Instruction Number 02/2021 for Specified Businesses - Malta

Summary

This is an Instruction issued by the GFSC under Section 49AA(6) of the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999, prompted by the FATF placing Malta on its increased monitoring list and Malta's removal from Appendix C (Equivalent Jurisdictions) of the Handbook for Countering Financial Crime and Terrorist Financing. It requires specified businesses to reassess risk and remediate customer due diligence for existing Maltese business relationships where CDD concessions (reliable introducer, intermediary, or Appendix C simplified due diligence) had previously been relied upon.

• Identify affected relationships: By 31 December 2021, identify all business relationships where CDD concessions under paragraphs 6 or 10 of Schedule 3 were used because the introducer, intermediary, or Appendix C business is a Maltese financial services business.
• Reliable introducers: For relationships relying on an introducer under paragraph 10, ensure full CDD measures under paragraph 4 of Schedule 3 and the Handbook are met.
• Appendix C businesses: For relationships where simplified measures under Handbook section 9.6 were applied to a Maltese Appendix C customer, ensure verification measures under paragraph 4 of Schedule 3 are met.
• Intermediary relationships: Where an intermediary was treated as the customer under paragraph 6 and Handbook section 9.8, either meet correspondent relationship requirements (paragraph 5(1)(b) and section 8.6) or apply full CDD to each of the intermediary's underlying customers.
• Notify the Commission if unable to remediate: If a business relationship cannot be remediated under points 2, 3 or 4 by 31 December 2021, notify the GFSC detailing additional risk controls put in place.
• Handle incomplete CDD: Where CDD ultimately cannot be completed, apply timing provisions under paragraph 7 of Schedule 3 and section 4.5 of the Handbook, and otherwise terminate the relationship and consider a disclosure to the Financial Intelligence Service under paragraph 9 and section 4.7.
• Review relationship risk assessments: By 31 December 2021, review all business relationships where Malta is a relevant risk factor, reassess risk exposure, and apply mitigating measures where risk has increased.

The Commission states it will review compliance with this Instruction through on site inspections and other supervisory means.

Key obligations

• Identify by 31 December 2021 all business relationships where CDD concessions under Schedule 3 paragraphs 6 or 10 were used due to a Maltese introducer, intermediary or Appendix C business
• Apply full customer due diligence under paragraph 4 of Schedule 3 to relationships that relied on reliable introducer arrangements with Maltese introducers
• Apply verification measures under paragraph 4 of Schedule 3 to relationships that relied on Appendix C simplified due diligence for Maltese customers
• For intermediary relationships, either meet correspondent relationship requirements under paragraph 5(1)(b) or apply full CDD to each underlying customer of the intermediary
• Notify the GFSC by 31 December 2021 if unable to remediate any identified relationship, detailing additional risk controls applied
• Terminate business relationships where CDD cannot ultimately be completed and consider disclosure to the Financial Intelligence Service
• Review by 31 December 2021 all business relationships where Malta is a relevant risk factor and apply mitigating measures where risk has changed

Applies to

specified businesses

Deadlines

• 31 December 2021: Deadline to identify affected business relationships, remediate CDD under points 2-4, notify the Commission if remediation cannot be completed, and review relationship risk assessments where Malta is a relevant risk factor.