APS bank fined €228,000 by FIAU over breaches of money laundering rules

APS Bank has been fined an administrative penalty of €228,706 by the Financial Intelligence Analysis Unit, over breaches of the Maltese prevention of money laundering rules.

APS, originally the bank owned by Malta’s Catholic archdiocese, said in a market update on the Malta Stock Exchange that it will not be appealing the penalty. The bank will give a detailed reaction on Friday, 3 February.

APS said the FIAU findings refer to legacy matters, and was satisfied that the outcome reflects the significant remediation that took place over the past years.

The FIAU carried out a customer file review which had identified numerous deficiencies in the bank’s procedures. For one customer file, shortcomings were noted on the compilation of the beneficial owners’ source of wealth: there were substantial shareholders’ loans reported, and the company registered consistent losses over the years. The FIAU said this was clear evidence that the customer was not entirely self-sufficient, relying on shareholders to finance its operations.

In another case, APS did not collect sufficient information on the expected source of funds at onboarding, where a declared net monthly remuneration of approximately €5,000 was insufficient to substantiate the estimated annual deposits of over €5 million. This inconsistency merited further investigation by the bank.

APS was also found lacking a centralised data management system, which may have impinged on the bank’s ability to implement an efficient record keeping system. At the time of the compliance examination, a records management and digitisation project was underway, which project had been initiated prior to the commencement of the compliance examination.

The FIAU reviewed a sample of transactions and noted that in two instances, the information held was considered insufficient.

In one case, a customer deposited over €100,000 on the same day by affecting a total of six distinct transactions, which did not reflect the customer’s profile, having a gross salary that had started off as slightly over €1,000 a month and only gradually increased to over €3,000 a month after years of working experience.

“The customer had explained that the funds comprised of savings held at home and provided supporting documentation such as the employment contract and payslips. However, the documentation provided did not substantiate these transactions. In this situation, the bank was expected to question the customer’s deposit spike, as well as request further explanations and supporting documentation to justify the rationale behind these transactions.”

In a second file, a customer had two transactions of €2.7 million, while another transaction was equal to roughly €200,000. While APS showed it had scheduled a meeting with the customer to understand the rationale behind these transactions and request supporting documentation, no further updates were provided to confirm that the meeting took place. “The bank was obliged to obtain further information and supporting documentation in order to validate the transactions and ensure that these make economic and lawful sense,” the FIAU said.

APS now must provide the FIAU with an action plan indicating the remedial actions that it has carried out and implemented since the compliance examination, together with the remedial actions which are expected to be carried out to address the identified breaches.

The FIAU said it acknowledged the APS’s ongoing commitment towards enhancing and updating its AML/CFT systems and processes, and praised the dedication displayed by the bank’s top management in their fight against ML/FT.

“The bank is fully committed to the highest standards of operational integrity and regulatory compliance, and is a key player in the fight against financial crime,” CEO Marcel Cassar said. “Over the past years, the bank has increased its investment in resources and technology to enhance and increase the effectiveness of its financial crime compliance framework, which had already commenced before the 2020 examination took place...

“Having taken the examination findings very seriously, we carried out remediation, invested in technology, robustly grew our financial crime compliance resources and scaled up training across the entire bank. Overall, we are positive that this process has continued to strengthen the Bank’s governance, systems and compliance controls.”