Court strikes down severe cash penalty as unconstitutional

By Dr Gianluca Cappitta

In a landmark decision, the Constitutional Court on 24 June 2024 declared a regulation imposing a 55% penalty on travellers carrying over €10,000 in cash as unconstitutional.

The ruling states that the legal provision “reduces the judicial process to a mechanical exercise.” This judgment was handed down in a breach of rights case initiated by Igaale Ali Muuse, who was apprehended at Malta International Airport three years ago with €165,548 in cash.

On 23 August 2021, Muuse was preparing to board a flight to Istanbul when a customs sniffer dog detected the substantial amount of cash hidden in his suitcase, which was already loaded into the aircraft’s cargo hold.

Upon inspection, officials discovered the money, and Muuse was subsequently arrested for failing to declare it in violation of the Cash Control Regulations. He had previously declared that he was not carrying more than the €10,000 legally permitted without declaration.

The following day, Muuse was arraigned and charged with breaching the Cash Control Regulations by not declaring the substantial excess cash. He initially pleaded not guilty. However, as the proceedings continued and the prosecution presented its evidence, Muuse eventually changed his plea. In August 2022, he admitted to the charges after being given time to reconsider his position.

The Magistrates’ Court subsequently sentenced Muuse to a fine of €85,601. This sum represented a 55% penalty on the amount exceeding the €10,000 limit, in addition to a €50 fine. Muuse, believing this penalty to be excessive, appealed the judgment and requested a constitutional reference. He argued that the current regulations resulted in disproportionate punishment, legal arbitrariness, and a lack of judicial discretion.

The First Hall of the Civil Court, acting in its constitutional jurisdiction, initially dismissed Muuse’s claims, stating that he had not suffered any breach of rights. However, Muuse appealed this decision, bringing the matter before the Constitutional Court.

In a significant ruling on 19 June 2024, the Constitutional Court, composed of Chief Justice Mark Chetcuti and justices Giannino Caruana Demajo and Anthony Ellul, upheld Muuse’s appeal. The court declared that Regulation 3(5)(b) of the subsidiary legislation on cash control constituted a “disproportionate interference” with Muuse’s right to the peaceful enjoyment of his private property.

The court referred to EU caselaw, noting that these cash control measures were derived from EU directives aimed at establishing a system of controls to prevent money laundering and the financing of terrorism throughout the bloc. The directives left it to each member state to introduce penalties that were “effective, proportionate, and dissuasive.”

Initially, Malta had imposed a 25% penalty on the total amount of undeclared cash, along with the confiscation of any amount exceeding the €10,000 statutory limit. However, the law was amended in 2020, increasing the penalty to a mandatory 55% on the excess amount, plus a €50 fine.

Additionally, the regulations stipulated that when an individual was found carrying more than €30,000, the excess amount would be deposited with the Tax Commissioner for up to 90 days while police investigated the source of the funds. If any criminal activity was suspected, further criminal action could be taken against the individual. In Muuse’s case, the authorities had ample time to investigate, but no additional action was pursued.

The State Advocate argued that the cash control regulations were designed to prevent arbitrariness, ensuring that anyone caught with excess cash would be fully aware of the penalty they faced. However, the court disagreed, stating that such a severe penalty was unduly harsh, especially since it applied automatically whenever a traveller failed to declare extra cash at the airport. The court emphasised that while the regulation served as a deterrent and punishment, it reduced the judicial process to a mere formality, eliminating the court’s ability to apply discretion based on the facts of each case.

The Constitutional Court expressed concerns about the source of Muuse’s money but ultimately held that the regulation interfered in a disproportionate manner with his fundamental property rights. The court highlighted that each case presented unique circumstances, and punishment should be tailored accordingly. Therefore, the regulation’s one-size-fits-all approach was deemed incompatible with the principles of justice and fairness.

As a result, the court declared the regulation unconstitutional and ordered that a copy of the judgment be sent to the Court of Criminal Appeal and the Speaker of Parliament for further action.

This decision marks a significant shift in the legal landscape, reinforcing the importance of judicial discretion and proportionality in the application of penalties. It underscores the need for regulations that, while deterring unlawful behaviour, also respect individual rights and provide a fair and just process for all.