Cash is still king in Malta, but for how long?

DAVID LINDSAY speaks to FIAU’s Manager of Legal and International Relations Daniel Frendo and FIAU’s Head of Legal Affairs Jonathan Phyall on new cash restriction laws

Daniel Frendo (left) and Jonathan Phyall (right)
Daniel Frendo (left) and Jonathan Phyall (right)

The new cash restriction law limiting payment transactions to below €10,000 has been something of a bone of contention but, according to the Financial Intelligence Analysis Unit’s legal team, Malta’s limit was settled upon after no insignificant amount of research into Malta’s particular situation, where cash is still most definitely king.

“Whenever we initiate the drafting of new legislation, we conduct extensive research,” explains Daniel Frendo, the FIAU’s Manager of Legal and International Relations. “And this was precisely one of those areas. We tried to cater to our particular scenario in Malta, while also bearing in mind that individual citizens have a right to make use of cash.

“Let’s also keep in mind that cash was, and still is, king in Malta. And this is something we took into consideration, in the sense that we did not want to create a culture shock by going from zero to 100 overnight.”

That is precisely why the €10,000 limit was settled upon and introduced with respect to those areas deemed to be the riskiest: immovable property, antiques, jewellery, precious metals, precious stones and pearls, cars, sea-craft and works of art.  The resulting legislation, the Use of Cash (Restriction) Regulations (Subsidiary Legislation 373.04), limits cash purchases of such items at €9,999.99.

That limit, however, may well be in for a change, depending on likeminded manoeuvres at EU level.

Dr Frendo elaborates, “We started off with this piece of legislation but it’s likely that, in the years to come, things will change, most probably from an EU perspective. That is because even the European Commission itself is once again trying to revive its efforts to come up with EU legislation limiting cash restrictions across the whole of the EU, and introducing a single threshold across the bloc”.

In fact, European Commissioner for Finance Mairead McGuinness earlier this month confirmed the Commission’s intention to present a new package of legislative proposals against money laundering in July, which is expected to include an EU-wide €10,000 ban on cash payments.

McGuinness said in an interview with the authoritative Suddeutsche Zeitung, “We are talking about the upper limit of €10,000. It is quite difficult to carry so much money in your pockets.”

As matters stand, cash payment limits fluctuate between the EU member states that have introduced such restrictions. The limit in Greece, for example, stands at just €500, in France at €1,000 while in Poland the limit is at €15,000. As such, Malta’s €10,000 limit appears quite reasonable.

The Commission also intends to establish an EU umbrella agency against money laundering and terrorist financing, which will have a number of powers, including how to directly monitor how obliged entities, such as banks implement the EU’s anti-money laundering policies.

Centralised Bank Account Register ‘a milestone’

The introduction of the Centralised Bank Account Register – a requirement of the EU’s 5th Anti-Money Laundering Directive - constituted something of a milestone for the FIAU in that it has sharply reduced the wait and red tape when it comes to retrieving essential information on bank and payment accounts in Malta, as well as on items held in safe custody, and on who their holders are.

Dr Phyall explains how the starting point had been a requirement of the 5th AMLD.  Malta’s CBAR includes info on IBAN identifiable accounts (and safe deposit boxes and other safe custody services) only, and does not extend to insurance policies/investment portfolios (something which may be found in other jurisdictions).

Most Member States that already had such a register had initially introduced it for tax evasion detection purposes, but, since then, it has developed into a crucial tool to combat the funding of terrorism - a stipulation the Directive in question lays out in black and white.

“The idea was that when you are dealing with the funding of terrorism, you need to have information as immediately as possible,” Dr Phyall explains.

“So the moment you get contacted by a foreign authority about  a possible transfer linked to terrorism or money laundering, you need to provide them with information as quickly as possible as to who is in control of that bank account, where it is held - in short, information that would allow action to be taken”.

The information includes basics such as name, surname, place of birth, place of residence, ID or passport, IBAN and bank account number.  There is, however, no immediate access to data on balances and withdraws, and the collection of transactional data or interest is not provided for by the system.

As Jonathan Phyall, the FIAU’s Head of Legal Affairs, explains, “We actually ask for that kind of information but the idea behind Centralised Bank Account Register (CBAR) as such is for the authorities to get an idea of where to look right away.”

Dr Frendo adds, “Prior to the introduction of the CBAR, what used to happen was the FIAU would send out a request to each and every individual bank and financial institution asking, for example, if Jonathan Phyall holds an account with them. That took a considerable amount of time, which is precious in these types of investigations.

“This information is now accessible through a database in an instant.

“What the CBAR does is it gives us a snapshot and then once we launch an analysis, as an FIU we can then ask, for example, for a particular set of transactions or a list of transactions pertaining to an account.”

A search on the CBAR, Dr Phyall explains, kicks in only after a suspicious transaction report filed at the FIAU, after a request from a foreign FIU for information on particular people, or on the basis of an analysis conducted of the FIAU’s own volition.

“There is always a trigger for searches on the CBAR,” he adds. “It is never a fishing expedition.”