By Dr Frank Anthony Tabone – Associate
Money Laundering is the process of illegal movement of money to hide its original source. Subject Persons such as Banks, other financial institutions, gaming platforms, real-estate agencies amongst others could be used by individuals with the aim to launder money deriving from illicit sources.
Anti-Money Laundering (AML) compliance is a process where subject persons carry out background checks and ongoing monitoring on their clients to identify and eliminate suspicious activities which could be related to money laundering. This type of procedure is part of the Know Your Client (KYC) verification and is mandatory for all subject persons as per AML regulations which regulations were implemented to eliminate money laundering and terrorist financing activities.
It is imperative for all subject persons to have in place an effective AML program, for them to protect their business from money laundering activities. An effective AML compliance program should be structured in a manner that it meets AML compliance norms such as internal policies and procedures, training to employees, adequate monitoring on new clients, ongoing monitoring on existent clients, detection of suspicious activities and efficient AML reporting system.
Article 5 of the Prevention of Money Laundering and Funding of Terrorism Regulations (Subsidiary Legislation 373.01) provides that every subject person shall have an effective AML compliance program to define the potential risk of their business including their legal obligations.
Same article further provides that all subject persons, must use a risk-based approach which is that subject persons must understand the money laundering and terrorist financing risk to which they are exposed to and take the appropriate mitigation measures as per the following:
- By identifying money laundering risks relevant to the business.
- By carrying out of a detailed risk assessment of the business focusing on customer behaviour and delivery channels.
- By carrying out risk assessment of customers.
- By designing and to put in place, controls to manage and reduce the impact of the potential risks.
- By monitoring the controls being adopted and to improve their efficiency.
- By keeping records of all measures adopted.
Regulation 5(5) of S.L. 373.01 further provides that subject persons shall:
- Have in place and implement customer due diligence measures, recording keeping procedures and reporting procedures.
- Implement risk management measures.
- Take appropriate and proportionate measures from time to time for the purpose of making employees awareof the measures, policies, controls, and procedures being adopted.
- Appoint, where appropriate and depending on the nature and size of the business, an officer at a managerial level with the aim to monitor and make sure that AML measures, policies, controls, and procedures are being implemented within the business.
- To carry out independent AML audits in order to certify that the business is in line and is implementing correct AML measures.
- Employees to be kept up to date with the recognition and handling of operation and transaction which may be related to proceeds of criminal activities, money laundering or funding of terrorism.
- Monitor and enhance the measures, policies, controls, and procedures adopted to better achieve their intended purpose.
Article 21 of S.L 373.01 which regulates the administrative penalties for subject persons provides that when a subject person is not compliant with the regulations could be subject to a fine amounting to a maximum of five (5) million euro. Hence, “if you think that compliance is expensive: try non-compliance”.