It is undeniable that the world of technology is moving at such a fast-tracked pace, that criminals are always finding innovative ways to avoid detection when carrying out illicit activities and transactions.
In mid-2021, the European Commission revealed transformation plans within the AML/CFT arena for EU member states to be better equipped to tackle the ongoing complex financial crime challenges. Accordingly, an AML/CFT legislative package was adopted in July 2021 which included three main legislative proposals.
Cash is particularly susceptible to misuse for money laundering and funding of terrorism (ML/FT) purposes. Credit institutions have always been exposed to the risks presented by cash since they are the main entry point through which cash can be introduced into the financial system and subsequently transferred to third parties.
ESG (Environmental, Social, and Governance) compliance is becoming an increasingly complex and challenging regulatory environment for entities to navigate into since the regulatory landscape needs to adapt to the effects of global warming, constitutional rights, social responsibility and environmental crimes.
The Financial Action Task Force (FATF) Plenary held in Berlin last week was certainly anticipated, by many, to determine if Malta would be removed from the FATF greylist. The PwC Tax Conference held on Friday 17 June 2022, tackled the impact of Malta’s greylisting and the way forward in its concluding sessions.
Money laundering and terrorist financing (ML/TF) continue to be a major concern for the EU’s financial system and the security of its citizens. On 31 January 2022, the European Banking Authority (EBA) launched its central database for Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT), known as the European Reporting system for material CFT/AML weaknesses (EuReCA).
Many people in the regulatory sphere would agree that the run up to April is the most intensive, time consuming and resource demanding time of the year mainly because of the number of annual regulatory submissions for both Financial Intelligence Analysis Unit (FIAU) and the Malta Financial Services Authority (MFSA) which are due. Now, with these regulatory submissions out of the way, can those aforementioned persons relax and wait for the next round?
Whilst the preferred answer would be a clear and loud “Yes”, in reality, this is a crucial time to keep up the momentum and move on to what very likely is the most fundamental step that subject persons should be taking.
The conflict between Russia and Ukraine has brought about the imposition of a series of sanctions and restrictive measures. In this regard, during the past month, various Maltese supervisory authorities have been issuing publications directed at reminding subject persons of their obligations under the National Interest (Enabling Powers) Act (NIA) and of how sanctions may impact their obligations under the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) and the Financial Intelligence Analysis Unit (FIAU) Implementing Procedures.
The Financial Intelligence Agency Unit (FIAU) has released the deadlines for the submission of this year’s Risk Evaluation Questionnaire (REQ). Subject persons may start completing the 2022 REQ in the Compliance and Supervision Platform for Assessing Risk (CASPAR) portal as from 1 March 2022.
Subject persons have been experiencing a growing demand for remote customer onboarding solutions, especially due to the restrictions on movement caused by the COVID-19 pandemic. In the European Commission’s view, customer due diligence rules in Directive (EU) 2015/849 do not provide sufficient clarity and convergence about what is, and what is not, allowed in a remote and digital context. As a result, supervisory expectations and the measures taken by financial sector operators, differ across Member States. In this regard, the European Commission asked the EBA to issue guidelines on the application of anti-money laundering and countering the financing of terrorism (AML/CFT) rules where customers are onboarded remotely.
Money laundering and the financing of terrorism are currently under the spotlight with subject persons, now more than ever, experiencing increased scrutiny in ensuring that their AML/CFT framework is up to standard. It is no longer sufficient to have policies and procedures in place, but assurance that agreed upon controls are stringently implemented and that these are effective in managing identified risks.
With global environmental crimes generating around $110 to $281 billion in criminal gains per year, the FATF is raising the alarm on the issue. Through a FAFT report published in July 2021 and titled Money Laundering from Environmental Crime, the FATF is aiming to increase global awareness and encouraging collaboration between environmental agencies, relevant financial investigators and intelligence agencies. This includes the establishment of communication channels between AML/CFT authorities.
In October 2020, the FATF revised Recommendation 1 and its Interpretive Note (R.1 and INR.1) to require countries and Subject Persons to identify, assess, understand and mitigate their proliferation financing risks.
The European Union has been making significant efforts to combat the laundering of money and terrorist financing within its Member States. Shortly after issuing the 5th Anti Money Laundering Directive (5AMLD), on the 23 October 2018 the EU further reinforced its mission by issuing the 6th Anti Money Laundering Directive (6AMLD). With the implementation deadline (3 June 2021) now on our doorstep, are Subject Persons prepared to handle what lies ahead?
The FIAU has issued a notice informing subject persons of a series of amendments to the PMLFTRs. These changes came into force on the 22 May 2020 with the issue of the Legal Notice 214 of 2020. Revisions were made to regulations 8,11, 12, 15 and 21 of the PMLFTRs. Regulations 15 and 21 had significant changes.
Subject persons operating between 1 January and 31 December 2019 must submit the REQ to the FIAU. The REQ is part of an information collection exercise carried out by the FIAU, in order to be able to risk assess operations of said Subject Persons and be able to adopt a risk based approach to supervision. Submission of this return is mandatory and failure to submit, or a late submission can lead to potential breaches which can result in sanctions.
The 2020 REQs are available on the CASPAR System, for completion by Subject Persons. The FIAU had previously noted that the deadline for the submission of the REQ was 1 April 2020, with a penalty of €100 for submissions made after this date. However, given the current situation and difficulties local entities are facing due to the COVID-19 outbreak, the late submission penalty of €100 shall no longer apply.
Additionally, there shall not be a ‘late submission’ period, and the only deadline for the submission of the REQ shall, for the time being and unless further extended by the FIAU, be set for 4 May 2020 at 17:00hrs. Subject Persons who submit their REQ after the 4th May deadline may be subject to administrative penalties.
Provision of incomplete or contradictory information can adversely impact the outcome of the risk assessment, as such, particular care and attention should be paid to avoid unnecessary repercussions.
PwC can assist you by carrying out a quality review of your REQ prior to submission to ensure information provided is consistent.
Feel free to reach out to us on the following contacts.
The BRA lies at the heart of the risk-based approach underpinning current AML/CFT regulatory frameworks and is a regulatory obligation that has been drawing increased scrutiny by supervisory authorities.