Judge declares FIAU fines unconstitutional in another landmark decision

Last Updated on Saturday, 15 July, 2023 at 12:16 pm by Andre Camilleri

A judge has declared that the laws regulating the administrative fines imposed by Malta’s financial crime watchdog are in breach of fundamental rights.

This emerges from a decision handed down on Thursday by the First Hall of the Civil Court in its Constitutional jurisdiction, presided by Madam Justice Joanne Vella Cuschieri.

The case had been filed by financial services and investment services provider XNT Ltd, formerly known as Exante, which the FIAU had served with a €244,679 fine for a number of failures to comply with the Prevention of Money Laundering Act and the Prevention of Money Laundering and Funding of Terrorism Regulations.The company was informed of the fine in June 2022 by means of a letter and given 20 days to pay what was referred to as an “administrative fine,” of almost a quarter of a million euros.

In filing the constitutional case, XNT’s lawyers, Jose Herrera and David Camilleri, pointed out that the Constitution and the European Convention on Human Rights protected the right not to be punished without first being found guilty by a court of criminal judicature.

They argued that the Prevention of Money Laundering and Funding of Terrorism Regulations effectively granted the FIAU the power to establish and impose criminal sanctions without a fair hearing. The proceedings which lead to such punishments are “totally lacking” insofar as the fair hearing guarantees required by the Constitution and the European Convention are concerned. 

In its reply, the FIAU had argued, amongst other things, that the size of the fine imposed is not the only factor to be taken into consideration in establishing whether or not it is a criminal sanction.

It accused the XNT of misrepresenting the sanction imposed on it, arguing that it was not a punishment for the crime of money laundering, which could only be decided by a court, but a sanction for failing to perform its obligations to prevent money laundering.

The FIAU’s remit had not established that money laundering took place, but had “merely examined the operation and procedures to assure itself of regulatory compliance and “imposed the relative sanction after determining that the applicant company had grave regulatory failings.”

The judge upheld XNT’s request to declare the Act and regulation to be in breach of its fundamental rights, ruling that every action that took place in terms of the two pieces of legislation “cannot be taken to have been carried out in a manner in which the same fundamental rights were protected.”

This was not the fault of the FIAU, ruled the judge, but the legislator. The court agreed that fair trial rights are given a very wide interpretation by the European Court of Human Rights, and covers other types of proceedings, besides criminal. By extension, the interpretation of the same right under Malta’s Constitution should also be given this interpretation and not be interpreted restrictively by the courts.

Although the fine central to this case was described as “administrative” it clearly emerged that the way it is imposed, as well as the amounts involved, are clearly intended to serve as both a deterrent and punishment for breaches -which meant that they are criminal sanctions and, therefore, subject to the constitutionally protected right to a fair hearing.

Because it had found a breach of fundamental rights resulting from a law which is in force, the court ordered a copy of the judgement to be served on the Speaker of the House upon the lapse of the appeal period.

Lawyers Jose Herrera and David Camilleri represented Exante/XNT in the proceedings.

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