International sanctions are penalties imposed in an attempt to be as diplomatic as possible when a country is breaking international law and threatening international peace and security. Due to the rise in conflict between Russia and Ukraine, a significant amount of new international sanctions are being imposed. The auditors at GCS Malta discuss the impact of sanctions imposed in this article.
How are Maltese businesses impacted?
Given that Malta is a leading European financial services centre, sanctioned persons might illicitly use our jurisdiction to establish complex legal structures to conceal ownership and association with specific assets. Therefore, while sanction screening was always crucial for customer onboarding and ongoing monitoring obligations, the current situation has served as a reminder to ensure that the policies and procedures adhere to the regulations.
The new focus on regulations led various Maltese supervisory authorities to issue publications addressing subject persons, such as accountants, auditors and CSPs, on the impact sanctions may have on obligations under the National Interest (Enabling Powers) Act (NIA), the Financial Intelligence Analysis Unit (FIAU) and the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR).
The Sanctions Monitoring Board (SMB)
The Sanctions Monitoring Board is the competent authority for ensuring sanctions compliance in Malta. Although the FIAU, MGA and MFSA conduct onsite visits on subject persons, they are required to report details regarding a specific entity to the SMB. The SMB also provides guidance on the required screening:
- Checking all UBOs
- Records of sanctions screening must be kept
- All subject persons must have adequate and effective internal controls and procedures
- Should enable subject persons to regularly monitor customers as necessary under Article 17(6)(a)
- The procedures followed by the subject person should allow the flagging of hits from within its client list
- Ensure that the company personnel involved in compliance are trained and up-to-date with sanctions screening obligations
- Subject persons must employ proportionate sanctions screening processes depending on the size and nature of the business
- In case of a hit, there should be written procedures to follow, such as updating/changing the systems for sanction screening when it is not proportionate to the size or complexity of the business
The Malta Financial Services Authority (MFSA)
The Malta Financial Services Authority issued a circular reminding its license-holders of their obligation to ensure that they have effective systems and controls in place that effectively sanction screen any person on the applicable sanctions list. More guidelines can be found here.
The Financial Intelligence Analysis Unit (FIAU)
The Financial Intelligence Analysis Unit (FIAU) issued a guidance note on the sanctions addressing the obligations under the NIA as well as what subject persons need to be more attentive to when it comes to AML/CFT obligations and sanctions:
- Beneficial ownership
- Risk understanding and assessment
- Transaction monitoring and reporting
Moreover, subject persons must adhere to all applicable sanctions with the screening and freezing obligations from the NIA and FIAU’s Implementing procedures.
Violation of sanctions might lead to:
- Winding up
- Temporary/permanent closure
- Suspension/cancellation of license
- Exclusion from entitlement to public benefits
- €80,000 – €10,000,000 fine (company)
- €25,000 – €5,000,000 fine (subject person)
- 1 year – 12 years imprisonment
Why GCS Malta?
At GCS Malta, our team of professional auditors can assist you with understanding your sanction screening obligations and internal and external auditing, guaranteeing that all financial statements will be examined to adhere to the Maltese regulations. Contact us today for more information.
