- A definition of ‘funding of terrorism’ that merely cross refers to articles 328B and 328F-328I of the Criminal Code, but which was long needed;
- A slight modification to the definition of ‘property’ to reflect the EU AML Directive and add a reference to assets (besides property) that could be corporeal or incorporeal (besides tangible or intangible) and that includes legal documents or instruments evidencing title to, or interest in, such property or assets;
- A clarification in article 3(2A) that the competence of the various courts discussed therein relates to crimes of money laundering specifically and not to all crimes under the PMLA;
- Attachment orders no longer need to be served on the garnishee and on the suspect by an officer of the Executive Police not below the rank of inspector, so non-inspectors may now also serve attachment orders;
- The validity period for attachment orders has been increased from 30 days to 45 days and where sufficient grounds exist, on application of the AG, the validity may be extended for another 45 days (totalling 90 days in all);
- Once a person is accused, and a freezing order may then be issued on the demand of the prosecution, where the court does not proceed forthwith to make such an order, the court “shall forthwith make a temporary freezing order having the same effect as an order made under (article 5), which temporary order shall remain in force until such time as the court makes the order required by the said article.” This new provision refers to the Court not proceeding forthwith to issue the freezing order ‘required’ in terms of article 5, whereas the freezing order is not automatic and is only issued on the demand of the prosecution. It is therefore not entirely clear whether the new temporary freezing order will kick in only where the prosecution requests a freezing order and the court happens to delay in issuing it (in which case the court would be obliged to issue a temporary freezing order).
- A new right of ‘appeal’ has also been given to the AG in those cases where the Court “for any reason whatsoever” denies a request by the prosecution for the issuance of a freezing order, which appeal can be made to the Criminal Court within 3 working days from the date of the Court’s decision, in which case the temporary freezing order shall remain in force until the Criminal Court determines the application. Likewise, the person charged may also apply to the Criminal Court within 3 days for any freezing order issued to be revoked.
- In order to assist in the recovery of assets pertaining to the accused (asset tracing), a new provision empowers the Registrar, whenever a freezing order is issued, to conduct inquiries to trace and ascertain the whereabouts of any moneys or other property “due, or pertaining to or under the control of” the person charged or convicted. Addressees of such enquiries are obliged to provide information within 30 days from the day of receipt of the demand for information. The provision clarifies that the demand for information may be made by electronic mail – this new article 11A essentially formalises the practice that was going on to date;
- A new ‘name and shame’ policy has been introduced via article 13A so that any administrative penalty which may be imposed by the FIAU in terms of rules and regulations under article 12 may be subject to publication where the administrative penalty is equivalent to or exceeds EUR1500 (whether it is imposed in respect of one or more contraventions) and publication may be made in such medium and in such manner (incouding electronically) as the Board of Governors determines in appropriate policies and procedures. The FIAU has, on the 27th May, 2015, published its policy on the ‘Publication of AML/CFT Penalties’. According to the Policy document, the information published shall include:
- (a) the identity details of the natural or legal person subject to the administrative penalty (i.e. name, identification document number or registration number of the legal person or legal arrangement);
- (b) date of imposition of the administrative penalty;
- (c) a summary of the reasons leading to the imposition of the administrative penalty; and
- (d) a reference to the legal provision/s that was breached.
- The Policy document recognises that administrative penalties imposed by the FIAU are subject to review in terms of Maltese law and that where the FIAU publishes an administrative penalty which has been subjected to a review process before the Courts of Malta or an administrative tribunal, it shall include a statement indicating that the administrative decision in respect of which the administrative penalty was imposed is subject to review. Moreover, the FIAU shall take all the necessary measures to communicate the outcome of the review process and to remove the publication notice should the challenge of the FIAU decision be successful.
- According to the FIAU Policy, published administrative penalties shall remain posted on the FIAU website for a period of five years from publication. Upon expiration of the five year publication period, the publication notice shall be removed from the FIAU website unless the Board of Governors is of the view that circumstances exist that warrant a longer period of publication.
- Article 12(4) PMLA has been amended increasing the fine (multa) that any regulations published in terms of the PMLA (such as the PMLFTR themselves) can impose from EUR46,500 to EUR150,000.
- The amendment made to the PMLFTR definition of suspicion (and the reporting obligation) as including ‘property that may have derived directly or indirectly, or constitutes the proceeds of, criminal activity’ has also been reflected in the functions of the FIAU in article 16 wherever the FIAU is required to consider reports;
- The duties of the FIAU to refer matters to the Police for further investigation have been extended from money laundering or funding of terrorism instances also to instances of proceeds of criminal activity and the underlying criminal activity itself so that, if the FIAU now suspects that a predicate offence has been committed (rather than the laundering process). it is empowered to refer the matter to the Police;
- The PMLA provision dealing with the transmission by the FIAU to the Police of information following its analysis of an STR, has been substituted and where the FIAU transmits information to the Police and the Subject Person happens to be supervised or regulated by another authority or agency, the FIAU is now obliged to inform the supervisory authority or agency of the actions taken by the FIAU.
