Anti-Money Laundering in Malta
24 February 2020
It’s truly impossible to calculate the exact amount of money that gets laundered year on year. An educated guess would produce an estimate in the region of billions of Euros, making it a primary target for every administration. The proliferation of online financial transactions has resulted in an increased focus on anti money laundering (AML) legislation and enforcement. This is further fuelled by the integration of the world’s financial systems, the free movement of capital and rapid advancement of technology. But such a weighty topic requires some deeper exploration, so let’s take things back a few steps and get into exactly what AML is and how it’s applied to some of the most vital sectors of our society.
What is money laundering?
To explain what AML is, it’s necessary to understand what money laundering is. This is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. The idea is to disguise the true source of wealth to an extent where it no longer appears illicit.
Looking at things in a very simplistic manner, money laundering can be described in three steps:
- Placement is the first stage that involves introducing the illicit funds into the financial system in some way. This could be through deposits on an online casino, or even a deposit into a bank account.
- Layering is where the actual ‘laundering’ takes place. The purpose is to disguise the original source of the funds by carrying out complex financial transactions.
- Integration is the final step whereby the launderer actually generates new wealth from the illicit funds, giving them a fresh origin that appears legitimate.
What is AML?
Anti Money Laundering is the set of processes put in place that have been designed to specifically combat this criminal act. Naturally, it follows that the business sectors which require AML regulation are ones that involve the transacting of finances.
This includes the obvious industries like banking and other financial institutions, but it also extends into casinos (both land-based and online) and even newer industries such as virtual financial assets (like cryptocurrencies and other digital finance technologies).
But how is money laundering actually combated in practice? This is done through a series of procedures and safeguards that are consistently enforced and reviewed. For example, an online casino would have a team of people to manage:
- Customer due diligence
- Enhanced due diligence (e.g. taking a much deeper look at an individual’s source of funds)
- Ongoing monitoring of transactions and behaviours
How is AML legislated in Malta?
AML is of particular importance in Malta. The island nation has become something of a hotspot for so-called risky business sectors like iGaming, Blockchain, Cryptocurrency, and the Individual Investor Programme (whereby by citizenship is sold for considerable sums of money). Malta pioneers much of the legislative framework for these industries, and AML is a required facet of these regulations.
The Financial Intelligence Analysis Unit (FIAU) is responsiblefor the prevention of money laundering and financing of terrorism. They ensure that both individuals and financial services operators are complying with the all anti-money laundering legislation in place.
The Maltese Prevention of Money Laundering Act (PMLA) imposes an obligation on financial institutions and other professionals to identify customers, establish risk-based controls and report suspicious activities. Malta has also adopted the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR), modelled on the European Union’s Fifth Directive on the prevention of money laundering.
While not an entirely dedicated body, the Malta Financial Services Authority (MFSA) also has a vested interest in the prevention of money laundering. They’re considered to be an agent of the FIAU and will assist andcooperatewith the FIAU as it works to meet its requirements under the PMLA.
Together, the FIAU and MFSA will take action against any entity breaching AML regulation, including remedial, enforcement and sanctioning measures. The FIAU maintains sector specific guidance for AML, which is constantly being adapted and expanded, covering new topics as they emerge or grow in importance. Their guidance is split into general regulation that is applicable across the board, and also sector specific guidance that delves into more detail on Malta’s main money laundering risk points.
How AE can help
AML is a necessary cog in any organisational machine that integrates the processing of finances. Developing this internal AML culture is critical, yet often challenging to manage. The repercussions for any errors in this area could result in large fines or even the revocation of a licence. Many organisations choose to mitigate these risks by outsourcing AML to a team who will take on the burden of this constant vigilance.
AE is made up of such a team. With a strong focus on practical solutions and an unwavering commitment to monitoring the developments in this legal space, we’re the ideal solution to your AML concerns. Our experience in Malta and internationally means that we understand a variety of company cultures and can create a framework that works for you, and not against you. Reach out to our specialist team at firstname.lastname@example.org