Prevention of Money Laundering Regulations, 2003

L.N. 199 of 2003

PREVENTION OF MONEY LAUNDERING ACT

(CAP. 373)

Prevention of Money Laundering Regulations, 2003

IN exercise of the powers conferred by article 12 of the Prevention

of Money Laundering Act, the Minister of Finance and Economic Affairs

has made the following regulations>-

The title of these regulations is the Prevention of Money Citation.

Laundering Regulations, 2003.

Interpretation.

In these regulations –

“applicant for business” means a legal or natural person,

whether acting as principal or agent, who seeks to form a business

relationship, or carry out a transaction with a person who is acting

in the course of either relevant financial business or relevant

activity<

“business relationship” means any arrangement between two

or more persons, at least one of which is acting in the course of

either relevant financial business or relevant activity, where-

(a) the purpose or effect of the arrangement is to

facilitate a frequent or habitual course of dealings between

the persons concerned< and

(b) the total amount of any payment or payments to be

made by any person to any other in the course of that

arrangement is not known or capable of being ascertained at

the time the arrangement is made<

“Case 1” (negotiations) means any case where negotiations

take place between the parties with a view to the formation of a

business relationship between them<

“Case 2” (suspicions) means any case where, in respect of

any transaction, any person handling the transaction knows or

suspects that the applicant for business is, or may be, engaged in

money laundering, or that the transaction is carried out on behalf

of another person who is, or may be, engaged in money laundering<

“Case 3” (single large transaction) means any case where, in

respect of any transaction, payment is to be made by or to the

applicant for business of the amount of Lm5,000 (five thousand

Maltese liri) or more<

“Case 4” (series of transactions) means any case where, in

respect of two or more transactions-

(a) it appears at the outset to a person dealing with any

of the transactions that –

(i) the transactions are carried out by the same

person and are of a similar character, and

(ii) the total amount, in respect of all of the

transactions, which is payable by or to the applicant for

business is Lm5,000 (five thousand Maltese liri) or more<

or

(b) at any later stage it appears to such a person that

the provisions of sub-paragraphs (a) (i) and (ii) above are

satisfied<

“collective investment scheme”, “participants” and “units”

