Malta
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FIAU loses yet another case over its unconstitutional fines

A judge on Thursday denounced the "institutionalised incest" adopted by the Financial Intelligence Analysis Unit in the way it operated, fining people amounts they cannot foresee and with fines being listed as profits. 

Mr Justice Toni Abela criticised the "dangerous" system adopted by the FIAU in the imposition of fines which, despite being unconstitutional as they breached people's fundamental right to a fair hearing, were also sustaining it since the amounts are deposited into a fund for its own use. 

He was ruling in a case brought by a notary, Roderick Caruana, who had been fined over what the FIAU claimed were a series of breaches of money laundering rules. 

The notary had been fined €62,000, a fine that was reduced to €4,000 on appeal. 

This is the fifth decision of its sort, in which the court declared that the anti-money laundering watchdog was acting as prosecutor, judge and juror in the cases it investigates.

In this case too, the court ruled that the administrative penalties imposed by the FIAU are unconstitutional and in breach of the rights of subject persons to be tried by an independent court.

Abela was ruling in a case filed by the notary over shortcomings in controls on identifying the ultimate beneficial ownership of financial structures he was involved with.

The FIAU had found failures at the notary's office when it came to understanding clients’ source of wealth and the source of funds.

In the files it reviewed, it also found shortcomings in the identification and verification of the identity of the customer and the beneficial owners.

Caruana could also not explain the corporate ownership and control structure of some financial structures. In others, the details were not comprehensive enough to establish who the real ultimate owners are.

But Caruana challenged the FIAU’s power to act as investigator, prosecutor and judge, filing a case claiming a breach of his rights to a fair hearing.

He argued that the FIAU was not an independent and impartial court and, therefore, out of line with the requisites of the constitution.

In a case filed against the FIAU and the state advocate, Caruana argued the FIAU investigation and fine imposed were arbitrary and breached his fundamental right to a fair hearing.

Abela upheld his arguments, adding that although FIAU’s regulations speak about “proportionate, effective and dissuasive” sanctions, they were not so.

“Without case law and jurisprudential teachings, even common sense dictates that such punishments… penalties, call them what you may, must be imposed by a court as constitutionally known… and not by a body of an administrative nature that operates in an opaque manner and [laden] with conflicts and interests,” Judge Abela ruled.

He continued: “This court is of the firm opinion that [the letter FIAU sent the notary] is equivalent to a criminal charge and although these fines are called administrative, they are actually penalties, intended to penalise and… are not proportional.”

Abela also commented on the system FIAU uses to calculate its fines, which he described as “completely alien to the system found in our laws” and “rather byzantine” where a person accused of a felony has no clue what the corresponding punishment may be.

Once the judge established that the notary was effectively facing proceedings of a criminal nature guised as being administrative, he went on to comment that the FIAU had a conflict of interest in the fines it imposed since the profits are deposited in a special fund for its own use.

“You cannot have such a clear and direct interest in the imposition of fines. The court is not saying that this is being done, but this certainly does not bode well for the objective test of the impartiality of the body that should judge. It is a cardinal principle that whoever is called to pass judgment should not have his remuneration dependent on sources and connected to the matter it has to decide,” Judge Abela ruled as he described this as “dangerous”.

He, therefore, decided in favour of the notary, ordering the FIAU to return any amount of the fine that he had already paid and the State Attorney to pay the notary €3,300 in moral damages.  

Times of Malta is informed that there are another 18 similar cases which are still to be decided by the court, with some of them deferred for a final judgment for more than two years.