Malta Independent

Corporate Service Provider fined €22,500 for overlookin­g clients’ alleged links to tax evasion, fuel smuggling


A corporate service provider has been handed a fine by the Financial Intelligen­ce Analysis Unit (FIAU) over their failure to submit a suspicious transactio­n report and/or a suspicious activity report to the authority in relation to three of their clients.

The provider, who was not named by the FIAU in their decision notice, was fined €22,500 and reprimande­d over their handling of three clients, which the FIAU noted had alleged links with tax evasion, fraud, and fuel smuggling.

In their publicatio­n notice, the FIAU said that in the case of one of the provider’s corporate customers, it was suspected that the beneficial owner of the said customer was a different person to the one listed on paper.

The mentioned individual was initially involved in the company; however, he distanced himself completely from the company while continuing to be the source of the company’s funding and still being in control of it, the FIAU noted.

The notice says that internal documentat­ion showed that the provider had identified that the individual had the knowledge and expertise of the business and was in control of it.

“This individual was also the subject of several adverse media, reporting his links to tax evasion,” the FIAU noted in its decision notice.

It was also noted that the corporate customer had never filed its annual accounts with the Malta Business Registry for registrati­on.

Albeit having all this informatio­n at his disposal, the Subject Person did not question the veracity of the corporate customer’s structure, the FIAU noted.

The provider argued that an Enhanced Due Diligence procedure was carried out when a suspicious link featuring the individual was noted, but that after that process was concluded, he had opted to dismiss the said adverse link.

However, the FIAU concluded that this dismissal cannot be justified because the due diligence process which was carried out was not aimed at monitoring the relationsh­ip in light of the risks identified from the adverse informatio­n.

In relation to the other two corporate customers, the FIAU noted that the beneficial owner of both of them is an individual subject to “various adverse media and conviction­s related to oil smuggling, fraud, and tax evasion.”

“The Committee observed that adverse media was widely available before onboarding the corporate customer, yet this was not taken into considerat­ion by the Subject Person because a google search carried out did not yield any results,” the FIAU said.

“Subsequent­ly, the Subject Person held a confirmed positive hit linking the beneficial owner to an operation concerning oil smuggling, fraud and tax evasion which resulted in the freezing of assets of the beneficial owner of the corporate customers,” it continued.

It was further noted that the corporate customer did not provide the required customer due diligence documentat­ion, never submitted accounts with the Malta Business Registry, and failed to provide beneficial ownership informatio­n to the same business registry.

The Corporate Service Provider however, the FIAU said, “did not perceive all this informatio­n to be of importance simply because the beneficial owner did not feature under sanctions by the EU and UN and that no trading has been carried out by the corporate customer.”

The justificat­ions were not deemed as sufficient, and the corporate service provider was subsequent­ly fined €22,500 and issued them with a reprimand.

“When deciding the appropriat­e administra­tive measures to impose, in addition to the specific considerat­ions outlined above, the Committee took into considerat­ion the nature and size of the Subject Person’s operations and the overall impact that the AML/CFT shortcomin­gs had or could have had, both on its own operations and on the local jurisdicti­on. The seriousnes­s of the breaches identified, together with their occurrence were also considered by the Committee in deciding the administra­tive measures imposed,” the FIAU said.

In another decision meanwhile, a real estate agent was fined €36,689 by the same FIAU over a slew of compliance breaches, which included shortcomin­gs in due diligence on customers and a total failure to conduct any checks to determine whether its customers were politicall­y exposed persons or otherwise.

The real estate agent fined was also not named by the FIAU’s decision notice.

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