have the same meanings as are assigned to these terms respectively

in the Investment Services Act<

“criminal activity” has the same meaning as is assigned to

the term in the Prevention of Money Laundering Act<

“established business relationship” means a business

relationship formed by a person acting in the course of either

relevant financial business or relevant activity where that person

has obtained, under procedures maintained by him in accordance

with the provisions of these regulations, satisfactory evidence of

the identity of the person who, in relation to the formation of that

business relationship, was the applicant for business<

“Financial Intelligence Analysis Unit” has the same meaning

as is assigned to the term in the Prevention of Money Laundering

Act<

“group of companies” has the same meaning as is assigned to

the term “group company” by the Companies Act so however that,

for the purposes of these regulations, it shall include also any other

body corporate registered or operating in a reputable jurisdiction

and forming part of the group of companies and which is further

licensed or otherwise authorised under the laws of that jurisdiction

to carry out any activity equivalent either to relevant financial

business or to relevant activity<

“money laundering” means the doing of any act which

constitutes an offence under the Prevention of Money Laundering

Act, or in the case of an act committed otherwise than in Malta,

would constitute such an offence if done in Malta<

“one-off transaction” means any transaction (including the

opening of an account and a safe custody facility) other than a

transaction carried out in the exercise of an established business

relationship formed by a person acting either in the course of

relevant financial business or in the course of relevant activity<

“relevant financial business” means-

(a) any business of banking or any business of an

electronic money institution, carried on by a person or

institution who is for the time being authorised, or required

to be authorised, under the provisions of the Banking Act<

(b) any activity carried on by a person or institution

who is for the time being authorised, or required to be

authorised, under the provisions of the Financial Institutions

Act<

(c) life assurance business carried on by a person or

institution who is for the time being authorised, or required

to be authorised, under the provisions of the Insurance

Business Act or the Insurance Brokers and Other

Intermediaries Act<

(d) investment business carried on by a person or

institution licensed, or required to be licensed, under the

provisions of the Investment Services Act<

(e) a collective investment scheme licensed, or required

to be licensed, under the provisions of the Investment Services

Act<

(f) any activity carried on by a person pursuant to a

valid stockbroker’s licence issued under the provisions of the

Investment Services Act<

(g) any activity carried on by a person pursuant to a

valid licence of a Recognised Investment Exchange issued

under the provisions of the Financial Markets Act<

(h) any activity which is associated with a business

falling within paragraphs (a) to (g) above<

“relevant activity” means the activity of the following legal

or natural persons when acting in the exercise of their profession>

(a)

auditors, external accountants and tax advisors<

(b) real estate agents<

(c) notaries and other independent legal professionals

in relation to assisting in the planning or execution of

transactions for their clients concerning the>

(i) buying and selling of real property or business

entities<

(ii) managing of client money, securities or other

assets, unless the activity is undertaken under a licence

issued under the provisions of the Investment Services

Act<

(iii) opening or management of bank, savings or

securities accounts<

(iv) organisation of contributions necessary for

the creation, operation or management of companies<

(v) creation, operation or management of trusts,

companies or similar structures<

or by acting on behalf of and for their client in any financial or real

estate transaction>

Provided that where a natural person undertakes any of the above

professional activities as an employee of a legal person, the obligations

under these regulations shall apply to that legal person<

(d) nominee companies and licensed nominees acting

as nominee shareholders or trustees, authorised under the

Malta Financial Services Authority Act<

(e) dealers in precious stones or metals, or works of

art or similar goods and auctioneers whenever payment is

made in cash in an amount equal to Lm5,000 (five thousand

Maltese liri) or more<

(f) any activity which is associated with an activity

falling within paragraphs (a) to (e) above<

“reputable jurisdiction” means any country having appropriate

legislative measures for the prevention of money laundering, taking

into account that countryís membership of, or any declaration or

accreditation by, any international organisation recognised as laying

down internationally accepted standards for the prevention of

money laundering<

“Subject Person” means any legal or natural person carrying

out either relevant financial business or relevant activity<

“supervisory authority” means-

(a)

the Central Bank of Malta<

(b) the Malta Financial Services Authority<

(c) the Competent Authority nominated under the

Banking Act, the Financial Institutions Act, the Investment

Services Act, the Insurance Business Act, or the Insurance

Brokers and Other Intermediaries Act<

(d) the Registrar of Companies acting under article 193

of the Commercial Partnerships Ordinance and under articles

403 to 423 of the Companies Act<

(e) an inspector appointed under article 30 of the

Insurance Business Act<

(f) a person appointed under article 20 or article 22 of

the Banking Act<

(g) a person appointed under article 14 or article 15 of

the Financial Institutions Act<

(h) a person appointed under article 13 or article 14 of

the Investment Services Act<

(i) the Lotteries and Gaming Authority acting under

the Lotteries and Other Games Act and the Gaming Act, the

Gaming Act Regulations, 1998 and any regulations issued

thereunder< and

(j) an inspector appointed under article 17 of the

Lotteries and Other Games Act.

(1) No Subject Person shall form a business relationship or

carry out any one-off transaction with an applicant for business unless

that Subject Person>

(a) maintains the following procedures established in

relation to that business>

(i) identification procedures in accordance with the

provisions of these regulations<

(ii) record-keeping procedures in accordance with the

provisions of these regulations< and

(iii) internal reporting procedures in accordance with

the provisions of regulation 10<

(b) takes appropriate measures from time to time for the

purposes of making employees aware of>

(i) the procedures under the provision of sub-paragraph

(a), and any other relevant policies that are maintained by

him< and

(ii) the provisions of the Prevention of Money

Laundering Act, and of these regulations< and

(c) provides employees from time to time with training in

the recognition and handling of transactions carried out by, or on

behalf of, any person who is, or appears to be, engaged in money

laundering.

