Landmark judgment – administrative fines issued by the FIAU are considered unconstitutional
In a judgment handed down on 30 March 2023, the Maltese Constitutional Court declared that administrative fines issued by the Financial Intelligence Analysis Unit (“FIAU”) against an individual were unconstitutional.
In light of the powers conferred by the Prevention of Money Laundering Act, Chapter 373 of the Laws of Malta (“PMLA”), and the Prevention of Money Laundering and Terrorist Financing Regulations, sub-legislation 373.01 of the Laws of Malta (“PMLFTR”), had FIAU issued a fine of €435,576 against Phoenix Payments Limited, for failing to comply with anti-money laundering obligations. Phoenix Payments Limited challenged the FIAU’s decision and believed, among other things, that they were not given an effective remedy against the FIAU’s decision.
The Constitutional Court declared that Article 13(2) of the PMLA and Article 21 of the PMLFTR infringed and prejudiced Phoenix Payments Limited’s fundamental rights which are protected by Article 6 of the European Convention on Human Rights and Article 39 of the Constitution of Malta. This is because, among other things, Phoenix Payments Limited was not given a fair hearing by an independent and impartial tribunal, it was not presumed innocent until proven guilty, and there was no parity of arms during the FIAU’s investigation procedure and decision to impose the fine. To this end, the Constitutional Court declared that Article 13(2) of the PMLA and Article 21 of the PMLFTR are null and void and the investigation procedure and the fine imposed by the FIAU were also invalid.
Although there is no precedential doctrine for judgments in Malta, and it remains to be determined whether changes will be made to the law and, if so, the extent of such changes, this is a landmark judgment that effectively significantly reduces the power of the FIAU.
Study on digital transformation and fintech adoption: within the Maltese financial sector published by MFSA
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Central Bank of Malta Directive No. 6 and 7 repealed and replaced by new Directive No. 6
In order to implement the guidelines of the European Central Bank of 24 February 2022 on a new generation trans-European automated real-time gross settlement express transfer system (TARGET) and the repeal of Guideline ECB/2012/27 (ECB/2022/8) the Central Bank of Malta (CBM) has repealed its Directive No. 6 on harmonized conditions for opening and operating payment module accounts, T2S dedicated cash accounts in Target2-Malta and TIPS dedicated cash accounts on TARGET2-Malta and Directive No. 7 on the provision of intraday credit and automatic collateral in its entirety.
In light of the aforementioned ECB guidelines, CBM has published a new Directive No. 6 on New Generation Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system applicable to participants in TARGET-Malta and has been in force since 20 March 2023.
Directive on the Issuance of Covered Bonds and Public Supervision of Covered Bonds Introduced into Maltese Law
The MFSA has issued a circular informing the public of the introduction of Directive 2019/2162 on the issuance of OMF and public supervision of OMF into Maltese law. The introduction of the directive has occurred through amendments to (i) the Financial Markets Act, Chapter 345 of the laws of Malta and (ii) the Financial Markets Act (Covered Bonds) Regulations, Subsidiary Legislation 345.27 of the laws of Malta. The amendments were added in March 2023. In addition, the Recovery and Resolution Ordinance, subordinate legislation 330.09 of the Laws of Malta and the Investment Services Rules had also previously been amended.
Directive 2019/2162 includes, among other things, requirements for issuing bonds with preferential rights; structural features of covered bonds; OMF public supervision and disclosure requirements in relation to such OMF.
ESA published draft joint guidelines for a system for exchanging information when assessing suitability and soundness requirements
EBA, EIOPA and ESMA have published a consultation document on the draft common guidelines for the system established by the European Supervisory Authorities for the exchange of information relevant to the assessment of the suitability and soundness of holders of qualifying holdings, directors and key functions owners of financial institutions and financial market participants by competent authorities.
The purpose of the guidelines is to ensure efficiency and harmonization of processes when competent authorities exchange information, including the way data should be entered into ESA’s information system, how appropriate and correct assessments of persons of interest can be found and the way competent authorities should cooperate in exchanging information in relation to to relevant assessments that have been made.
The deadline for making comments to the consultation memorandum is 2 May 2023.
BR/09 on measures that address non-performing exposures and deferred exposures has been updated
The MFSA has published an updated version of BR/09 on measures addressing non-performing exposures and deferred exposures to provide for changes to the quantitative requirements for non-performing exposures (such as expected minimum coverage paths) and to implement the following EBA guidelines (i) the guidelines for application of the definition of default under Article 178 of Regulation (EU) No 575/2013 (EBA/GL/2016/07); (ii) the guidelines for credit institutions’ practices for credit risk management and accounting for expected credit losses (EBA/GL/2017/06); (iii) The guidelines for handling defaulted and deferred exposures (EBA/GL/2018/06); and (iv) The guidelines for publication of defaulted and deferred exposures (consolidated version) (EBA/GL/2018/10).
