The FIAU has today issued for consultation the revised Prevention of Money Laundering and Funding of Terrorism Regulations (the “PMLFTR”), through which it is seeking to transpose the provisions of the Fourth Money Laundering Directive.
In the first instance, one notes an extended definition of ‘relevant financial business’ to safe custody services as well as the provision of advice to undertakings on capital structure, industrial strategy and related questions and advice, as well as services related to mergers and the purchase of undertakings. In addition, it is also proposed that persons or entities acting as ‘qualified persons’ in terms of the Trusts and Trustees Act are to be included in the definition of ‘trust and company service providers’ and therefore considered subject persons by virtue of them carrying out a relevant activity.
The first part of the proposed revised ‘beneficial owner’ definition largely mirrors the current definition, i.e. any natural person or persons who ultimately own or control that body corporate or body of persons through direct or indirect ownership of twenty 25% plus 1 or more of the shares or more than 25% of the voting rights or ownership interests in a body corporate or body of persons, including through bearer share holdings, or through control via other means, other than a company that is listed on a regulated market which is subject to disclosure requirements consistent with European Union law or equivalent international standards which ensure adequate transparency of ownership information. The second part of the definition, however, appears to introduce an element of subjectivity when it provides that a shareholding of 25% plus 1 share or more, or the holding of an ownership interest or voting rights of more than 25% in the customer shall be an indication of ownership (emphasis added). The introduction of the term ‘indication’, which reflects the provisions of the Fourth Directive, may therefore be interpreted to mean that subject persons may not simply rely on the 25% threshold as a fixed cut-off but may be expected to carry out further checks or otherwise vary the threshold depending on the circumstances of the case. As stipulated by the Fourth Money Laundering Directive, if no beneficial owners can be identified using this definition, subject persons must also consider the natural person(s) who hold the position of senior managing official(s) to be the beneficial owners. It is unfortunate to note that the PMLFTR, whilst providing for the definition of ‘senior management’, do not specifically define ‘senior managing official’. One would hope that, if not through a direct change to the PMLFTR, these issues would be clarified in the revised set of Implementing Procedures once these are released.
The FIAU has retained discretion on a number of matters. By way of example, the FIAU, in conjunction with the Malta Gaming Authority, has retain the discretion to dis-apply the PMLFTR (partially or fully) with respect to specific gaming services on the basis of proven low risk of money laundering and funding of terrorism (since gaming licensees across the board have by default been included within the scope of the regime). The FIAU is also being entrusted with designating certain activities or services as representing a ‘high’ or ‘low’ risk of money laundering and funding of terrorism and therefore considered to qualify for the application of enhanced or simplified measures respectively. Further guidance on these matters is expected to be contained in the Implementing Procedures.
Other predicted changes including the lowering of the threshold for cash payments from €15,000 to €10,000, the mandatory application of the risk-based approach, as well as the revision of the ‘politically exposed person’ (“PEP”) definition which has been extended to apply to domestic PEPs in addition to foreign PEPs.
Although further revisions may be expected following feedback from the consultation process as well as following the release of the revised Implementing Procedures, it is strongly recommended that subject persons familiarise themselves with the proposals in order to make their views heard during the consultation process and be alerted to the salient changes that they will need to consider going forward.
The consultation period runs until 7 August 2017 and the revised proposed PMLFTR can be accessed here.