Five remittance agents investigated for money laundering

Five cases of suspected money laundering using remittance agents were referred to the police for investigation by the Financial Intelligence Analysis Unit over the past four years.

An FIAU analysis released recently shows that between January 2017 and May 2020, remittance agents submitted 98 suspicious transaction reports.

Just over a third of these STRs were linked to suspicion of fraud, 23% were tax-related and 4% and 3% were linked to organised crime and the financing of terrorism respectively.

The FIAU concluded 40 investigations and passed on five of these cases to the Maltese police or other regulatory bodies for further action. It also sent six spontaneous intelligence reports to foreign FIUs.

The FIAU identified major controls weaknesses in relation to the transaction monitoring systems adopted by the companies offering remittance services.

The number of STRs raised by money remitters during the period “is not considered to be sufficient” given the number of transactions processed by these agents.

The report says money remittance services constitute a significant risk of money laundering given the cash-intensive nature of the services, the high speed and/or high volumes of transfers and transfers to high-risk jurisdictions.

Remittances are mostly used by migrants and foreign workers from non-European countries to transfer funds back to their families at home. However, they are also used by companies and individuals to carry out business transactions.

One of the suspicious cases flagged in the report involved a Maltese company that transferred funds through a money remitter and was flagged because the transactions were not in line with its commercial activity.

The reason provided by the client for a significant payment was for the purchase of a property. But the sale agreement provided as supporting documentation for the transactions, showed no apparent link between the buyer, the seller, and the client who paid out the funds, raising the suspicions of the money remitter.

Another substantial transaction was justified by the client through a simple, generic loan agreement.

The FIAU said that considering the nature of the transaction and the significant amount involved, a robust agreement was expected, with clear terms and clearly identifying the parties and specifying their roles. This was not the case, since the supporting documentation did not even specify which party was the lender and which was the borrower.

The money remitter also flagged “adverse media” in relation to some of the identified parties, which prompted it to file a suspicious transaction report.

Another case that prompted an STR was the complexity of what should have been a simple transaction between two companies. The FIAU said that a company registered in another EU member state, operating in the IT services field, attempted to send a payment to a company incorporated in the US, operating in a completely different field.

However, it did not choose to do so directly from its bank account in Malta to the bank account of the US Company, but by using the services of a local money remitter.

To complicate matters, the narrative of the transaction suggested it was a payment on behalf of a third-party, involved in another US company with whom the EU company had an agreement with.

The complex structure of the payment, involving many financial institutions, jurisdictions and parties, which did not have any apparent or economic lawful purpose gave rise to an STR being submitted with the FIAU.

The number of financial institutions providing money remittance activity in Malta is limited to a few institutions.

Given the vulnerability of the sector to money laundering, the FIAU said that financial institutions venturing in money remittance activities have to be sufficiently aware of the risks and invest adequately in controls that mitigate the risks.

STRs filed by money remittance agents