(2) Any Subject Person who contravenes the provisions of

this regulation shall be guilty of an offence and shall, on conviction, be

liable to a fine (multa) not exceeding Lm20,000 (twenty thousand

Maltese liri) or to imprisonment for a term not exceeding two years, or

to both such fine and imprisonment.

(3) In determining whether a Subject Person has complied

with any of the requirements of paragraph (1), a court shall consider>

(a) any relevant guidance or procedures issued, approved

or adopted by the Financial Intelligence Analysis Unit with the

concurrence of a supervisory authority, which applies to that

Subject Person< and

(b) in a case where no guidance or procedures falling within

the provisions of sub-paragraph (a) apply, any other relevant

guidance issued by a body which regulates, or is representative of,

any trade, profession, business or employment carried on by that

Subject Person.

(4) In proceedings against any Subject Person for an offence

against this regulation, it shall be a defence for that person to show that

he took all reasonable steps and exercised all due diligence to avoid the

commission of the offence.

(5) In this regulation, the term “employees” means

employees whose duties include the handling of either relevant financial

business or relevant activity.

Where an offence against the provisions of regulation 3 is Offences by bodies

corporate and

committed by a body or other association of persons, be it corporate or unincorporated

unincorporate, every person who at the time of the commission of the associations.

offence was a director, manager, secretary or other similar officer of

such body or association, or was purporting to act in any such capacity,

shall be guilty of that offence unless he proves that the offence was

committed without his knowledge and that he exercised all due diligence

to prevent the commission of the offence.

(1) Subject to the provisions of regulations 6 and 8, Identification

procedures<

identification procedures maintained by a Subject Person shall be business

deemed to be in accordance with the provisions of this regulation if in relationships

and transactions.

Cases 1 to 4 they require, as soon as it is reasonably practicable after

contact is first made between that Subject Person and an applicant for

business concerning any particular business relationship or one-off

transaction-

(a) the production by the applicant for business of

satisfactory evidence of his identity< or

(b) the taking of such measures specified in the procedures

as will produce such evidence of identity and where that evidence

is not obtained, the procedures shall require that the business in

question shall not proceed or shall proceed only in accordance

with any direction made by the Financial Intelligence Analysis

Unit.

Without prejudice to the above, where to refrain in such manner is

impossible or is likely to frustrate efforts of investigating a suspected

money laundering operation that business shall proceed on condition

that a report is immediately lodged with the Financial Intelligence

Analysis Unit in accordance with regulation 11.

(2) For the purposes of these regulations, evidence of

identity shall be deemed to be satisfactory if –

(a) it is reasonably capable of establishing that the applicant

is the person he claims to be< and

(b) the person who obtains the evidence is satisfied, in

accordance with the established internal procedures and policies

of the business concerned, that it does establish that fact.

(3) In determining for the purposes of these regulations what

is reasonably practicable in relation to any particular business

relationship or one-off transaction, all the circumstances shall be taken

into account including, in particular>

(a) the nature of the business relationship or transaction

concerned such that a Subject Person is able to establish the

business profile of the applicant for business<

(b) whether it is possible to obtain the evidence before

commitments are entered into between the parties or before money

is exchanged< and

(c) in relation to Case 3 (single large transaction) or Case 4

(series of transactions), the earliest stage at which there are

reasonable grounds for presuming that the total amount payable

by an applicant for business is Lm5,000 (five thousand Maltese

liri) or more.

(4) Where, following the identification procedures under

these regulations, in an established business relationship doubts have

arisen or changes have occurred in the circumstances surrounding that

established business relationship, then the identification process shall

be repeated in accordance with these regulations.

(5) Subject Persons shall examine with special attention any

complex or large transactions and any transactions which are particularly

likely, by their very nature, to be related to money laundering.

