A common initial perception of an AML/CFT enforcement action is that it is primarily associated with the imposition of a penalty, frequently of a significant nature. However, AML/CFT enforcement has a broader, more comprehensive, and sustainable purpose. Its ultimate objective is to ensure that subject persons implement the highest standards of AML/CFT controls. This, in turn, serves to safeguard the public and uphold the good reputation of the jurisdiction. These goals are at the core of the FIAU’s enforcement objectives.
Our recently published Corrective Actions Paper offers practical insights into how corrective action is reshaping behaviours, frameworks, and ultimately, the risk culture within subject persons (SPs).
From Penalty to Restoring Compliance
Penalties will always remain a necessary form of enforcement action, intended to address serious, systemic, and repeated breaches stemming from unmanaged risks. These deficiencies expose customers and the jurisdiction to potential exploitation and abuse by money launderers. While penalties carry both financial and reputational consequences and are designed to be proportionate, effective, and dissuasive, they may not, on their own, lead to the necessary enhancements in controls required to ensure the protection of customers and their savings. Administrative measures requiring corrective actions (known as Directives) ensure that SPs have in place durable and sustainable control frameworks which are necessary to target the specific risks that they are exposed to. Directives are legally binding, and monitoring by the Enforcement Section of the FIAU ensures concrete action is taken by SPs. Between 2020 and 2024, the FIAU imposed over 100 Directives, for SPs to correct course and elevate their compliance maturity.
In fact, SPs appreciate the importance of remediation, which is meaningful, forward-looking, and tailored to their actual ML/FT risk profile. For MLROs and SPs, these Directives present a powerful learning tool.
Key Lessons from the Frontlines
The Enforcement Section adopts a structured two-phase approach to assess the extent of remediation undertaken by subject persons:
- Phase 1 evaluates the technical design and completeness of AML/CFT controls.
- Phase 2 assesses how well those controls work in practice through effectiveness’ testing.
Across both phases, a number of clear, recurring lessons have emerged, which can be used as best practices that offer valuable direction for MLROs and SPs looking to proactively build stronger compliance frameworks.
1. Continuous improvement sets AML/CFT Leaders apart
Notably, several SPs used the Directive process as a springboard, not just to fix issues, but to enhance systems, adopt better technology, and deepen their risk understanding. Some even initiated self-assessments in parallel. This mindset separates compliance survivors from compliance leaders.
2. Collaboration beats confrontation
Institutions that proactively engaged with our officials by submitting structured documentation, providing detailed clarifications, and adhered to the Directive’s requirements, achieved better outcomes. These SPs weren’t just complying; they were transforming.
3. Controls must talk to each other
Transaction monitoring, customer risk assessment, and up to date customer due diligence cannot operate in silos. True effectiveness comes from interlinked systems that evolve in tandem. AML/CFT isn’t just a series of checkboxes; it’s an ecosystem. SPs should ensure all controls function as one cohesive system, not in isolation.
4. Documentation tells the real story
Effective documentation is critical. Vague, excessive, or misaligned submissions hinder coherence. Documentary organisation, whether centralised or compartmentalised, automated or manually maintained, speaks volumes about an SP’s ability to actively monitor customer activity.
For SPs, these lessons offer practical benchmarks for continuous improvement. Whether through internal audits, control testing, or training programmes, the opportunity to strengthen compliance doesn’t begin with a Directive, it begins now!
Enforcement as a Compliance Partner
A critical takeaway from the above considerations is this: Corrective Actions are not about the past; they are about ensuring future compliance.
A Directive is a blueprint that empowers SPs to strengthen internal controls, refine governance structures, and embed a culture of compliance that is resilient to risk and responsive to change.
The reputational cost of inaction, however, is real. Non-compliance can erode trust with clients, regulators, correspondent banks, and other key stakeholders. Enforcement findings are closely monitored, and deficiencies can impact market access, investor confidence, and international relationships.
When SPs and regulators work in tandem with clarity, collaboration, and a shared purpose, AML/CFT enforcement becomes a mechanism for positive change.
The Way Forward
As the ML/FT landscape continues to evolve, enforcement frameworks must follow suit. What is needed is a mindset shift, from viewing enforcement as an end, to seeing it as a means to elevate standards.
At the FIAU, we remain committed to this principle. Through ongoing dialogue, data-driven assessments, and shared responsibility, we aim not just to police the system, but to fortify it.
MLROs, board members, and compliance professionals alike should see corrective actions not as reactive mechanisms, but as living templates for continuous improvement. In the world of AML/CFT, tomorrow’s resilience is shaped by today’s response.
Article written by
Mr. Ian Bugeja MSc., CAMS , Manager within the FIAU Malta’s Enforcement Section.