€10,000 limit proposed on cash transactions

The government is planning to bring in new controls on cash transactions in order to tighten up the fight against tax evasion and money laundering, by limiting cash transactions to a maximum of €10,000.

The controls will make it unlawful for people to make or receive payments or carry out transactions in cash exceeding €10,000, where it is in one single payment or in broken-down payments that appear to be linked – a practice known as ‘smurfing’ that breaks down cash into smaller payments to avoid suspicion of money laundering.

The penalty for transactions exceeding the limit will be of anything between 15% to 40% of the amount paid in excess of the €10,000 threshold.

The Financial Intelligence Analysis Unit has told the GRTU small enterprises chamber that the risk of money laundering in certain sectors of business remains high. The rules will affect businesses that tend to handle high volumes of cash transactions, offering such business owners the potential of making large-scale payments for other goods or services that remain untraceable.

Cash-front businesses such as restaurants, nail bars, petrol stations, salons and other service businesses dealing with high volumes of cash can also provide an ideal cover for the source of inexplicable quantities of cash.

Suspicious transaction reports (STRs) increased in number in 2014, which registered a record 202 reports, up by 59 disclosures. The 202 STRs gave rise to 168 new cases dealt with by the FIAU.

The increase in the number of STRs filed in 2014 originated mainly from credit institutions – 112 compared to 66 disclosures in 2013 – in part reflecting the high awareness and vigilance prevalent in banks and financial institutions.

In six cases referred to the police by the FIAU, cash deposits were made by persons known to be connected to drug trafficking into the accounts of individuals whose known profile did not tally with the volume of deposits.

The 180 cases dealt with by the FIAU during 2014 concerned a total of 395 persons.

In total 27 cases, from a total of 154 concluded cases, were forwarded to the police for investigation by the FIAU. 15 of these cases originated from STRs by credit institutions. The suspected offence for the 27 cases forwarded to the police was mainly fraud (nine cases) – in three cases, the offence was mass-marketing fraud, and two cases of using remote gaming companies to launder the proceeds of pre-paid cards that were acquired fraudulently.

Money laundering trends

In seven of the cases referred to the police, a clear trend emerged in which foreign nationals incorporate a Maltese company and open accounts with Maltese banks. Substantial amounts of money were then transferred to these accounts that were then, either immediately or after some time, wired to bank accounts in the name of other companies in other jurisdictions.

In most cases, the funds were received in one transaction and then remitted out of the bank account in separate transactions of different values. In most cases, the purported reason for the transaction was said to be a shareholder’s loan.

Bank accounts in Malta were also used as conduits to channel money generated from the suspected illegal activity.

In three other fraud cases, the money was placed with a remote gaming company through the use of credit cards or using pre-paid card information that was in the first place, acquired fraudulently. In all these cases, the clients of the remote gaming companies held bank accounts in their country of residence and requested the remote gaming companies to transfer the funds held in their remote gaming account to their bank account.

Malta far from ‘cashless society’

The Maltese retain a fondness for using cash, with a Central Bank study finding that 88% of payment transactions are in cash, and with credit cards and debit cards only taking up 4% of each.

€20 and €50 in cash are used for daily purposes, and only 1.8% of respondents told a CBM survey that they do not carry any cash around with them at all.

Around €15 million of transactions every day are made in cash for such things as consumer goods like white goods, cars, electronics and furniture (62%), followed by debit cards (13.6%), credit cards (9.7%), and cheques (5.3%).

However, internet banking was mainly used for higher-value transactions.

According to the World Payments Report, global debit card transactions grew by 13.4 per cent in 2012, compared to a year earlier, while credit card use rose by 9.9 per cent.

Debit and credit cards accounted for 60.9 per cent of all non-cash transactions.

The European Central Bank had figures for 2013 for the EU alone, with card payments accounting for 44 per cent of all transactions, and cheque use declining steadily.