Landmark judgement rules FIAU anti-money laundering fines unconstitutional

In a landmark judgement that is expected to catalyse a change in the law, the Constitutional Court presided over by Madam Justice Audrey Demicoli today declared the Financial Intelligence Analysis Unit’s compliance process that leads to the imposition of administrative fines to be null and without effect.

In a judgement expected to have serious repercussions on Malta’s anti-money laundering laws, the court ruled that the current laws and regulations governing the FIAU’s processes breach the right to a fair hearing as protected by the Constitution of Malta.

Ordering a copy of the judgement to be sent to parliament, Judge Demicoli also declared that part of the Prevention of Money Laundering and Funding of Terrorism Regulations, and the rules on the imposition of fines, as null and anti-constitutional.

Annulling a fine of over €400,000 levied against a financial services operator, Phoenix Payments Limited, the court ruled that the imposition of such fines by the FIAU has no validity under the Constitution of Malta since the Unit cannot act as judge, jury and executioner.

The fine was imposed by the FIAU in 2021 as the country was in the throes of the Financial Action Task Force’s grey-listing saga.

The court declared “null and without effect the investigative procedure of compliance carried out by the FIAU.”

The Shift is informed that there are several similar cases currently before the courts that are challenging the process and the fines the FIAU has imposed. Today’s judgement is expected to have a marked effect on those cases, in which fines imposed by the FIAU at very well be similarly cancelled.

The Constitutional case was filed in January 2022 by Phoenix Payments Ltd after it was slapped with €435,000 FIAU fine for alleged money-laundering breaches linked to cryptocurrencies.

The company, which has since parted ways with Malta, claimed the FIAU had no right to impose such fines and that it had not been given a fair hearing in which it could counter the FIAU’s claims.

Phoenix founder Marco Lavanna told The Shift in 2021 that, at the time, both the Malta Financial Services Authority and the FIAU were flexing their muscles to impress the Financial Action Task Force, which had Malta on its grey list for years for allowing the jurisdiction to be used for money laundering.

“They are doing this by slapping international businesses with fines after years of closing their eyes,” he had complained.