On the 18th October 2021, the FIAU published a revised version of the Implementing Procedure Part I, which formally introduced the changes that were proposed in the Consultation Document issued in March 2021.

A summary of the salient changes introduced to the revised Implementing Procedures are outlined below.

1. Adverse media

The Implementing Procedures provide guidance on assessing the relevance, reliability, and timing of adverse media with specific focus on information that may potentially give rise to the suspicion of Money Laundering and Financing of Terrorism ("ML/FT"). The revised Implementing Procedures also offer additional guidance on the evaluation of supervisory and regulatory information within the context of simplified due diligence ("SDD").

2. Beneficial Ownership

Further clarity is detailed in the revised Implementing Procedures in relation to subject persons' obligations to determine the identity of the beneficial owner in specified situations. These scenarios consist of situations where shares in a corporate customer are held in a trust, and when the customer is a state-owned enterprise. The revised Implementing Procedures also explain how to carry out identification in cases where one or more of the beneficial owners is a body corporate.

3. Agents

The revised Implementing Procedures cater for the identification and verification obligations applicable when dealing with agents. When the agent is a body corporate, it would only be necessary to carry out identification and verification of the body corporate itself. Moreover, the obligation to verify the identity of the directors or partners of a CSP when acting as agents of a customer is only triggered in respect of those directors or partners that are authorised to legally represent the body corporate, and who exercise such powers within the context of an occasional transaction or a business relationship.

4. Transaction monitoring obligations

It is provided in the revised Implementing Procedures that when the transactions carried out by a subject person on behalf of its customers are at the discretion of the subject person, the subject person will not be required to monitor the transactions that it is carrying out itself. This is applicable primarily within the context of discretionary portfolio management and investment management services offered to collective investment schemes or retirement schemes.

5. Ongoing Monitoring

Guidance is provided on the checks that need to be carried out in the context of low risk business relationships, particularly to determine whether the relationship still merits being considered a low risk one. The revised Implementing Procedures detail further situations that allow the application of simplified due diligence when the customer is a collective investment scheme or a nominee/omnibus securities' account.

6. The MLRO

A number of changes have been introduced relating to the criteria required to appoint a Money Laundering Reporting Officer ("MLRO"). According to the revised Implementing Procedures, both executive and non-executive directors may be appointed as MLROs. Furthermore, guidance is offered on the considerations required when a subject person appoints an MLRO that is not located in Malta.

The revised Implementing Procedures provide for the assessments that are required in situations where the MLRO carries out other functions and duties, besides his function as MLRO, within the subject person that may impact the MLRO's impartiality and independence in relation to time commitment and possible conflicts of interest. According to the revised Implementing Procedures, a MLRO may accept several appointments. However, the more appointments the MLRO has and the more complex the activities carried out by the subject person appointing such an individual as a MLRO, the more difficult it is for the MLRO to satisfy his obligations at law. A subject person must assess whether the MLRO will be able to dedicate sufficient time to properly execute his duties for each specific subject person, and this assessment should reviewed from time to time to ensure that the MLRO is dedicating sufficient time to fulfil all the functions associated with the said role.

Along with the revised Implementing Procedures, the FIAU has also published a copy with tracked changes to show the changes that have been made from the previous version.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.