This week's Malta court decision has prompted questions about the island's capacity to impose penalties for AML violations.
It comes after a judge on Thursday invalidated the watchdog's decision and ruled that the administrative fines levied by the Financial Intelligence and Analysis Unit (FIAU) were illegal.
Importantly for the FIAU's efforts, the court also determined that the penalties violated the rights of the subjects to an impartial trial.
The judge overturned a prior court decision that Phoenix Payments Ltd. should pay a penalty of €435,576 for a number of AML violations related to cryptocurrencies.
According to reports, the Maltese courts will hear 18 additional cases, thus the outcome could have a big impact on whether the FIAU's fines are upheld.
Phoenix, a payment processing corporation, asserted that the 2021 case violated its rights to a fair hearing. Phoenix contended that aggrieved parties have no meaningful redress to the FIAU's findings and administrative penalties, and disputed the FIAU's authority to operate as "investigator, prosecutor, and judge," according to the Times of Malta.
A fair hearing before an impartial and independent tribunal, as required by the European Convention on Human Rights and the constitution, had been denied, the corporation said before Judge Audrey Demicoli.
Phoenix asserted that the FIAU's authority to investigate and impose astronomical administrative fines although it was not a court in the traditional sense of the word violated its rights to a fair hearing in a matter before the First Hall of the Civil Courts under its constitutional jurisdiction.
Judge Demicoli upheld this claim, concluding that the FIAU did not fall under the legal definition of a court as required by the Prevention of Money Laundering Act, and that its authority to impose administrative fines on the basis of that provision was unconstitutional and thus in violation of the European Convention on Human Rights.
In accordance with the law, the FIAU may impose administrative fines not to exceed €5M or, where this is determinable, twice the benefit received from the contravention, breach, or failure to comply, or 10% of the total annual turnover as reported in the most recent approved available financial statements.
According to the publication, the judge decided that the authority given to the FIAU by this law was unconstitutional and ordered that the House of Representatives be informed of the decision so that it can take appropriate measures.
The court declared the FIAU's ruling in its favor as well as the administrative penalty it had imposed as null as a remedy for the infringement.
Francesc Xavier Alabart Lopez, a Spanish national, Keith Farrugia,a Maltese national, and Marco Lavanna, an Italian who resides in Switzerland, are the company's directors.
The FIAU claimed to have discovered flaws in the way the company gathered data on clients' businesses, occupations, source of wealth, and source of funds.
The same held true for making sure it fully comprehended the level and nature of transactions that were anticipated, including the projected amount and frequency of payments.
Because the FIAU was just relying on a law to enforce its sanctions, the judge also ordered that it not be required to pay court fees. Instead, it mandated that the State Advocate be responsible for paying all fees.
According to the Times of Malta, there have been at least 18 additional cases brought by individuals or businesses that have paid administrative fines against the FIAU.
Attorneys John Refalo and Ingrid Bianco represented the FIAU, and attorneys Kristina Rapa Manche' and Edward Fenech Adami appeared on behalf of the corporation. For the State Advocate, attorney Fiorella Fenech Vella appeared.
By fLEXI tEAM