The conflict between Russia and Ukraine has brought about the imposition of a series of sanctions and restrictive measures. In this regard, during the past month, various Maltese supervisory authorities have been issuing publications directed at reminding subject persons of their obligations under the National Interest (Enabling Powers) Act (NIA) and of how sanctions may impact their obligations under the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) and the Financial Intelligence Analysis Unit (FIAU) Implementing Procedures.
The Sanctions Monitoring Board (SMB) has issued a guidance note explaining that UN, EU and National sanctions have direct applicability under Maltese law and every individual and entity operating in Malta has the obligation to ensure that sanctions are fully adhered to. In the case of subject persons conducting relevant activity or relevant financial business as defined under the PMLFTR, there is an added obligation to have in place internal controls and procedures as required under Article 17(6) of the NIA and to screen the client database against applicable sanctions lists on a regular basis and immediately after any change. In those cases where a positive sanction hit is identified, subject persons are obliged to inform the SMB and immediately notify them of the actions taken.
The Malta Financial Services Authority (MFSA) has issued a circular reminding license holders of their obligation to ensure that they have systems and controls in place to effectively screen their customers and related parties. The MFSA highlighted that license holders should ensure they are using the latest applicable sanctions lists for their customers’ sanction screening, and that they are agile with reacting to the changes being made in those lists.
The FIAU issued a guidance note indicating key areas where additional attention should be exercised by subject persons when it comes to sanctions:
Risk Understanding and Assessment – It was held that the imposition of sanctions should be taken into consideration when assessing jurisdictional risk exposure and customer risk. The imposition of any such measures should lead to a revision of one’s overall risk assessment for given business relationships and should also be a determining factor in assessing the risk associated with onboarding a prospective customer.
Beneficial Ownership - The imposition of sanctions and restrictive measures may lead to attempts by beneficial owners targeted by these sanctions or restrictive measures to distance themselves from the entities or legal arrangements they own. The FIAU has asked subject persons to pay more attention to whether any attempt to divest oneself of beneficial ownership is genuine or merely an attempt to conceal who is the actual beneficial owner, whilst the original beneficial owner retains control over the entity or arrangement through other means.
Transaction Monitoring and Reporting – It was indicated that when carrying out transaction monitoring and scrutiny, subject persons need to pay additional attention to possible activities and/or transactions pointing to a customer being in breach of sanctions. Particular attention should be paid to those customers who the subject person knows to have significant dealings with countries that are subject to sanctions or restrictive measures, or that otherwise have close contact with individuals who are subject to any such sanctions or restrictive measures.
Additionally, the Financial Action Task Force (FATF) also issued a public statement calling on all jurisdictions’ competent authorities to provide advice and facilitate information sharing with their private sectors on assessing and mitigating any emerging ML/TF/PF risks identified from the situation.
Whilst sanction screening has always been a crucial part of customer onboarding and ongoing monitoring obligations, the current situation has certainly served as a reminder to revisit policies and procedures in place and particularly to ensure that these are fit for purpose. Our Financial Crime Compliance Team can assist you with understanding your sanction screening obligations and with ensuring that they are being effectively met.
