By PAUL O’DONOGHUE, Senior Correspondent
TWO recent court rulings have ensured that Malta’s FIAU has the authority to hand out penalties to obliged entities, according to the organization’s head.
Alfred Zammit, the Director of the FIAU, told AML Intelligence that the decisions show that the FIAU is acting in line with the constitution.
“Obviously, the ruling is one that enables the FIAU to continue operating the current legal framework,” he said.
“So it means that, as a result of these rulings, we do not have to stop our operations and overhaul the current laws in place.”
The result is crucial for the Malta FIAU. It faced multiple legal challenges from finance and crypto firms which it fined.
Many appealed the penalties on the grounds that the FIAU did not act in line with the Maltese constitution, and did not grant them the right to a fair investigation.
In 2023, several Civil Court judges ruled that the FIAU’s powers allowing it to fine companies for breaching the country’s Prevention of Money Laundering Act were unconstitutional.
For instance, a judge found a €245,000 fine imposed by the FIAU on a company called Phoenix Payments for money laundering breaches was invalid.
XNT pleaded that the fine had been imposed in the absence of a fair trial. The Civil Court upheld the appeal, quashing the FIAU’s fine.
Malta FIAU court decisions and hearings
However, this decision was reversed by Malta’s Constitutional Court, which found no violation of the company’s right to a fair trial.
XNT also pleaded its case to the European Court of Human Rights. In May, the case was thrown out after the company’s application was declared inadmissible.
Zammit said: “We had our first two rulings late last year, in 2024. These rulings, in very simple words, confirmed the validity of the Prevention of Money Laundering Act, in the sense that the current framework does not breach the Maltese constitution.”
He also said that the FIAU has been careful to ensure that companies receive a fair hearing before any AML penalties.
“These days, we actually hold oral hearings or meetings with obliged entities after they submit their first round of representations in writing,” he said.
“And even after an in person meeting, after obliged entities have received what we refer to as a potential breaches letter from the FIAU, we then invite them for even a second Round of written representations to the FIAU.”
There are still other cases from different companies appealing against FIAU fines making their way through Malta’s courts. However, Zammit said the latest rulings are a positive sign for the FIAU.
“Each ruling only ties down the parties of the case. So actually, we still have a number of appeals that we filed together with the State Advocate. Where we are still waiting for a ruling.
Other cases
He added: “The other cases are ultimately all very similar cases, because the arguments [appealing FIAU penalties] are almost always the same.
“Now, having already two rulings from the Constitutional Court, one can only guess that the rulings that we will have from the same courts, might be similar to the rulings that we obtained.”
Zammit also said that the Malta FIAU prefers not to resort to penalties, preferring a strong working relationship with the firms it supervises.
“Even in most enforcement cases, even in cases where we are currently in court with an obliged entity, there would typically still be a good working relationship between the FIAU and the obliged entity,” he said.
“Everyone has the right to appeal, everyone might feel that [our] penalties are not sufficiently proportionate. We don’t have an issue with that.
“But in the end, what really matters the most is that there is also ongoing work by obliged entities to strengthen their [AML] controls.”
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