(1) Where an applicant for business would, apart from this Identification

procedures>

sub-regulation, be required under identification procedures in accordance payment by

with the provisions of regulation 5, to produce evidence of his identity, post, etc.

but-

(a) the circumstances are such that a payment is to be made

by the applicant for business< and

(b) it is reasonable in all the circumstances -

(i) for the payment to be sent by post or by any

electronic means which is effective to transfer funds< or

(ii) for the details of the payment to be sent by post, to

be given on the telephone or to be given by any other electronic

means<

subject to the provisions of paragraph (3), the fact that the payment is

debited from an account held in the applicant’s name at a credit

institution within the meaning of article 2(1) of the Banking Act, shall

be capable of constituting the required evidence of identity.

(2) For the purposes of paragraph 1(b), it shall be immaterial

whether the payment or its details are sent or given to a Subject Person

or to some other person acting on his behalf.

(3) The provisions of subregulation (1) shall not have effect

to the extent that>

(a) Case 2 (suspicion) applies to the circumstances of the

payment< or

(b) the payment is made by any person in the course of

opening an account with a credit institution within the meaning of

article 2(1) of the Banking Act.

(1) Subject to the exemptions provided in regulation 8, the

provisions of this regulation apply in relation to a Subject Person where

an applicant for business is or appears to be acting otherwise than as

principal.

(2) In all identification procedures maintained by a Subject

Person it shall be deemed to be in accordance with this regulation if, in

a case to which the provisions of subregulation (1) of this regulation

apply>

(a) they require reasonable measures to be taken for the

purpose of establishing the identity of any person on whose behalf

the applicant for business is acting in addition to identification of

the applicant for business< and

(b) they require that, where such measures cannot be taken,

the business relationship or one-off transaction shall only proceed

as provided for under regulation 5(1).

(3) In determining, for the purposes of subregulation (2),

what constitutes reasonable measures in any particular case, regard shall

be had to best practice which, for the time being, is followed in the

relevant field of business and is applicable to the circumstances of the

case.

(4) For the purposes of subregulation (2), it shall be

reasonable for a Subject Person to obtain from the applicant for business

a written declaration, accompanied by the relevant supporting

documentary evidence, in which he discloses satisfactory identification

of his principal>

Provided that-

(i) where the principal is a body corporate, satisfactory

identification shall also be disclosed of all directors and of all

qualifying shareholders. For the purpose of this regulation a

qualifying shareholding means a shareholding of 10% or more of

the equity shares of the principal<

(ii) the applicant for business is duly authorised in writing

by the principal.

(5) (a) Where the applicant for business is acting on behalf

of a body corporate, the shareholding of which includes a qualifying

shareholding as defined in subregulation (4) held under a nominee,

trustee or other fiduciary arrangement, a Subject Person shall not

undertake any business with or provide any service to such applicant

for business unless that applicant for business discloses the identity of

the beneficial owners or beneficiaries of the qualifying shareholding

and produces the relevant authenticated identification documentation.

Such disclosure procedures shall also apply where there are changes in

beneficial ownership or beneficiaries.

(b) Where the applicant for business is acting as a nominee

shareholder, trustee or under any other fiduciary arrangement, a Subject

Person shall not undertake any business with or provide any service to

such applicant for business unless that applicant for business discloses

the identity of the beneficial owners of the shares held by him or of the

trust beneficiaries or of his principal, as the case may be, and produces

the relevant authenticated identification documentation. Such disclosure

procedures shall also apply where there are changes in beneficial

ownership, beneficiaries or principal.

(6) An applicant for business who makes a false declaration

for the purposes of this regulation shall be guilty of an offence and shall

be liable, on conviction, to a fine (multa) not exceeding Lm20,000

(twenty thousand Maltese liri) or to imprisonment for a term not

exceeding two years or to both such fine and imprisonment.

