Notary fined €61,000 over weak due diligence for clients

A notary was fined €61,573 by the Financial Intelligence Analysis Unit for failing to have adeqaute controls on corporate customers, due diligence risks and source of wealth information.

Notary Roderick Caruana was served a follow-up directive to ensure full remediation of his shortcomings within four months.

Caruana appears to have been largely incapable of understanding customer risk analysis where certain businesses could be indicative of higher money laundering and funding of terrorism risks. “The customer risk was taken solely from a purchaser perspective and geographical risks were inadequately assessed.”

The notary’s business risk assessment failed to address certain essential factors such as the geographical risks that were exposing or could potentially expose the SP’s business to as a Notary and the controls required to mitigate the specific risks identified as well as the effectiveness of such controls led to an incomprehensive BRA.

The notary stated that he knows his own clients and has declared such in every deed, but the FIAU said this “can never constitute a justification from carrying out a comprehensive understanding of the customer risk, which understanding is not possible by simply stating that one knows the customers being serviced.”

The notary’s anti-money laundering manual had not been revised since 2016, and procedures were lacking: he failed to indicate the level of due diligence in line with the risk allocation of clients; provide an updated definition of beneficial ownership for the various types of legal persons; and adequate guidance on understanding the source of wealth and the source of funds on a risk sensitive basis.

There was also a number of shortcomings on the verification of the identity of the customer and the beneficial owners (BO). There was no file explaining a corporate customer’s ownership and control structure, and there were others where the ownership and control structure chart found on file was not entirely comprehensive to establish who the BOs are.

As a result in a number of files where corporate entities were involved the notary did not determine the beneficial owners behind the corporate customer being serviced.

Moreover, there were instances where the beneficiaries of a trust, including the settlor and the protector were neither identified nor verified. The trustee was also not verified. “Where no BO existed under the definition of direct or indirect ownership, the beneficial ownership should have been established via other means by determining the natural persons holding control or the position of senior managing officials.”

The FIAU noted that Caruana’s office partner was replying to the questions being posed by the FIAU in his stead. “The Committee stresses on the importance that the SP himself as a Notary Public carrying out relevant activity, is able to understand and review circumstances of customers and transactions that may raise suspicion and to determine in an independent manner in on the basis of such considerations the need to submit an STR or otherwise.”