The Financial Intelligence Analysis Unit (“FIAU”) issued a Consultation Document setting out proposals for several changes to the Implementing Procedures Part I (“IPs”).
The main changes being introduced are the following:
Adverse media
Additional guidance is given on assessing the relevance, reliability, and timing of adverse media, and on the evaluation of supervisory and regulatory information within the context of simplified due diligence.
Beneficial Ownership
Determining the beneficial owner in certain situations, including when shares in a corporate customer are held in a trust, and when the customer is a state-owned enterprise or a foundation. In the case the beneficiary of the trust is identified in terms of law, the the subject person would not be required to identify and verify all the beneficial owners of the trust.
The Agent
The revised IPs clarify some aspects relating to the identification and verification obligations applicable when dealing with agents, including:
- That when the agent is a body corporate, it is only necessary to carry out the identification and verification of the body corporate itself;
- That the obligation to verify the identity of directors or partners of a CSP when acting as agents of a customer is only triggered in respect to those directors or partners that are authorised to legally represent the body corporate, and who exercise such powers within the context of an occasional transaction or a business relationship.
- The verification requirements when the customer carries out financial business and empowers a significant number of individuals to act as signatories or carry out transactions on its behalf.
Transaction Monitoring
The revised IPs provide further guidance on transaction monitoring obligations, namely that when the transactions carried out by a subject person on behalf of its customers are left to the subject person’s own discretion, the subject person is not expected to monitor the transactions that it is carrying out itself. This is applicable primarily within the context of discretionary portfolio management and investment management services offered to collective investment schemes or retirement schemes.
Fund Administrators servicing Collective Investment Schemes
Section 4.6.6.1. of the revised IPs provides further guidance on adhering to record keeping obligations when there is a change in the fund administrator servicing a collective investment scheme, when the carrying out of AML/CFT obligations and the MLRO have been outsourced.
Ongoing Monitoring
Guidance is provided on the checks that need to be carried out in the context of low risk business relationships, particularly to determine whether the relationship still merits being considered a low risk one.
Furthermore guidance is also provided on the application of simplified due diligence when the customer is a collective investment scheme or a nominee/omnibus securities’ account.
MLRO
A number of changes have been made with respect to the criteria for appointing a Money Laundering Reporting Officer (“MLRO”), including that both executive and non-executive directors may be appointed as MLROs. In addition, guidance is given on:
- The aspects to be considered when a subject person considers appointing an MLRO that is located outside Malta;
- The assessments to be made in situations where the MLRO has additional functions/duties within the subject person, relating to the impact on the impartiality and independence of the MLRO, on time commitments, and on the possibility of conflicts of interest;
- Those situations that may present a conflict of interest due to personal, professional or economic ties, including the introduction of an element of proportionality which allows subject persons to adopt mitigating measures rather than refusing or removing the (proposed) MLRO;
The IPs also clarify that there are no restrictions on the number of Designated Employees that can be appointed, in view of the variations in the nature and size of the subject person’s activity.
Jurisdictional Risk Assessment
The jurisdictions that are to be considered for assessment purposes vary depending on the nature of the relevant activity or relevant business carried out by the subject person. Although the IPs already provide guidance on what the jurisdictional links may be, further guidance and more examples have been provided. Guidance has also been provided in respect of the use of assessments carried out by third parties, in the form of criteria that need to be adhered to.
