Euro­pean Com­mis­sion re­quests Mal­tese FIAU to step up bank su­per­vi­sion

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The Euro­pean Com­mis­sion yes­ter­day adopted an opin­ion re­quir­ing the Mal­tese anti-money laun­der­ing su­per­vi­sor to con­tinue tak­ing ad­di­tional mea­sures to fully com­ply with its obli­ga­tions un­der the fourth Anti-Money Laun­der­ing Di­rec­tive.

In reply, the Fi­nan­cial In­tel­li­gence Anal­y­sis Unit (FIAU) said it is com­mit­ted to de­vot­ing ap­pro­pri­ate re­sources in or­der to en­sure full com­pli­ance with Union law. The FIAU is con­tin­u­ously work­ing to strengthen the ef­fec­tive­ness of its su­per­vi­sion ac­tiv­i­ties and re­in­force AML su­per­vi­sion in Malta. The FIAU said has al­ready un­der­taken a num­ber of mea­sures as part of its ef­forts to fully ad­dress the EU Com­mis­sion’s con­cerns that are out­lined in its for­mal opin­ion, in­clud­ing en­gage­ment with in­ter­na­tional ex­perts to en­hance the FIAU, its poli­cies, pro­cesses and IT in­fra­struc­ture to sup­port its ca­pa­bil­i­ties in su­per­vis­ing Malta’s ever-grow­ing and dy­namic fi­nan­cial, gam­ing and other sec­tors.

In a state­ment, the Euro­pean Com­mis­sion said that fol­low­ing the Com­mis­sion’s re­quest, the Euro­pean Bank­ing Au­thor­ity (EBA) in­ves­ti­gated and con­cluded that Malta’s Fi­nan­cial In­tel­li­gence Anal­y­sis Unit (FIAU) was breach­ing Union law and is­sued a Rec­om­men­da­tion on 11 July 2018.

It con­sid­ered that Malta had failed to cor­rectly su­per­vise fi­nan­cial in­sti­tu­tions and en­sure their com­pli­ance with an­timoney laun­der­ing rules. Build­ing on the rec­om­men­da­tion of Euro­pean Bank­ing Au­thor­ity and ac­knowl­edg­ing the mea­sures adopted by Malta to ad­dress the iden­ti­fied short­com­ings in the mean­time, the Euro­pean Com­mis­sion adopted to­day a for­mal opin­ion on the ba­sis of the EBA reg­u­la­tion.

The opin­ion re­quires the Mal­tese anti-money laun­der­ing su­per­vi­sor (the FIAU) to take ad­di­tional mea­sures to fully com­ply with its obli­ga­tions un­der the fourth Anti-Money Laun­der­ing Di­rec­tive to ef­fec­tively su­per­vise fi­nan­cial in­sti­tu­tions in its ter­ri­tory, in­clud­ing by hav­ing an ef­fec­tive sanc­tion­ing regime.

First Vice-Pres­i­dent Frans Tim­mer­mans said: “To pro­tect the se­cu­rity of Euro­peans and en­sure a safe, re­li­able fi­nan­cial sys­tem, ev­ery au­thor­ity in ev­ery mem­ber state must up­hold EU mon­ey­laun­der­ing rules in full. We re­main vig­i­lant and ready to act so that any breach is swiftly reme­died and that bet­ter su­per­vi­sory prac­tice en­sures it does not hap­pen again.” Com­mis­sion Vice-Pres­i­dent Valdis Dom­brovskis, re­spon­si­ble for Fi­nan­cial Sta­bil­ity, Fi­nan­cial Ser­vices and Cap­i­tal Mar­kets Union, said: “We need to en­sure that money laun­der­ing and ter­ror­ist fi­nanc­ing risks in the fi­nan­cial sec­tor are prop­erly as­sessed and mit­i­gated by our su­per­vi­sory au­thor­i­ties. The Euro­pean Bank­ing Au­thor­ity con­trib­utes to a har­monised ap­pli­ca­tion of anti-money laun­der­ing su­per­vi­sory rules. Our Septem­ber pro­posal will equip the EBA with the ad­di­tional in­stru­ments and re­sources needed to en­sure ef­fec­tive co­op­er­a­tion and con­ver­gence of su­per­vi­sory stan­dards. I count on the Euro­pean Par­lia­ment and Coun­cil’s co­op­er­a­tion to turn this pro­posal into leg­is­la­tion rapidly.”