(1) Subject to the provisions of subregulation (2), Identification

procedures,

identification procedures under the provisions of these regulations shall exemptions.

not require any steps to be taken to obtain evidence of any person’s

identity-

(a) where there are reasonable grounds for believing that

the applicant for business is a person who is authorised to undertake

relevant financial business or is a person who is licensed or

otherwise authorised under the laws of a reputable jurisdiction to

carry out any activity which is equivalent to relevant financial

business<

(b) where any transaction is carried out with a third party

pursuant to an introduction effected by a person in respect of whom

there are reasonable grounds for believing that that person is

authorised to undertake relevant financial business or is a person

who is licensed or otherwise authorised under the laws of a

reputable jurisdiction to carry out any activity which is equivalent

to relevant financial business, and who provides the name of the

third party and gives an assurance that he has obtained evidence as

to the identity of the third party>

Provided that the Subject Person shall ensure that supporting

identification documentation is available or may be made available

if required by the relevant authorities.

(c) in relation to life insurance business in respect of which

a premium is payable in one instalment of an amount not exceeding

Lm1,000 (one thousand Maltese liri)<

(d) in relation to life insurance business in respect of which

a periodic premium is payable and where the total payable in respect

of any calendar year does not exceed Lm500 (five hundred Maltese

liri)< and

(e) in relation to insurance policies in respect of pension

schemes taken out by virtue of a contract of employment or the

insuredís occupation>

Provided that such policies contain no surrender clause and

may not be used as collateral for a loan.

(2) Nothing in this regulation contained shall apply in

circumstances falling within Case 2 (suspicion).

(1) Record-keeping procedures maintained by a Subject

Person shall be deemed to be in accordance with the provisions of this

regulation if they make provision for the keeping, for the prescribed

period, of the following records>-

(a) in relation to any business relationship that is formed or

a one-off transaction that is carried out, a record indicating the

nature of the evidence of a person’s identity obtained under

procedures maintained in accordance with these regulations,

comprising a copy of the evidence of identity and providing

sufficient information to enable the details as to a person’s identity

contained in the relevant evidence to be re-obtained.

(b) a record containing details relating to all transactions

carried out by that person in the course of an established business

relationship.

(2) For the purposes of subregulation (1), the prescribed

period shall be the period of at least five years commencing with-

(a) in relation to such records as are described in paragraph

(a), the date on which the relevant financial business was

completed< and

(b) in relation to such records as are described in paragraph

(b), the date on which all dealings taking place in the course of the

transaction in question were completed>

Provided that, in relation to records relating to a one-off

transaction or a series of one-off transactions, the aforesaid period of at

least five years shall commence with the date on which the one-off

transaction or the last of a series of one-off transactions took place.

(3) For the purposes of paragraph 2(a) the date on which

relevant business is completed shall, as the case may be, be deemed to

be the date of-

(a) in circumstances falling within Case 1 (negotiations),

the ending of the business relationship in respect of whose

formation the record under this regulation was compiled,

(b) in circumstances falling within Case 2 (suspicion) or

Case 3 (single large transaction), the carrying out of the one-off

transaction or the last of a series of one-off transactions in respect

of which the record under this regulation was compiled, and

(c) in circumstances falling within Case 4 (series of

transactions), the carrying out of the last one-off transaction in a

series of one-off transactions in respect of which the record under

this regulation was compiled,

and where the formalities necessary to end a business relationship have

not been observed, but a period of five years has elapsed since the date

on which the last transaction was carried out in the course of that

relationship, then the date of that transaction shall be treated as the date

on which the relevant business was completed.

(1) Internal reporting procedures maintained by a Subject Internal reporting

procedures.

