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Do your AML procedures need updating?
In March 2021, the FIAU issued a Consultation Document setting out proposals for several changes to the Implementing Procedures Part I (“IPs”). After taking feedback received into consideration, on 18 October 2021, the FIAU issued a revised version of the IPs.
The revised IPs provide additional guidance on assessing the relevance, reliability, and timing of adverse media, and on the evaluation of supervisory and regulatory information within the context of Simplified Due Diligence (SDD).
The identification and verification requirements of beneficial owners when a body corporates’ shares are held in trust has been further clarified. If the beneficiary of the trust is identified and consideration is given as to whether the beneficiary is a beneficial owner at law, the subject person would not be expected to identify and verify (ID&V) all of the beneficial owners of the trust.
The above is also applicable to any foundations and further guidance was provided for the instances where the customer is a state-owned enterprise.
Identification and verification requirements of agents are set out more clearly.
Clarity was provided in terms of the ID&V of an agent who is a body corporate, the obligation to ID&V any directors or partners of a CSP when acting as agents and the verification requirements for customers who carry out financial businesses and have a significant number of individuals acting as signatories/carrying out transactions on its behalf.
With the applicability of this guidance aimed at discretionary portfolio management and investment management services offer to Collective Investment Schemes (CIS) or retirement schemes, it was advised that when carrying out transactions on behalf of customers, subject persons are not expected to monitor their own transactions.
Section 184.108.40.206 of the IPs now provides further guidance on the record keeping obligations of subject persons when a fund administrator servicing a CIS has been replaced and when the Money Laundering Reporting Officer (MLRO) and Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) obligations have been outsourced.
Low risk customer relationships checks and whether such relationships are to remain low risk have been considered in the revised IPs, together with the application of SDD when the customer is either a CIS or a nominee/omnibus securities’ account.
A notable change has been added to the revised update of the IPs where both executive and non-executive directors may now be appointed as MLROs and the introduction of an element of proportionality allowing subject persons to adopt mitigating measures rather than refusing a proposed MLRO.
Further guidance is also given on appointed MLROs located outside Malta, the assessments to be made when the MLRO has additional functions or duties within the subject person relating to both impartiality and independence of the MLRO and time commitment allocation etc.
Section 8.1.2 of the IPs has supplemental text with examples on the jurisdictions that are to be considered for assessment purposes. Guidance has also been provided on the use of assessment carried out by third parties and the form of criteria that needs to be followed.
For more information on the revised Implementing Procedures and guidance on how to apply them to your current AML/CFT framework, feel free to get in touch with our Financial Crime Compliance Team.