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An estate agent has been fined €48,000 after failing to verify the source of wealth.

06/05/2024

A real estate agent has been slapped with a hefty fine of €48,000 by Malta’s Financial Intelligence Analysis Unit [FIAU], a stark reminder of the serious consequences of failing to verify the source of wealth of a golden passport holder who acquired a €2 million property.

In 35% of the sample of files reviewed by the FIAU, several buyers posed a high risk of money laundering due to

  • High-value acquisitions or
  • The use of their own funds for the purchase.

The real estate company was found to have failed to provide enhanced due diligence on such property buys, highlighting the potential dangers of non-compliance.

An example was.

  • The purchase of two properties by a client who had acquired Maltese nationality through Malta’s citizenship scheme.
  • The properties, purchased in one of the island’s special designated areas for real estate, had a combined value of over €2 million, both occurring in less than a year.

The realtor was said to have collected detailed information on the purchaser’s source of wealth, including.

  • Details on the business owned within a non-EEA jurisdiction and
  • A copy of the financial statements of a local company the purchaser owned,

This was considered insufficient for the following reasons. The FIAU said.

  • “It was not sufficient for the company to simply collect the source of wealth information, as the company was then expected to verify the veracity of such information against documentation, this particularly in view of the risks pertaining to the two files.
  • This could have been done by performing open source or internet checks on the purchaser to verify the information on the purchaser's wealth, occupation, and business activities, which could have served to further corroborate the declared source of wealth,”
  • The financial statements also showed that the client company was unprofitable and suffered year-on-year losses.
  • “The fact that the client was able to inject around €200,000 as a shareholder’s loan does not provide sufficient justification to account for the source of funds behind an accumulated purchase of property worth of €2 million.”

In another file, a married couple who financed a €2 million property through the ‘use of own funds’ declared.

  • That the wife was a ‘homemaker’
  • While the husband ‘owned an established company which he had just sold but remains CEO

Open-source information showed that the company had been sold and was worth over €200 million. However, there was no evidence that the husband was the company's owner which was sold and that he benefitted from such sale.

Instead, the real estate company said.

  • It was its understanding that the company “(…) was owned (or partly owned) by the (family of the purchaser) and
  • That the sale of the company generated substantial income to the (said) family.”

The FIAU said.

  • “Even so, being CEO of the company does not entail that the customer benefited from the sale of the company,”
  •  “Hence the actions taken by the company do not mitigate the sector-specific high-risk factors.”

The €48,000 administrative penalty is not yet final and may be appealed before the Court of Appeal.

Source

https://www.maltatoday.com.mt/news/national/128745/fined_48000_for_not_verifying_passport_buyers_source_of_funds_on_2m_home

https://fiaumalta.org/app/uploads/2024/04/Publication-Notice-27032024.pdf

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