- The FIAU’s compliance obligations have also been broadened under article 26 because in order to establish compliance, the FIAU is not restricted to request information or documents relating to the subject person’s internal procedures for compliance, but may request any information or documents ‘as may be required in order to establish compliance’;
- The power of the FIAU to carry out on-site examinations on subject persons with the aim of establishing compliance with the provisions of the PMLA and any regulations made thereunder has been specifically included amongst the compliance functions of the FIAU in article 26(2);
- The reference to ‘Suspicious Transaction Report’ has been removed and reference is now made to a report received under article 16(1)(a), possibly so as not to restrict the broadness of the report and the reference to both transactions and activities. Article 16(1)(a) PMLA now refers to ‘reports of transactions or activities suspected to involve money laundering or the funding of terrorism or property that may have derived, directly or indirectly, from or constitutes the proceeds of criminal activity.’ In practice, the industry in Malta still uses the term STR predominatly (and not SAR or Suspicious Activity Report) and the FIAU itself still refers to STR’s on its website and has a ‘template STR Form’ uploaded. The FIAU’s PMLFTR also refer specifically to STR’s in regulation 14(2)(a) and (b) in relation to the statistical data that the FIAU, competent authorities and subject persons are required to maintain and in regulation 14(4) PMLFTR regarding the FIAU’s obligation to give timely feedback on the effectiveness of STR’s.
- Article 28 dealing with the delay of execution of a suspicious transaction has been overhauled following various discussions with various stakeholders during the Joint Committee for the Prevention of Money Laundering and Funding of Terrorism that was established, under the chairmanship of the FIAU, to enhance dialogue between the industry and the regulatory authorities, in the field of AML-CFT. Essentially the revised provision refers both to situations where it is the subject person itself that notifies the FIAU about the suspicious transaction as well as to situations where the FIAU identifies the suspicious transaction on the basis of information in its possession (including upon a request by a foreign FIU or similar authority) and also covers instances where the transaction may involve property that is derived ‘directly or indirectly’ from, or constitutes, the proceeds of criminal activity. In these instances, the FIAU may oppose the execution of the transaction in which case it must notify the subject person by any written means. In those instances where the FIAU opposes the transaction following receipt of information from the subject person, the notification of such opposition must be made by not later than 1 working day following the day on which the information was received and during such time the subject person must not execute the transaction. This right to be notified in a relatively timely manner highlights the importance for the subject person itself being the one to preempt matters and report the suspicious transaction, rather than to have the FIAU take the initiative itself (without prior notice, of course) – the reference to working days, however, can be quite tricky if weekends get in the way.
- The opposition now suspends execution for 1 working day following the day of the notification (and no longer 24 hours from the time of the notification) and the FIAU may now also, at its discretion, extend the period by a further working day where this is considered necessary by the FIAU (and the extension is to be notified to the subject person before the lapse of the 1-working day extension). EXAMPLE: So basically, if an STR is made on the Monday, within the Tuesday (being 1 working day following the day of the notification) the FIAU must notify the subject person of its intention to suspend execution, in which case the transaction will be suspended throughout the Wednesday (being 1 working day following the day of the notification) and before the expiry of the Wednesday the FIAU can extend the period by a further 1 working day until the end of Thursday (i.e. a total of 4 running days) – add a weekend to the equation and if the STR is made on Friday, notification of suspension must be made on the Monday and the transaction will be suspended throughout the Tuesday and possibly also the Wednesday (if extended) – i.e. a total of 6 running days.
- As a somewhat important compromise the new article 28(4) now clearly states that “the obligation not to execute a transaction suspended by the Unit for the period of time referred to in sub-article (2) or the extended period referred to in sub-article (3) shall prevail over any legal or contractual obligation to which a subject person may be subject.” This provision was debated at length before the Joint Committee for the Prevention of Money Laundering and Funding of Terrorism where concern was expressed, in the light of the Shah vs HSBC decision, about the risk of customers suing subject persons for civil negligence or breach of duty for failing to carry out a transactions when they are faced with an order from the FIAU obliging them not to execute the transaction. This provision now dispels any fears that complying with any such order may expose the subject person to contractual damages or other legal liability.
