The Financial Intelligence Analysis Unit (FIAU) in Malta has recently released updates to its Guidance Note on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) obligations in relation to payment accounts with basic features. These updates are crucial for credit and financial institutions to ensure compliance with the Credit Institutions and Financial Institutions (Payment Accounts) Regulations without compromising their ability to meet their AML/CFT obligations.
Key Updates and Red Flags to Watch Out For
The updated Guidance Note provides detailed instructions on the AML/CFT obligations that credit and financial institutions must adhere to when dealing with payment accounts with basic features. Individuals that are legally resident in Malta or any other EU Member State can open and operate a payment account with basic features, even if they have no fixed address or they are considered to be asylum seekers or refugees, stateless persons or failed or refused asylum seekers.
The Guidance Note provides credit and financial institutions detailed guidance on how to identify and verify the identities of the aforementioned group of individuals, as well as a number of templates of the various forms of verification documents that can be collected for this purpose.
Moreover, the Guidance Note covers credit and financial institutions’ on-going monitoring obligations with respect to payment accounts with basic features. The obligation to ensure that information and documentation is kept up to date and valid and to conduct ongoing transaction monitoring still applies, and it is important to note that the purpose and the level of activity that is expected to be transacted through such an account is collected.
Additionally, credit and financial institutions are still expected to apply the risk-based approach to consumers that have the right to open an account with basic features and therefore it is crucial that both credit and financial institutions take the following action:
- Unusual Transaction Patterns: Be vigilant for transactions that do not match the customer’s known profile or expected activity. This includes sudden large deposits or withdrawals, frequent transfers to high-risk jurisdictions, and transactions that lack a clear economic or lawful purpose.
- Customer Behaviour: Pay attention to customers who are reluctant to provide necessary information or who provide inconsistent or suspicious details. This could indicate an attempt to conceal their true identity or the source of their funds.
- Third-Party Involvement: Watch for accounts that are frequently used by third parties who are not the account holders. This could be a sign of money laundering or other illicit activities.
- High-Risk Jurisdictions: Transactions involving countries known for high levels of corruption, terrorism financing, or weak AML/CFT controls should be scrutinised more closely.
- Structuring Transactions: Be aware of customers who attempt to evade reporting thresholds by structuring transactions just below the reporting limit. This is a common tactic used to avoid detection.
Ensuring Compliance
To ensure compliance with the updated Guidance Note, credit and financial institutions should:
- Adequately identify and verify the identity of any person who is entitled to and who wishes to open a payment account with basic features through independent and reliable sources, as mentioned in the Guidance Note.
- Understand the purpose of the customer’s request to open a payment account with basic features (e.g. savings, receiving social security benefits, salary/wages, etc.)
- Collect information on the level of activity that is expected to be transacted through the account such as an estimate of the amounts to be deposited in the account, the expected source of funds as well as the destination of any transfers to be affected.
- Implement robust transaction monitoring systems to detect and report suspicious activities.
- Conduct regular training for staff to recognise and respond to red flags.
- Perform enhanced due diligence on high-risk customers and transactions in line with the risk-based approach.
- Maintain accurate and up-to-date records of customer information and transaction history.
By staying informed and vigilant of regulatory and industry updates, credit and financial institutions can play a crucial role in combating money laundering and terrorist financing. ARQ Group can assist with ensuring that your organisation is always compliant and up to date with the regulations.
For further assistance, reach out to Martina Mifsud, our Head – Risk & Compliance (Advisory).
Martina Mifsud
Head – Risk & Compliance (Advisory)
Martina Mifsud is the Head of Risk & Compliance (Advisory) within the ARQ Group. Prior to joining ARQ, she worked with the Financial Intelligence Analysis Unit, where her main role was to carry out both on-site and off-site AML/CFT reviews and inspections of financial services entities and DNFBPs.
