Back in March, the Financial Intelligence Analysis Unit (“FIAU”) had issued a Consultation Document setting out proposals for several changes to the Implementing Procedures Part I (“IPs”). Today, on the 18th October 2021, the FIAU is issuing a revised version of the IPs, a copy of which may be accessed and/or downloaded from the FIAU’s website. The FIAU is also publishing a copy with tracked changes to show the changes made from the previously applicable version of the 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.
For further information, subject persons may wish to consult Section 3.5.1(a) of the IPs.
Beneficial Ownership
The revised IPs provide additional guidance on 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 (the latter on the basis of guidelines issued by the European Banking Authority). Guidance is also provided on how to carry out identification in cases where one or more of the beneficial owners are a corporate entity.
For further information, subject persons may wish to consult Sections 4.2.2.1 and 4.3.2.4 (iv) of the IPs.
The Agent
The revised IPs clarify some aspects relating to the identification and verification obligations applicable when dealing with agents, including by explaining:
- 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.
For further information, subject persons may wish to consult Section 4.3.3 of the IPs
Transaction Monitoring
The revised IPs provide further guidance on transaction monitoring obligations, namely by explaining 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.*
For further information, subject persons may wish to consult Section 4.5.2.1 of the IPs
Fund Administrators servicing Collective Investment Schemes
Guidance is given 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.*
For further information, subject persons may wish to consult Section 4.6.6.1 of the IPs
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.
- 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.*
For further information, subject persons may wish to consult Section 4.8.1 of the IPs
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.
For further information, subject persons may wish to consult Section 5.1 and 5.2 of the IPs
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 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.
For further information, subject persons may wish to consult Section 8.1.2 and of the IPs
It should be noted that the above is only a summary of the main changes and therefore, all subject persons are to read the revised IPs to familiarize themselves with the most recent amendments.
*It should further be noted that certain provisions within these IPs are applicable only within the context of specific services or sectors (as indicated in the guidance itself). Until sector specific guidance for such sectors is issued, the provisions shall remain contained in the IPs.
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