- An obligation on subject persons or other persons from whom the FIAU demands information in terms of article 30 has been imposed to provide such information in a timely manner and within such time period as the FIAU may direct or as may be established in Regulations under the Act;
- The same timeliness applies to requests for information by the FIAU pursuant to article 30A (i.e. information it deems relevant for the purpose of pursuing its functions under article 16);
- The obligation of the FIAU to provide information on any STR’s filed by a subject person, when requested by the subject person, may now also be provided by the FIAU of its own motion;
- A new power (article 30C) has been granted to the FIAU enabling it to issue directives in writing requiring a subject person to do or refrain from doing any act, which directives are to be complied with within the time and in the manner stipulated therein. Such directives can be issued:
- (a) in order to combat ML and FT;
- (b) to ensure compliance by subject persons with their obligations under the PMLA and the PMLFTR; and
- (c) to prevent the financial system from being used for criminal purposes.
- A new article 35(a) PMLA was amended to enable the FIAU to recover fees in respect of its supervisory functions “and other services rendered by it” in an attempt to justify the EUR50/EUR60 charge that the FIAU levies in connection with the electronic/manual filing of the Annual Compliance Return.
Insofar as the amendments to the Criminal Code are concerned:
A) Various amendments were made to the articles of the Criminal Code dealing with acts of terrorism to now also cover terrorist activities in a wholly new article 328A(4) listing various acts (over and above the acts of terrorism referred to in sub-article (1)) that deal with acts of terrorism against or involving aircraft/ships or navigation facilities, the taking of hostages, violence at airports, various acts in respect of nuclear material and others;
B) The provision dealing with terrorist groups and the financing thereof has also been broadened to cover the direct or indirect (and by any means) collection, receipt or provision of money or other property or other means of financing (or the invitation to another person to provide money or other property) of a terrorist group, and this, as a result of the amendment, even if there is knowledge that this will contribute towards the activities of the group, even if these are not necessarily criminal activities.
C) The actual crime of funding of terrorism in article 328F has been broadened even further by a series of subtle, but important, amendments referring to the collection of money (besides other activities that were already present in the provision) and this all, by any means, directly or indirectly, and intending any such finance to be used, whether in full or in part, for terrorist activities or knowing that it will contribute towards the activities, whether criminal or otherwise, of any person involved in terrorist activities.
D) A slight amendment was also made to article 6B of the Professional Secrecy Act clarifying that the obligation of a person to disclose information otherwise subject to professional secrecy when required to do so by a competent law enforcement or regulatory authority investigating a criminal offence or a breach of duty applies also when required to do so by the Security Service established by the Security Service Act (Cap. 377 of the Laws of Malta);
E) Important – and steep – penalty increases have also been the hallmark of Act VIII of 2015 (published on the 17th March, 2015) which, besides making amendments to various provisions of the Criminal Code and to various other related laws (such as the Medical and Kindred Professions Ordinance and the Dangerous Drugs Ordinance) also amended the PMLA most noteably by increasing the punishment for money laundering from EUR2,329,373.40 (the equivalent of the old Lm1 million) or 14 years imprisonment to EUR2.5 million or 18 years imprisonment. Corresponding amendments were also made to the punishment for money laundering where the accused is tried before the inferior courts.
F) Article 23C of the Criminal Code was also amended to make it easier for the prosecution to prove that the fact that the property of a person found guilty of a relevant offence (which, by catching any criminal offence punishable with more than one year imprisonment, therefore also catches the crime of money laundering) is disproportionate to his lawful income, is because of the commission of a crime. As amended the court can now reasonably presume that it is substantially more probable that the property in question has been obtained from the criminal activity of that person rather than from other activities, in which case the property concerned shall be liable to forfeiture.
G) Article 328A(3) of the Criminal Code was also amended in order to increase the minimum fine for carrying out an act of terrorism from 5 years (to life) to 7 years (to life).
H) The crimes in article 328C Criminal Code linked to terrorist acts have been broadened to also catch any person:
- who travels or attempts to travel for the purpose of the perpetration, planning, or preparation of, or participation in, terrorist activities, or the providing or receiving of training in terrorist activities
- who finances, organises or in any other manner facilitates travel for the purposes mentioned above;
- who produces, distributes, disseminates, imports, exports, offers, sells, supplies, transmits, makes available, procures for oneself or for another, or shows a publication likely to encourage or induce the commission of terrorist activities or to be useful in the commission of such activities.
I) Act VIII of 2015 also added a new article 700 in the Criminal Code dealing with the setting up of the Asset Recovery Bureau. According to this provision, the Minister may, by regulations, provide for the setting up of an Office to be known as the Asset Recovery Bureau, to provide for its structure, powers, distribution of duties, liability for damages, administrative and operational procedures including internal proceedings, the legal and judicial representation of the Office, its funding and anything ancillary or incidental thereto. The Office shall be responsible for the tracing, identification, freezing, confiscation and management of assets and property related, directly and indirectly, to criminal activity with a view to combating crime and, for this purpose, the Office may be authorised to exercise any such powers as may be exercised by the Commissioner of Police, by the Commissioner for Revenue or any other public authority established by law.