Com­mis­sioner for Jus­tice, Gen­der Equal­ity and Con­sumers, Vera Jourová, added: “Europe has the strong­est anti-money laun­der­ing rules in the world. But they need to be en­forced with the same high stan­dards across the EU to avoid cre­at­ing any weak link. Malta and other coun­tries must have well-equipped au­thor­i­ties and fully im­ple­mented rules in place. The Com­mis­sion will use all its pow­ers, in­clud­ing in­fringe­ment pro­ce­dures, to close any loop­holes in the fight against money laun­der­ing.”

More con­cretely, the Euro­pean Com­mis­sion calls upon Malta’s Fi­nan­cial In­tel­li­gence Anal­y­sis Unit to take a num­ber of mea­sures, which in­clude:

- Im­prov­ing its method­ol­ogy to as­sess money laun­der­ing and ter­ror­ist fi­nanc­ing risks; En­hanc­ing its mon­i­tor­ing and su­per­vi­sory strat­egy by align­ing re­sources with the risk of money laun­der­ing posed by cer­tain in­sti­tu­tions;

- En­sur­ing that the au­thor­ity is able to re­act in an ap­pro­pri­ate time when a weak­ness is iden­ti­fied, in­clud­ing by re­vis­ing its sanc­tion­ing pro­ce­dures;

- En­sur­ing that its de­ci­sion-mak­ing is prop­erly rea­soned and doc­u­mented;

- Adopt­ing sys­tem­atic and de­tailed record-keep­ing pro­cesses for off-site in­spec­tions.

Malta’s Fi­nan­cial In­tel­li­gence Anal­y­sis Unit has ten work­ing days upon re­ceipt of the opin­ion to in­form the Com­mis­sion and the Euro­pean Bank­ing Au­thor­ity of the mea­sures it in­tends to take to com­ply with their obli­ga­tions. This process un­der the EBA Reg­u­la­tion is sep­a­rate from and with­out prej­u­dice to the Com­mis­sion’s pre­rog­a­tive of launch­ing an in­fringe­ment pro­ce­dure against Malta.

Re­fer­ring to the EC de­ci­sion, the FIAU high­lighted that the de­ci­sion is based on the pre­vi­ously adopted rec­om­men­da­tions by the Euro­pean Bank­ing Au­thor­ity (EBA) and rep­re­sents an­other step in the process ini­ti­ated in 2017. The FIAU wel­comes the fact that the Com­mis­sion has ac­knowl­edged the pos­i­tive re­sults al­ready achieved and the no­tice­able progress made to-date by the FIAU. In­deed, the FIAU main­tains its ab­so­lute com­mit­ment to co­op­er­ate fully with the Com­mis­sion and the EBA as it strongly be­lieves that ef­fec­tive im­ple­men­ta­tion of AML reg­u­la­tion, is cen­tral to ad­dress­ing the chal­lenges fi­nan­cial crime presents.

The FIAU is com­mit­ted to de­vot­ing ap­pro­pri­ate re­sources in or­der to en­sure full com­pli­ance with Union law. The FIAU is con­tin­u­ously work­ing to strengthen the ef­fec­tive­ness of its su­per­vi­sion ac­tiv­i­ties and re­in­force AML su­per­vi­sion in Malta. The FIAU has al­ready un­der­taken a num­ber of mea­sures as part of its ef­forts to fully ad­dress the Com­mis­sion’s con­cerns that are out­lined in its for­mal opin­ion, in­clud­ing en­gage­ment with in­ter­na­tional ex­perts to en­hance the FIAU, its poli­cies, pro­cesses and IT in­fra­struc­ture to sup­port its ca­pa­bil­i­ties in su­per­vis­ing Malta’s ever-grow­ing and dy­namic fi­nan­cial, gam­ing and other sec­tors.

