A study on the challenges faced by the Maltese non-financial sector to prevent money laundering

Abstract

Anti-money laundering (AML) is currently at the forefront of the agendas of most developed and developing countries and the requirements for both the financial and non-financial sectors, known as subject persons, to combat money laundering / terrorist financing (ML/FT) has been given prominence. Worldwide AML legislation and guidelines have mushroomed and become stricter, with the need for a risk based approach also being fundamentally emphasised. In Malta, the relative transposition of the AML requirements are designed around the Prevention of Money Laundering Act, the Prevention of Money Laundering and Funding of Terrorism Regulations and the FIAU’s Implementing Procedures. All persons who are subject to these requirements, in both the non-financial sector and the financial sector, must comply with their AML/CFT obligations. The non-financial sector, who are collectively known as Designated Non-Financial Businesses and Professions (DNFBPs), includes notaries, advocates, real estate agents, accountants, auditors, and trust and company service providers. Such DNFBPs have been identified as a vulnerable sector and have a higher risk of being considered attractive channels for ML/FT and financial crime operations. They are likely to be the weakest link to crack in the whole ML chain when criminals come to introduce illicit cash proceeds into the financial system. DNFBPs in Malta, given that the majority of the sector constitutes of sole practitioners, face challenges in complying with their obligations under the relevant Maltese AML legislation when compared to subject persons in the financial sector, such as credit and financial institutions, which have more resources and manpower available to them. The author aims to identify, analyse and discuss the challenges being faced by subject persons in the Maltese non-financial sector in the prevention of ML and what can be done to address such challenges to help strengthen the country’s fight against ML.