable measures which can be applied in accordance to the severity of the breach, with the aim of ensuring that the enforcement measure imposed is commensurate to the breach determined by the CMC. By way of example, this includes the imposition of administrative penalties, directives to take remedial actions or reprimands in case of minor failures.
Effective
The term effective means that the enforcement measure (or measures) applied is sufficient and adequate to the extent that it promotes compliance by the subject person against whom the measure has been imposed and deters the subject person from performing the same breach in the future.
Dissuasive
The term dissuasive refers to the extent to which an administrative measure can deter noncompliance by other subject persons not subject to such an enforcement measure. This is attained through the official publication notices, factsheets, guidance papers and outreach mechanisms aimed at sharing case studies and ML typologies and providing guidance on the control framework necessary to manage them.
Enforcement Measures
When an administrative penalty is applied, the Committee may decide that a directive to remedy the failures identified is also served on the SP. The Committee may also conclude that a written reprimand is warranted for minor breaches of the law. The Committee needs to evaluate the case while bearing in mind the three considerations set out below. It then decides which enforcement measure/s need/s to be imposed.
- Seriousness of the breach
- Systemic nature of the breach
- Repetitive nature of the breach
Enforcement Measures
- Administrative Penalty
- Directive to take remedial action
- Written reprimand
- Publication of Administrative Measures
- Termination of particular business relationships
- Notification or recommendation to other supervisory authorities
The most common failures noted across all sectors were those related to:
- Deficiencies in the customer risk assessment (CRA) methodology.
- Not obtaining all the information necessary in relation to the purposes and intended nature of the business relationship.
- Not carrying out the necessary enhanced due diligence (EDD) measures for high-risk customers.
- Non comprehensive policies and procedures.
- Non comprehensive customer verification measures.
- Failure to carry out effective scrutiny of transactions.
- Deficiencies in the business risk assessment (BRA) methodology, including in the effective assessment of risks posed by jurisdictions.
Administrative penalties per sector imposed
| Sectors |
Administrative
penalties imposed per sector following a compliance examination |
Number of
directives imposed per sector following a compliance examination |
Administrative
penalties imposed following failure to carry out periodic reporting or late submissions in 2021 |
Administrative
penalties imposed following failure to reply or late reply to requests for information |
| Credit Institutions | €8,116,419 | 4 | - | €177,250 |
| Financial Institutions | €2,183,154 | 5 | €800 | €55,750 |
| Investment Services | €346,702 | - | €24,320 | €27,800 |
| Life/Long-Term Insurance | - | - | €9,120 | - |
| Gaming Operators | €863,394 | 4 | €52,040 | - |
| TCSPs | €112,500 | 3 | €13,680 | €154,650 |
| Notaries | €119,811 | 2 | €7,560 | - |
| Accountants/Auditors /Tax Advisors | - | - | €5,020 | €1,050 |
| Advocates | - | - | €720 | - |
| Real Estate Agents | €63,189 | 1 | €23,160 | - |
| Total | €11,805,169 | 19 | €136,420 | €416,500 |
|---|
Administrative penalties per sector imposed
| Administrative penalties imposed per sector following a compliance examination | €8,116,419 |
|---|---|
| Number of directives imposed per sector following a compliance examination | 4 |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | - |
| Administrative penalties imposed following failure to reply or late reply to requests for information | €177,250 |
| Administrative penalties imposed per sector following a compliance examination | €2,183,154 |
|---|---|
| Number of directives imposed per sector following a compliance examination | 5 |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €800 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | €55,750 |
| Administrative penalties imposed per sector following a compliance examination | €346,702 |
|---|---|
| Number of directives imposed per sector following a compliance examination | - |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €24,320 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | €27,800 |
| Administrative penalties imposed per sector following a compliance examination | - |
|---|---|
| Number of directives imposed per sector following a compliance examination | - |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €9,120 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | - |
| Administrative penalties imposed per sector following a compliance examination | €863,394 |
|---|---|
| Number of directives imposed per sector following a compliance examination | 4 |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €52,040 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | - |
| Administrative penalties imposed per sector following a compliance examination | €112,500 |
|---|---|
| Number of directives imposed per sector following a compliance examination | 3 |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €13,680 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | €154,650 |
| Administrative penalties imposed per sector following a compliance examination | €119,811 |
|---|---|
| Number of directives imposed per sector following a compliance examination | 2 |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €7,560 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | - |
| Administrative penalties imposed per sector following a compliance examination | - |
|---|---|
| Number of directives imposed per sector following a compliance examination | - |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €5,020 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | €1,050 |
| Administrative penalties imposed per sector following a compliance examination | - |
|---|---|
| Number of directives imposed per sector following a compliance examination | - |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €720 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | - |
| Administrative penalties imposed per sector following a compliance examination | €63,189 |
|---|---|
| Number of directives imposed per sector following a compliance examination | 1 |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €23,160 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | - |
| Administrative penalties imposed per sector following a compliance examination | €11,805,169 |
|---|---|
| Number of directives imposed per sector following a compliance examination | 19 |
| Administrative penalties imposed following failure to carry out periodic reporting or late submissions in 2021 | €136,420 |
| Administrative penalties imposed following failure to reply or late reply to requests for information | €416,500 |
What is CBAR?
