MaltaFiles firm fined €261,000 by FIAU over shortcomings

A corporate services provider, Credence, has been fined €261,000 by the Financial Investigation Analysis Unit.

Credence Corporate Advisory Services is a Maltese law firm which had featured in news articles related to the MaltaFiles, on the existence on Turkish President Erdogan’s offshore network, as well as for providing corporate services to a Russian billionaire’s loan company to save millions in tax.

The FIAU issued two reports, one on Credence Corporate and Advisory Services Limited and the other on Credence Fiduciary Limited.

On Credence Corporate and Advisory Services Limited, the FIAU said that although the Company did have a Business Risk Assessment (“BRA”) in place, said BRA only marginally referred to the ML/FT risks that the company is or may be exposed to and what measures the company is taking to mitigate these risks. “Instead, the company’s risk assessment focused on risks unrelated to ML/FT (e.g. legal, financial, organizational and reputational risks). Furthermore, the assessment failed to consider the threats and vulnerabilities emanating from the services the company offers, the likelihood of these risks materialising and their resulting impact. Additionally, the company also failed to assess its control measures, and consequently, to determine the level of residual risk it was still exposed to.”

“Throughout the review, it was also highlighted that the company was not assessing the geographical risks arising from the business relationships with, or the occasional transactions carried out for, its clients. In fact, officials onsite noted that the company had failed to carry out a jurisdictional risk assessment on at least 26 jurisdictions; the jurisdictional risk assessment is intimately linked to the understanding geographical risk. In light of these findings and shortcomings, the Committee determined that the company failed to carry out an adequate BRA and therefore found the Company in systematic breach of its obligations.”

Aside from this, the company was found to be in breach of other regulations also for other reasons. The Committee noted shortcomings in the Company’s obligations specifically failing to identify and verify an ultimate beneficial owner (“UBO”) in one file. “In another file, it resulted that the client had connections with Iran and Panama, both of which appear on the FATF’s list of high risk and other monitored jurisdictions. Although the Company did collect additional documentation on this client and even appointed two in-house Directors, these measures were not deemed sufficient as the nature of the activities involved demanded a higher level of on-going monitoring and a better understanding of the economic rationale behind the transactions taking place.”

In view of the findings identified, the Committee concluded that the Company was in breach of the various AML/CFT obligations, which necessitated the imposition of an administrative penalty of €143,119.

With regards to Credence Fiduciary Limited, an administrative penalty of € 118,365 was issued, for similar breaches.