Court finds FIAU fines unconstitutional for the third time in a row

The constitutional court has ruled against the Financial Intelligence Analysis Unit in yet another case in which an FIAU fine was deemed unconstitutional.

The court ruling is the third in four months that has been decided against the unit, which has seen a number of its fines dismissed and rulings ordered to be passed on to Parliament for consideration.

Lombard Bank had challenged an October 2020 decision by the FIAU to fine the bank €340,058, claiming that under Article 39 (1) of the Maltese constitution, the fine should not have been issued. The fine had been issued in accordance with an article of the Prevention of Money Laundering and Funding of Terrorism Regulations.

This is the third landmark case since March that found the current laws and regulations governing the FIAU’s processes breach the right to a fair hearing as protected by the Constitution of Malta. Lombard’s constitutional court case joined another case the bank raised against the FIAU at the appeals court.

The court, presided over by Judge Grazio Mercieca ordered that a copy of the court sentence be passed to speaker Anġlu Farrugia, making it the third such sentence following courts cases against the FIAU decided in favour of Insignia Cards Ltd. and Phoenix Payments Ltd.

As part of the judgement, the court declared that Lombard’s constitutional rights had also been breached since the FIAU failed to properly inform the bank of the exact infraction and severity of the fine they were planning to issue, preventing the bank from properly defending itself against the allegations.

On 24 May The Shift reported on a court case heard in front of Mr Justice Lawrence Mintoff at the constitutional jurisdiction of the civil court in which Insignia Cards Ltd. similarly challenged an FIAU decision to fine it €373,670.

In that case, the FIAU had fined Insignia for failing to file a suspicious transaction report about a Russian client who was a politically exposed person with alleged ties to organised crime. The financial regulator had also claimed that Insignia’s source of wealth report on the same customer was not reliable.

That case followed a 30 March judgement by Madam Justice Audrey Demicoli which declared the FIAU’s compliance process that leads to the imposition of administrative fines to be null and without effect.

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.

Data tabled by Finance Minister Clyde Caruana in response to a 15 May parliamentary question tabled by Opposition MP Chris Said shows that the FIAU is subject to 17 other court cases alleging breaches of constitutional rights under Article 39(1) of the Maltese Constitution.