Firm fined €1.18 million by FIAU files constitutional claim over severity of fine

A financial services firm that was shuttered by the Malta Financial Services Authority has filed a constitutional claim protesting a sanction by the FIAU.

MPM Capital Investments, which was shuttered by the financial regulator, was fined €1.18 million by the Financial Intelligence Analysis Unit – a record fine. MPM Capital Investments was found to have carried out an extensive volume of transactions as an unlicensed payment service provider, coupled with ineffective controls that breached money laundering rules. Directors Alexander Mangion and Melvyn Mangion were given a 10-year prohibition on taking up any approved position with MFSA-licensed positions.

In its claim, MPM Capital Investments said its rights were breached in the FIAU’s applications of sanctions against it.

MPM said only a law court could impose such a sanction and then only when its right to a fair hearing, as laid down in human rights law, was guaranteed.

“When one sees the damage suffered from the penality, and the severity of the sanction, even though described as an administrative penalty, one can only see such severity as meritorious of a criminal accusation… The exorbitant and debilitating fine are such that it falls in the constitutional parameters for someone accused of a crime,” the firm said in its constitutional application.

MPM also said that the FIAU acted as judge and jury by inflicting the administrative fine after carrying out its own compliance inpsection. “The fine is excessive and undoubtedly disproportionate to the alleged breaches. The fine is not suited to reach the aim it is set out for. Apart from the fact that it is too heavy a burden for the company to bear. Nor is there any mechanism declared on which the fine is worked out.”

MPM said it suffered a breach of fair hearing when the MFSA took years to conduct its compliance visits, starting in 2016 and finally with with the FIAU inflicting a fine in 2020.

The MFSA took a copy of the MPM servers in January 2016, then carried out a compliance visit in October 2019. MPM informed the MFSA in April 2020 it was in the process of being liquidated; but in June, the FIAU sent a compliance review report on the 2019 visit, where it informed them of nin breaches of the Prevention of Money Laundering and Terrorist Financing Rules.

The company has denied any wrongdoing and said it had collaborated fully with authorities. MPM will be contest the fine and findings through all legal avenues. “When one compares the treatment meted out by the regulator to other subjects, with respect to similar and identical allegations, it is clear that [MPM] is being treated in a discriminatory manner, without any factors that could justify such differential treatment,” the firm said.

The FIAU said MPM had weak record keeping procedures which resulted in the company failing to keep adequate records of the documentation related to its customers and to evidence adherence towards its anti-money laundering (AML) obligations.

In one of the files reviewed, although the cumulative investments during the period October 2010-May 2017 amounted to €2.6 million, the customer had declared a yearly income of €50,000. The FIAU said MPM had failed to scrutinise these transactions particularly in view that these were not in line with this information.

The FIAU also noted that in four other files in which a politically exposed person was identified, transactions were being passed without any scrutiny when in fact, these customers required enhanced ongoing monitoring to be applied.