FIAU di­rec­tor Ken­neth Far­ru­gia stated: “The FIAU re­mains deeply com­mit­ted to en­sur­ing that Malta’s fi­nan­cial and other sec­tors re­main pro­tected from the grow­ing threats of money laun­der­ing and fi­nan­cial crime. As such, the FIAU has un­der­taken sig­nif­i­cant re­forms in its su­per­vi­sory ap­proach, in­clud­ing the en­hance­ment of its re­sources and the adop­tion of new tech­nol­ogy tools, to ren­der it more ef­fi­cient in its su­per­vi­sory func­tions. We are com­mit­ted to con­tinue con­struc­tively work­ing with the Euro­pean Com­mis­sion and EBA in ad­dress­ing the new chal­lenges that are be­ing faced, not only by Malta but by the Euro­pean Union as a whole.”

Nu­mer­ous ac­tions have al­ready been un­der­taken as part of a com­pre­hen­sive Ac­tion Plan that was com­mu­ni­cated to the EBA on 25 July 2018. The FIAU wel­comed the op­por­tu­nity to meet the Com­mis­sion on 18 Oc­to­ber 2018, dur­ing which meet­ing the FIAU pro­vided the Com­mis­sion with in­for­ma­tion and ev­i­dence to sup­port the lat­est ac­tions taken by the FIAU. Among many re­cent ac­tions un­der­taken, the FIAU has, in Oc­to­ber, pub­lished for con­sul­ta­tion a re­vised and en­hanced Im­ple­ment­ing Pro­ce­dures to re­flect leg­isla­tive amend­ments fol­low­ing the trans­po­si­tion of the fourth Anti-Money Laun­der­ing Di­rec­tor (4AMLD) (Di­rec­tive (EU) 2015/849). These up­dated Im­ple­ment­ing Pro­ce­dures will pro­vide more de­tailed and qual­i­ta­tive AML/CFT guid­ance to as­sist obliged en­ti­ties in ad­her­ing to their obli­ga­tions in to­day’s busi­ness en­vi­ron­ments.

Fur­ther­more, the Im­ple­ment­ing Pro­ce­dures high­light the im­por­tance of obliged en­ti­ties adopt­ing a risk-based ap­proach to im­ple­ment AML/CFT obli­ga­tions. This com­pli­ments the FIAU’s com­mit­ment to adopt a risk-based ap­proach to its su­per­vi­sion. The FIAU’s Ac­tion Plan com­pre­hen­sively ad­dresses the Com­mis­sion’s con­cerns and demon­strates its com­mit­ment to strengthen its su­per­vi­sory pro­cesses in or­der en­hance and im­prove its riskbased ap­proach to su­per­vi­sion.

As part of that Ac­tion Plan, the fol­low­ing mea­sures have been un­der­taken in re­cent months: Ini­ti­ated the process to fur­ther in­crease hu­man re­sources of its com­pli­ance sec­tion in­clud­ing the pro­vi­sion of fur­ther and more qual­i­ta­tive train­ing to bet­ter equip the sec­tion in su­per­vis­ing the var­i­ous sec­tors; Is­su­ing gen­eral, sec­tor spe­cific, and top­i­cal guid­ance to as­sist obliged en­ti­ties in com­ply­ing with do­mes­tic law; Im­prov­ing its risk as­sess­ment method­ol­ogy and data col­lec­tion pro­cesses, such as de­vel­op­ing en­hanced and dy­namic ques­tion­naires for obliged en­ti­ties; Pro­gres­sively re­vis­ing its Su­per­vi­sory Pro­ce­dures Man­ual to en­sure that it re­flects the Euro­pean Su­per­vi­sory Au­thor­i­ties’ stan­dards and in­ter­na­tional best prac­tices; and En­hanc­ing in­ter­nal su­per­vi­sory pro­ce­dures that strengthen its in­sti­tu­tional gov­er­nance, method­ol­ogy, and de­ci­sion mak­ing pro­cesses, in­clud­ing the ef­fec­tive use of sanc­tions and other su­per­vi­sory mea­sures.

The FIAU will fully re­spond to the Euro­pean Com­mis­sion and the EBA pro­vid­ing in­for­ma­tion on all spe­cific ac­tions al­ready im­ple­mented as well as ac­tions it in­tends to take in the short­est pos­si­ble time-pe­riod.

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