Person, shall be deemed to be in accordance with the provisions of this

regulation if they provide for-

(a) a reporting officer employed by the Subject Person to

whom a report is to be made of any information or other matter

which gives rise to a knowledge or suspicion that another person

is engaged in money laundering<

(b) consideration of such report by the reporting officer or

by another designated employee of the Subject Person, in the light

of all other relevant information, for the purpose of determining

whether or not the information or other matter contained in the

report does give rise to a knowledge or suspicion that another person

is engaged in money laundering<

(c) reasonable access for the reporting officer or other

designated employee to any information held by the Subject Person

which may be of assistance for the purposes of considering the

report< and

(d) a procedure whereby any knowledge or suspicion that

another person is engaged in money laundering determined by the

reporting officer or other designated employee is reported in

accordance with regulation 11.

(2) It shall be lawful for the reporting officer or other

designated employee of the Subject Person to disclose information

obtained in the course of internal reporting procedures under these

regulations to the reporting officer or other designated employee of

another Subject Person or Persons forming part of the same group of

companies of the former Subject Person.

(3) A supervisory authority shall maintain internal reporting

procedures in accordance with the provisions of paragraph (1). The

failure of a supervisory authority to maintain such procedures in

accordance with the provisions of this regulation shall not constitute an

offence but may be the subject of disciplinary proceedings against the

officials or employees concerned.

(4) Any official or employee of a Subject Person or a

supervisory authority who discloses to the person concerned or to a

third party not being the reporting officer or other designated employee

as referred to in subregulation (2) that an investigation is being carried

out pursuant to the provisions of this regulation, or that information has

been transmitted to the Financial Intelligence Analysis Unit pursuant

to this regulation or regulation 11, shall be guilty of an offence and

liable on conviction to a fine (multa) not exceeding Lm20,000 (twenty

thousand Maltese liri) or to imprisonment for a term not exceeding two

years or to both such fine and imprisonment.

(1) Where a supervisory authority, either in the course of

its supervisory work or in any other way, or a Subject Person -

(a)

obtains any information, and

(b) is of the opinion that the information indicates that any

person has or may have been engaged in money laundering that

supervisory authority or Subject Person shall, as soon as is

reasonably practicable, disclose that information, supported by the

relevant identification documentation, to the Financial Intelligence

Analysis Unit.

(2) Subject Persons carrying out a relevant activity under

paragraph (a) or paragraph (c) of the definition of “relevant activity”

shall not be bound by the provisions of subregulation (1) if such

information is received or obtained in the course of ascertaining the

legal position for their client or performing their responsibility of

defending or representing that client in, or concerning judicial

proceedings, including advice on instituting or avoiding proceedings,

whether such information is received or obtained before, during or after

such proceedings.

Any information disclosed under these regulations shall be Use of disclosed

used only in connection with investigations of money laundering information.

activities.

Any bona fide communication or disclosure made by a Exoneration from

supervisory authority or by a Subject Person or by an employee or the

duty of professional

director of such a supervisory authority or Subject Person in accordance secrecy.

with these regulations shall not be treated as a breach of the duty of

professional secrecy or any other restriction (whether imposed by statute

or otherwise) upon the disclosure of information and shall not involve

that supervisory authority or Subject Person or the directors or employees

of such supervisory authority or Subject Person in any liability of any

kind.

The Financial Intelligence Analysis Unit, with the Power to issue

Procedures.

concurrence of the relevant supervisory authority, may issue procedures

as may be required for the carrying into effect of the provisions of these

regulations. Such procedures shall be binding on persons carrying out

relevant financial business or relevant activity.

Nothing in these regulations contained shall require a person Transitory

who is carrying out a relevant activity to maintain procedures in provisions.

accordance with these regulations which require evidence to be obtained,

in respect of any business relationship formed by him before the date

on which these regulations come into force, as to the identity of the

person with whom that relationship has been formed, and any such

relationship shall be treated as if it were an established business

relationship>

Provided that where a doubt has arisen or changes have occurred

in the circumstances surrounding the established business relationship

the identification process shall be carried out in accordance with these

regulations.

Repeal of L.N.

The Prevention of Money Laundering Regulations, 1994 are

195 of 1994.

hereby repealed.

Mitbug[ fl-Istamperija tal-Gvern — Printed at the Government Printing Press