The removal of barriers to trade, the free movement of capital and people, and the emergence of new technology have the EU and the rest of the world more opportunities. Unfortunately, lack of regulation has created loopholes in the system.
Money laundering is a problem that has been around for decades. New technologies such as cryptocurrency and the proliferation of offshore companies have brought the issue to the fore.
The Prevention of Money Laundering Act (PMLA)
Money laundering is the practice of taking “dirty” money from ill-gotten gains such as prostitution, illegal gambling, racketeering, tax avoidance, and other illegal activities and channelling 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), and 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 confiscating property upon conviction of money laundering and freezing a person’s assets when 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 6th Anti-Money Laundering Directive
The European Union has announced the introduction of the 6th Anti-Money Laundering Directive. 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.
The 6AMLD will harmonise the definition of a money laundering offence across the European Union, with the specific intent of eradicating potential conflicts between the Member States. It will also provide a list of 22 offences classified as cybercrime and other offences.
Important Regulations under the 6AMLD
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 about Article 2 of the said Directive.
Directors, decision-makers, and those acting on behalf of a company (including lawyers, tax advisors, etc.) must be aware that the Directive shall extend criminal liability to them. They should ensure to carry out that due diligence and client profiling fastidiously. The laws will outline punishment for such offences, punishable by up to four years of effective jail time.
While not a law in itself, another critical regulation that all companies 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. They and their staff must be completely up to date and trained to their maximum ability to detect and prevent money laundering related crimes.