March 25, 2019

Following the amendments to the Implementing Procedures (part 1) by the Financial Intelligence Analysis Unit (“FIAU”), which took effect from the 19th July 2019, CC Funds Services (Malta) Limited (“CCFS”) looks at what has been updated or changed in these procedures. 

The amendments to the Implementing Procedures (part 1) aim to provide Subject Persons with guidance in complying with their Anti-Money Laundering (“AML”) as well as combatting the Financing of Terrorism (“CFT”) obligations. The Prevention of Money Laundering and Funding of Terrorism Regulations defines Subject Persons as those persons, legal or natural, carrying out "relevant activity" or "relevant financial business".

The main change revolves around the risk-based approach that Subject Persons are required to adopt and implement in view of their AML/CFT obligations, including details on what the risk-based approach entails and how business and customer risk assessments should be carried out.

Amendments have also been affected to the Customer Due Diligence (CDD) obligations of Subject Persons, whereby Subject Persons are provided with appropriate and sufficient guidance on how to go about high-risk scenarios and on the conduct of appropriate and effective on-going monitoring.

Another chapter that has undergone major changes relates to the dealing with in Non-Reputable & High-Risk Jurisdictions. This revised chapter provides enhanced guidance in assessing the reputability of jurisdictions and determining high-risk jurisdictions. The Guidance refers to the application of these obligations considering communications issued by bodies such as the EU Commission and the FATF.

Due to the fact that outsourcing of AML functions has gained popularity in the past years, the Implementing Procedures now includes a chapter dedicated to this, providing Subject Persons with a clear understanding of obligations which may be outsourced. Finally, information in relation to penalties for breaches of AML/CFT obligations have also been amended to reflect the changes that took place in the Prevention of Money Laundering and Funding of Terrorism Regulations Act. The Guidance highlights the penalties for relevant activity and relevant financial business.

Supplementary information on the Money Laundering Reporting Officer (“MLRO”) relating to the need for such officer not to have to be located in Malta nor be physically present where the operations are or records kept was highlighted by the FIAU. Nonetheless the MLRO must have access to all the records to conduct his/her functions and duties. Furthermore, the FIAU placed no restriction or limitation on the MLRO holding additional roles.