Last year the Financial Intelligence Analysis Unit (FIAU) opened 121 new cases from the 143 Suspicious Transaction Reports (STRs) it had received, a 17 per cent increase over the number of STRs investigated during 2012. 

An additional 11 cases were opened after the unit received information from its counterpart financial intelligence units in other countries – making a grand total of 132 reports that were investigated.

Overall, the majority – 46 per cent – of reports were made by credit institutions, 11 per cent by remote gaming companies, 10 per cent by financial institutions, seven per cent by company service providers and six per cent by trustees and fiduciaries.

According to the FIAU’s annual report published this week, the main type of cases forwarded to the Police last year were “undoubtedly the incorporation of companies in Malta by foreign nationals and the use of credit institutions by foreign nationals as a vehicle to launder the proceeds of criminal funds generated outside Malta”.

Here, the main trend observed was that most cases referred to the police for investigation involved the use of a company registered in Malta having at least one non-resident foreign beneficial owner.

The FIAU also reports that, once again, the use of Maltese bank accounts and international wire transfers featured in the “vast majority” of cases.

In some cases, the subjects availed themselves of the services of Maltese professionals and service providers, according to the FIAU. In these cases, it is believed that these entities were unknowingly and unwittingly used to launder criminal funds.

As in 2012, the use of companies licensed by the Lotteries and Gaming Authority to operate in the remote gaming sector also featured in a number of cases referred to the police for investigation. The FIAU also observes that similarly, companies licensed or authorised by the MFSA to provide services were identified as having potentially been used to disguise the origin of criminal proceeds.

 

Maltese companies/bank accounts used to launder criminal proceeds

Several of the cases dealt with by the FIAU in 2013 involved the suspicion of the use of Maltese company structures and bank accounts to a varying degree, mainly by foreign nationals, to launder the proceeds of a number of different crimes committed in other jurisdictions.

The FIAU, which is chaired by Attorney General Peter Grech, explains: “The modus operandi observed in eight of the cases referred to the police in 2013 followed a specific sequence – one or more non-resident foreign national setting up Maltese companies, the opening of a bank account with a Maltese credit institution in the name of the companies, the receipt of substantial funds from bank accounts in foreign jurisdictions and the subsequent transfer of these funds to other foreign bank accounts.”

In such scenarios, the FIAU notes that the Maltese companies would form part of a larger, multi-national company structure intentionally set up to layer the proceeds of crime generated in foreign jurisdictions.

“In a number of cases it was established that the foreign nationals had availed themselves of the services of CSPs that would have assisted them in the incorporation of the companies” and in most cases they also provide registered address services and directorship and/or company secretariat services.

Some cases also featured the use of trustees and fiduciaries, which the FIAU analyses after a report is initiated either on the receipt of intelligence from a foreign FIU – which would have identified the link to Malta during the course of an analysis or investigation that it was carrying out – or on receipt of an STR from a reporting entity that would have identified a suspicion of money laundering.

“The red flag indicators that gave rise to the reporting of suspicious transactions and/or activity in these cases varied from case to case,” the FIAU explains. 

 

Maltese companies/bank accounts used for fraudulent schemes

Three separate cases involved a very similar typology, where Maltese companies were set up by foreign nationals who opened bank accounts in the name of the companies with Maltese credit institutions.

“These companies and the bank accounts were then used to carry out fraudulent schemes internationally,” the FIAU explains. “The proceeds of the scheme were thought to have been laundered through the same structures.

“In one of the cases, a Maltese bank received claims from foreign remitting banks to return the funds remitted, since fraudulent activity had been identified. The analysis of the Maltese companies’ bank accounts revealed that the transactions that were being carried out were, in fact, inconsistent with the declared intended activities of the companies.

“Intelligence obtained from the FIAU’s counterparts in another case provided substantial indications that the Maltese companies and bank accounts had been used to defraud hundreds of individuals in foreign countries and subsequently launder the illicit proceeds.”

According to the FIAU: “Both these cases involved widespread fraudulent schemes operated by foreign nationals residing outside Malta that involved several victims, all of which were remitting relatively small sums of money from different countries to bank accounts in Malta held in the name of Maltese companies that were beneficially owned by the foreign nationals.

“In the third case, the victim of the fraud was a foreign company that was allegedly defrauded by foreign nationals through dealings carried out through a Maltese company.”

Another typology identified in 2013 by the FIAU was the use of Maltese bank accounts by Maltese nationals to carry out licensable activities without the required authorisation from the competent authorities.

“Cases involved the suspicion of the laundering of profits of illegal gambling through cash deposits in a bank account followed by substantial wire transfers to online gaming companies registered outside Malta,” the FIAU reports.

“The FIAU also referred cases to the police involving the deposit of large numbers of cheques in bank accounts over a protracted period of time which were incompatible with the type of business or occupation of the person making the deposits.”

 

The use of substantial amounts of cash

Three cases forwarded to the police by the FIAU in 2013 involved the use of substantial amounts of funds in cash suspected to be the proceeds of crime due to the different circumstances and persons involved in each case.

“In these cases, which differed from each other both in terms of nature and volume, a number of interesting features were identified,” the FIAU explains.

It noted cases involving “the use of substantial sums of money in cash for the purchase of luxury items by individuals having a history of proceeds-generating convictions, the use of potentially forged withdrawal vouchers to substantiate cash deposits, multiple deposits on the same day at different banks and unreasonable explanations on the source of the funds upon deposits being made”.

 

False documentation

Several cases subject to FIAU analysis in 2013 involved the use of forged documentation and false invoices being produced by companies to provide documentary evidence in support of wire transfers.

“Fictitious back-to-back agreements entered into merely to support very large transfers between companies in different jurisdictions also featured prominently in the cases reviewed,” it notes.

“The FIAU also examined the attempt to transfer funds of a foreign Politically Exposed Person (PEP) by a non-EU bank through a correspondent banking relationship held with a Maltese bank.

“The suspicious transaction, which was supported by an invoice that did not appear to be genuine, was very similar to several other cases identified in previous years where high profile PEPs in African countries attempted to carry out suspicious transfers through banks in their country that in turn used corresponding banking relationships with banks in Malta.”

 

The use of remote gaming accounts

A number of cases in 2013 involved the use of remote gaming accounts held with remote gaming companies licensed in Malta to launder the proceeds of crime.

According to the FIAU: “Cases varied from the use of prepaid cards to deposit potentially illicit funds in the remote gaming accounts with eventual withdrawals taking place through bank accounts, to the attempt to transfer funds held in the account to other persons, thereby transferring the ownership of the proceeds of the criminal activity. Cases of this nature invariably involve foreign nationals.”

 

Maltese entities used to disguise origin of funds

According to the FIAU: “The cases analysed during 2013 once again revealed that it is not uncommon for the services of licensed financial institutions, trustees, fiduciaries and company service providers to be used to assist in disguising the origin of illicit funds, in particular to distance the subjects from the ownership of the funds and to give a false appearance of legitimacy.”