Launched in October 2020, the Centralised Bank Account Register (CBAR) is a data collection and retrieval system for bank and payment accounts identifiable by IBAN, safe custody services (SCS) and safe deposit boxes (SDB) provided by credit and financial institutions.
The requirements originate from Directive (EU) 2018/843, commonly referred to as the 5th AML Directive, and Directive (EU) 2019/1153 on the use of financial and other information. These were transposed into local legislation via the Centralised Bank Account Register Regulations (CBAR Regulations). As part of the local transposition, the FIAU has been vested with the power to establish and administer CBAR.
CBAR proves to be a valuable financial intelligence resource on bank account information for Designated Authorities, all of which have gradually adopted it as part of their day-to-day processes. Now entering its second year of operation, the system racked up over 16,800 searches across 42 designated users in 2021. As a result, information previously taking up to five days to obtain is now generated in a matter of seconds.
This has also drastically reduced the number of requests for information submitted by the FIAU to banks making way for more targeted requests based on CBAR as demonstrated in the following graph:
Information Requests vs CBAR Searches
As depicted in the above graph, the introduction of CBAR has led to a steady decline in the number of requests for information issued by the FIAU. Conversely, the level of searches on CBAR carried out by the FIAU over the same period has increased.
The high-level CBAR process
CBAR in numbers
Information reported above in relation to Reportable Products and Client Base refers to active relationships reported as at 24/01/2021. Persons or entities holding a relationship with more than one reporting entity are being counted multiple times in the above statistics for the amount to represent the number of clients across all reporting entities.
2.5
Cash Restriction
Using cash to purchase property or other expensive and luxury items is a relatively easy way to launder money obtained from illicit activities (such as drug trafficking, corruption and tax evasion). It enables the offender to convert proceeds of crime into assets that can then be enjoyed. It is also relatively easy to move items like jewellery, precious metals and stones, and other luxury items across borders to be sold and converted back into cash or other assets. In this manner, illicit cash is laundered with the additional benefit that no money trail is left.
The prohibition of making and receiving payments or carrying out transactions in cash amounting to, or exceeding €10,000 , when purchasing or selling the below high-value goods :
The new regulation is being proposed by the European Commission as part of the action plan for a comprehensive Union policy on preventing ML/FT. The proposed regulation will limit cash payments across Europe to a maximum of €10,000 .
Support Functions
3.1
Strategy, Policy & Quality Assurance
The Strategy, Policy and Quality Assurance (SPQA) Section was set up in the final quarter of 2020.
3.2
Legal Affairs
The work of the Legal Affairs Section was again heavily influenced by Malta’s international commitments, especially the actions being taken on a national level to ensure that Malta is de-listed by the FATF in the shortest time frame possible.
3.3
Technology & Information Security
The Technology and Information Security Section within the FIAU is a critical part of its infrastructure and forms the backbone of the Unit. To perform its functions effectively, the FIAU relies heavily on technology.
3.4
Corporate Services & PPC
The main aims of the Corporate Services and People, Performance and Culture (PPC) Section are to provide support services for the FIAU’s financial planning and management, human resources management, procurement and office management.
Special Focus
4.1
Malta’s FATF Grey Listing
The Process leading to Malta’s Grey Listing
Exiting the Grey List
4.2
New Premises
In the 2020 annual report, it was reported that, in view of the increase in staff numbers necessary for the FIAU to perform its functions effectively, and as had been recommended by various international assessing bodies, a decision was taken to move to larger offices.
Further statistics can be found here .