MFSA Strengthens AML procedures

Mr. Steve Muscat Azzopardi | Published on 08 Oct 2018

MFSA Strengthens AML procedures

New Guidelines issued for PEPs 

On the 8th October, the Malta Financial Services Authority (MFSA) announced that the current Anti-Money Laundering (AML) procedures relating to Politically Exposed Persons (PEPs) have been further strengthened through the publication of guidelines. The Authority will, hence, adopt the best international practices and work alongside international supervisory bodies to ensure such supervision will be of the highest standard. 

Guideline Overview 

The MFSA will expect all persons or entities authorised by it to abide by the obligations upheld within the Prevention of Money Laundering and Funding of Terrorism Regulation (PMLFTR). This regulation stipulates the application of various strict restrictions for the identification of PEPs. Once the PEP has been correctly identified, Enhanced Due Diligence (EDD) measures must be applied. The same measures will be employed to family members of the PEP as well as close associates. These guidelines stipulate that the PEP, his family and known associates will be subject to such rigorous due diligence for up to 12 months after the PEP has ceased to carry out his public function. 

The European Union’s 4th AML Directive upholds that PEPs are to be identified as individuals who are entrusted with prominent public functions. Although this is quite a broad term, various examples have been provided within the aforementioned law to clarify if such extensive measures should be applied or not.  The Guidelines issued by the MFSA stress that not all PEPs pose the same level of risk, and therefore, the EDD measures must be applied in such a manner which is proportionate to the risk posed by the individual. 

Most importantly, the necessary measures must be applied to correctly determine the source of wealth and funds of the PEP, with ongoing monitoring taking place. Verification of such essential information may be carried out through publicly available information, information obtained directly from the customer or through commercial databases.  


The MFSA’s efforts 

The issuance of these Guidelines will allow for certain precautions to be taken in relation to PEPs, their family members and known associates. By applying such rigorous due diligence supervision, the State will be putting at a forefront the importance of abiding with the Prevention of Money Laundering and Funding of Terrorism Regulation and adopting international standards when doing so. 

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