‘FIAU will have addressed all Moneyval recommendations by September’ – FIAU Director

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The Financial Intelligence and Analysis Unit will have addressed all the recommendations put forward by Moneyval within the coming months up to August or September, FIAU Director Kenneth Farrugia told The Malta Independent.

Asked about the FIAU’s readiness for the Moneyval test – where Malta risks being grey-listed if it fails – Farrugia said that while certain recommendations still have to be implemented, they will be implemented by August or September of this year.

He said that they had already implemented a number of changes and are seeing results. For instance, he said, the time for an analysis to take place went from an average of around 300 days to an average of 104 days.

Asked about worries about other entities such as the police and the judiciary when it comes to the Moneyval assessment, Farrugia said that he can only give guarantees on the FIAU.

“We are coordinating and working much closer with other entities, but I cannot give a guarantee that everything across the board will be ready; others have to speak for that”, Farrugia said.

Farrugia’s comments come after the FIAU published their Annual Report for 2019.

The report shows that the FIAU received a record 2,778 suspicious transaction reports (STRs) – a 65% increase on the 1,679 received in 2018. These STRs resulted in 2,446 cases – 57% more than in 2018, and a mammoth 248% more than in 2017.

In addition, a further 35 cases were initiated by the FIAU on its own initiative after receiving information from elsewhere, generally from their foreign counterparts.

The bulk of these STRs came from remote gaming companies and credit institutions. The former actually overtook the latter when compared to 2018 by quite a significant margin; 1,445 STRs came from these gaming companies – a 106% increase on 2018 – while 962 came from credit institutions.

Together, remote gaming companies and credit institutions filed 87% of all the STRs the FIAU received in 2019.

The number of STRs in all the other reporting entities did not exceed 100 – the sector to report the third most STRs were supervisory authorities – which reported 83 such STRs.

The 2,778 STRs involved a total of 4,788 natural and legal persons, an 77% increase over 2018.

Almost 75% of the natural and legal persons reported during 2019 were non-Maltese nationals or foreign-registered companies. In the case of the remote gaming industry, an overwhelming 98% of the reported subjects were foreign nationals.

“This is similar to what has been observed in previous years and also continues to confirm the international element that the Maltese financial sector is exposed to”, the report reads.

The increase in reports is seen in part down to increased awareness being raised in companies over their legal obligation to report such suspicious transcations.

61 cases sent to police after FIAU concludes ‘reasonable suspicion’

The FIAU’s Intelligence Analysis section processed a total of 3,585 cases in 2019. A third of these cases were initiated before 2019. In 2019 the FIAU concluded 1,398 cases, which equate to 39% of all the cases handled during the year. A total of 2,187 cases remained ongoing as at the end of the year.

A total of 61 cases were disseminated to the police for further investigation following a determination of reasonable suspicion by the FIAU.  A further 41 spontaneous intelligence reports were sent to the police as well after the unit concluded that the intelligence revealed during the course of an analysis would be of relevance to the Police.

Asked about the issue of the police failing to act on certain FIAU reports, and whether they have been given assurances that the police do act on their reports, Farrugia said that they are aware of some cases which the police are working on.

He said that because intelligence reports need to be converted into evidence, it does take longer for that evidence to be sought through the necessary channels meaning that these reports are not resolved in a matter of months.

He said that the police have come back to the FIAU for further intelligence on certain cases, and noted that there is dialogue between the two when a case does not go to prosecution.

The head of the FIAU’s Legal Affairs team Alex Mangion meanwhile pointed out that there is the need for more investment in this area so that prosecutions in money laundering can increase moving forward.

Because 86% of the STRs received relate to foreign natural or legal persons, in a number of these cases, the FIAU considered it more appropriate to send a spontaneous intelligence report to foreign FIUs rather than initiating an in-depth analysis in Malta, due to the jurisdictional limitations that of these cases.

Indeed, there were 1,547 disseminations to foreign FIUs.  There were 186 disseminations to competent authorities, which are generally tax authorities on cases of tax evasions – in fact some €1.2 million in unpaid taxes have been recovered in the past year.

The most prevalent suspected predicate offence continues to be fraud, with 596 instances reported – equivalent to 39% of all instances.

This was followed by tax crimes, suspected terrorism (including terrorist financing), participation in organised criminal groups and racketeering, forgery, and corruption and bribery, which together made up 47% of all predicate offences reported in STR submissions.

FIAU made over 13,000 requests for information, namely due to increase in STRs

The FIAU made 13,696 requests for information to approximately 1,650 entities. This 34% increase in requests compared to 2018 is largely a result of the overall increase in the number of STRs and cases dealt with in 2019.

Credit institutions remain the primary source of information for the FIAU, representing more than 64% of all the FIAU’s requests for information. Other major recipients were company service providers, and trustees and fiduciaries.

“The FIAU sends out requests for information following the receipt of STRs, the receipt of requests for information from foreign FIUs and in cases generated by the FIAU itself”, the report reads.

In 2019, the requests for information made following the receipt of STRs totalled 9,366, which is a 52% increase over the previous year. A further 2,766 requests were made in the course of analysis being carried out independently of the receipt of an STR, and the remaining 1,564 were following an international request from information.

The FIAU sent 711 requests for assistance to 94 foreign FIUs in 2019. This is a 41% increase on 2018. These requests for information and assistance reflect the increase of international elements in cases subject to an analysis by the FIAU.

Of the 711 requests for assistance sent to FIUs, 79% were sent to 46 different FIUs in Europe. This was followed by requests for information sent to FIUs in Asia and the Americas, to which the FIAU sent 9% to each.

The FIAU’s top counterparts in 2019 were the United States (71 requests), Italy (56 requests), Germany (49 requests) and Bulgaria (30 requests).

With regard to the timeliness of FIUs in replying to the FIAU’s requests for information, it was noted that 38% of all requests for information sent were replied to within one week, 24% were replied to within one month and another 38% were replied to after one month.

The requests for information received by the FIAU in 2019 amounted to 228 from 56 different countries, which marks a 9% decrease on 2018. European FIUs sent 79% of the requests received.

With 39 requests, the Italian FIU made the most requests to Malta’s FIAU – followed by the Indian FIU (23 requests), the US FIU (19 requests) and the German FIU (12 requests).  

Of the 228 requests for information received, the FIAU replied to 73% of all requests within a week of receipt. A further 24% of replies were sent within a month of receipt and a further 3% were replied to after one month.