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A Maltese advocate firm is fined €49,585 for not reporting suspicion in good time.

06/05/2024

The Maltese Financial Intelligence Analysis Unit (FIAU) has fined an advocate firm for a significant breach of compliance with regulatory requirements for not reporting a suspicion promptly.

The case against the firm

  • The Firm represented two foreign politically exposed persons (PEPs) and their companies from 2015 to 2019.
  • During this period, numerous adverse media reports were published, alleging that one of the PEPs had amassed their wealth through corruption.
  • One media report spoke about how this foreign PEP had acquired a company through a questionable deal with a Governmental company that dealt in the same commodity, and this through a joint shareholding by both companies aforementioned in a company which wholly owns another company, which the Firm had assisted with several transactions.

The FIAU Committee observed.

  • A significant breach in the Firm's compliance with regulatory requirements. Despite the Firm’s assertions that there was no need to file a suspicious transaction report (STR) before 2020, it failed to do so promptly.

The firm’s representations stated.

  • That the adverse media reports and reputation of the clients had been carefully assessed and that clarifications had been sought from several individuals, including the clients’ own foreign lawyers.
  • It also questioned the reliability of the adverse media reports, and it investigated the transaction in question.
  • It conducted extensive probing and concluded that there was NO NEED to escalate matters to the Firm's MLRO at the time.

The FIAU Committee

  • Acknowledged the fact that the Firm sought clarifications and explanations about this transaction, and whilst it understood that the Firm did indeed try to get into the crux of the matter, it stressed that the adverse media about the PEPs in question had long been accumulating.
  • Considered the Firm’s assertions that although there were adverse media concerning the clients it was servicing, there were also several positive media reports. However, this was discounted since the so-called positive media reports referred to by the Firm did not provide any insight discounting the adverse information found but rather provided information on the business fortune of the customers.
  • Commented on the Firm’s contention that the adverse media were politically motivated and held that although known legal providers were indeed servicing these PEPs and some media articles were not adverse, this is not enough to determine that these were Politically motivated and to discount the same. This is more so when considering that the Firm did indeed submit STRs with the FIAU. The Committee, therefore, recommends that the Firm provides more transparent and more substantiated justifications for its actions in future.
  • Considered that, ultimately, there was a connection between the Firm’s knowledge of the customers’ dealings and what the adverse information was claiming. This is because the Firm had a shareholder’s agreement, which was linked to the transaction mentioned above, and through such agreement, the adverse information became more than simple. Therefore, the adverse details surrounding the foreign PEP and the way the wealth was earned (as extensively explained in all the adverse media reports on the PEP) is corroborated with a concrete example that genuinely depicts how money that belonged to the country and had to be used for the benefit of such country could ultimately and very easily end up owned by this foreign PEP.
  • Saw the Firm’s representations, which held that it had indeed submitted STRs following adverse information referencing numerous documents about these PEPs, which was issued in 2020.
  • Stressed that the information unveiled through these leaks corresponded with that published in the media. Therefore, no new information was available through the 2020 adverse information that would have triggered the submission of an STR at that time and not before when it held all the other adverse information.
  • Further pointed out that the Firm was not only in possession of such adverse media reports, but it also had on file the Shareholders’ Agreement mentioned above; therefore, suspicion should have at least arisen by June 2015, when it obtained the shareholder’s agreement, confirming the Firm’s delay in its submission of the STRs.

SOURCE

https://fiaumalta.org/app/uploads/2024/04/PublicationNotice16042024.pdf

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