Following the issues highlighted by the Moneyval’s Mutual Evaluation Report (2019) for Malta, which drew up a number of recommendations for local authorities to adopt in order to avoid being black-listed, the Financial Intelligence Analysis Unit (FIAU) has issued an update relating to its Implementing Procedures – Part I which focuses on time frames for handling internal reports and their consideration by the Money Laundering Reporting Officer (MLRO).
One of the issues refers specifically to the timeframe within which the subject person has to make a report to the FIAU. For the past years, subject persons, have been given a five (5) day period within which suspicious transactions were to be reported to the FIAU; however, this timeframe was deemed not to provide the prompt submission of such reports. Following the changes to Art. 15(3) of the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) which entered into force on the 22 May 2020 (through Legal Notice 214 of 2020), this period is no longer applicable and subject persons are now obliged to report any such transaction to the FIAU promptly.
Following the above amendments, the FIAU published a marked-up version of Chapter 5 of the Implementing Procedures which now includes, among other things, additional requirements and directions on Internal and External Reporting procedures that subject person need to have in place to ensure that any suspected or known instance of ML/FT is reported to the Authority within the timeframes set out in the Regulations.
The main changes being introduced are the following:
- Internal Reports to the MLRO
Where an employee of a subject person becomes aware of any information or matter, that is considered by said employee to give rise to knowledge or suspicion that a person or a transaction is connected to money laundering (ML) or funding of terrorism (FT), an internal report should be filed with the MLRO without delay which, according to what the Implementing Procedures state, should be construed as by not later than the next following day.
This timeframe is to be adhered to, independently of whether the employee in question is to consult with any superior which means that the matter has to be treated with the utmost urgency in order to raise the internal report with the MLRO by not later than the next working day from when he/she becomes aware of the matter.
However, the Implementing Procedures expressly recognise that not all internal reports may contain the necessary information and/or be accompanied by the required documentation for the MLRO to make his determination. Following this recognition and without specifying the time frame within which the MLRO is to make said determination, the Implementing Procedures provide that this exercise has to be carried out without any unreasonable delay.
Subject persons are to ensure that its Internal Procedures are updated accordingly and that all their staff members within the relative teams are clearly cognisant of these time frames.
- Consideration of internal reports by the MLRO
The MLRO must consider, with the utmost urgency and without unreasonable delay, every internal report he/she receives to determine whether or not the information contained in the report does give rise to a knowledge or suspicion of ML/FT in which case the MLRO should proceed to submit a STR to the FIAU in a prompt manner in accordance with the reporting procedures set out in the Implementing Procedures or whether additional information is necessary to reach this determination.
In the latter circumstances, the MLRO must collect and consider without delay any such additional information.
In case more information or documents are needed for the MLRO to make his determination whether to submit or not the report, the revised Implementing Procedures do not set out any specific timeframe however, the consideration of internal reports and the collection and consideration of any additional information and/or documents by the MLRO has to take place without unreasonable delay. Whilst it is not possible to give a clear definition of what constitutes an ‘unreasonable delay’, as this may vary from one case to another, subject persons should be guided by the following expectations:
- MLROs are not expected to carry out investigative or analytical work. Their role is that of determining whether there is knowledge or suspicion of ML/FT which ought to be flagged to the FIAU for analysis;
- The highest priority should be given to those cases which might be related to FT;
- Priority should also be given to cases of ML involving substantial amount of funds (especially if the funds in question are still within the control of the subject person), pending transactions, or cases involving PEPs;
- MLROs should be supported by adequate human and technical resources to be able to make such assessments as expeditiously as possible;
- Where the MLRO identifies the need to obtain information from the customer or any person or other external sources, the request should be made immediately and followed up regularly. The lack of cooperation, including non-response, by a customer could be seen as a further indicator of suspicion;
- Information that is already held by the subject person (e.g. previous transactional history or information on connected accounts) should be obtained without delay; and
- There shouldn’t be any unnecessary delays in making the necessary considerations and determinations.
The Implementing Procedures expressly provide that the subject person and MLRO are not only expected to ensure that their ongoing monitoring and internal/external reporting processes are conducted in an expeditious and effective manner, “but that the analysis of internal reports is carried out with the necessary due diligence, keeping in mind that subject persons would be in breach of their reporting obligations where they are in possession of information that constitutes even a reasonable ground to suspect ML/FT, and which is not brought to the attention of the FIAU.”
The FIAU recommends that timing is an aspect that should be clearly considered by subject persons when drawing up their internal reporting procedures, especially if they include intermediate filtering levels.
- Delegation of the MLRO functions
Changes to Chapter 5 also focuses on the function of the MLRO and resources available for carrying out his obligations. However, changes now allow for any action to be undertaken by the MLRO with respect to the reporting obligations, not to be undertaken by the MLRO himself but may be delegated to any employee falling under his supervision.
It has to be pointed out that any such delegation is to be accompanied by the appropriate level of supervision by the MLRO as the MLRO remains responsible for the carrying out of the core functions assigned to this function.
- Submission of the STR by the MLRO
The Implementing Procedures require the MLRO to make any disclosures to the FIAU promptly, meaning that a suspicious transaction report should be submitted on the same day when knowledge or suspicion of ML/FT is considered to subsist by the MLRO. Having said that, there is a recognition by the FIAU that “in certain more complex cases the compilation and submission of the STR within the same day when the knowledge or suspicion of ML/FT would prove challenging in view of the extensive volume and/or complexity of information / documentation that may need to be provided. In such instances the MLRO shall ensure that the STR is submitted within the shortest time possible.” In such a situation the STR need not to be submitted within the same day but “within the shortest time possible”. It is therefore highly advisable that the MLRO records the process undertaken by him or his team from the moment of receipt of the internal report leading up to the filing of the STR in order to substantiate the timing of the relative submission.
Any reference to different timeframes for the submission of STRs present in any Implementing Procedures – Part II or in any other document issued by the FIAU is to be considered as superseded by the above-mentioned requirements.