The removal of barriers to trade, the free movement of capital and people and the emergence of new technology has allowed people in the EU and around the world to better their circumstances, but lack of regulation has created loopholes in the system.
Money laundering is a problem that has been around for decades, but with new technologies such as crypto currency and the proliferation of offshore companies, the issue has been brought to the fore.
Money laundering can be described as the practice of taking ‘dirty’ money from illgotten gains such as prostitution, illegal gambling, racketeering, tax avoidance and other such illegal activities and channeling it through seemingly ‘clean’ sources.
Maltese legislation comprises the Prevention of Money Laundering Act (PMLA), the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR), as well as Sub-Title IV A of the Criminal Code.
The PMLA outlines procedures for the investigation and prosecution of money laundering offences.
It also regulates the measures for the confiscation of property upon conviction of money laundering as well as freezing a person’s assets when they are charged with a money laundering offence.
The second part of the Act establishes the Financial Intelligence Analysis Unit and sets out its functions, powers and duties.
The European Union has announced that the 6th AML Directive is set to be introduced and member states are bound to transpose it into local law by not later than December 2020 with a window until June 2021 to bring themselves into line.
6AMLD with harmonise the definition of what is a money laundering offence across the European Union, with the specific intent of eradicating potential conflicts between Member States.
It will also provide a list of 22 offences which are classified as cybercrime and other offences.
The most important regulation in 6AMLD is that staff of firms involved in the transfer of money, funds or financial planning need to be fully trained to recognise possible indicators of money laundering, especially in regard to Article 2 of the said Directive.
Directors, decision makers and those acting on behalf of a company (including lawyers, tax advisors, etc.) are to be aware of the fact that the Directive shall extend criminal liability to them and should therefore make sure that due diligence and client profiling is carried out fastidiously.
The laws will outline punishment for such offences which will be punishable by up to four years effective jail time.
While not a law in itself, the third most important regulation that any company should adhere to is to eliminate any shadow of a doubt that the source of funds might be tainted.
Companies, directors, managers and individuals should seek the advice of the FIAU and legal advisors to ensure that they are compliant and that they themselves as well as their staff are completely up to date and trained to their maximum ability to detect and prevent money laundering related crimes.