FIAU tells financial services industry not to impose stringent grey list measures on locals

The Financial Intelligence Analysis Unit (FIAU) says financial services practitioners are not required to use more stringent measures to assess potential clients or business connections if they are Maltese or resident in Malta, despite the decision by the FATF to include Malta in its greylist of non-reputable financial jurisdictions.

The anti-money laundering unit has published on its website an “interpretive note” for the industry on how to deal with the additional anti-money laundering obligations that come along with greylisting by the FATF.

The FATF yesterday outlined its reasons for placing Malta, the only EU country ever included, on its grey list, citing lack of transparency on ultimate beneficial owners of companies and weak financial intelligence on tax crimes as the main serious strategic deficiencies of the island’s jurisdiction.

The international money laundering watchdog said its report identified a “large number of serious issues regarding risks” in the country, including issues around criminal tax and related money laundering cases. It said Malta had been deficient in implementing changes efficiently and warned that the government “must not downplay the importance of these measures”.

The FIAU’s note, however, says that while greylisting means the jurisdiction is regarded as “non-reputable,” which triggers the obligation for enhanced scrutiny and due diligence measures of individuals and firms operating within the jurisdiction, this does not apply to “Malta itself”.

It instructs financial services operators that the FATF greylisting is not a “trigger” to update business or customer risk assessments and does not, on its own, mean there should be any “intensification” of anti-money laundering or countering of terrorism financing measures.

“Although subject persons are required to assess the reputability and risk of a jurisdiction to better understand the risks they are exposed to, this obligation is not to be interpreted as being also applicable to Maltese subject persons with respect to Malta itself,” the note reads. Practitioners should not be concerned about jurisdictional risks around business relationships or occasional transactions with Maltese or resident clients, it says.

It goes on to advise the industry it can continue to treat Maltese or resident customers, “including bodies corporate and legal arrangements established in Malta or having Maltese beneficial owners,” as they did previously and says practitioners are not required to apply enhanced due diligence procedures before doing business with these entities.

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