€30,000 FIAU fine for Baltimore confirmed on appeal

A Maltese financial services provider has had a €30,000 fine for regulatory breaches confirmed on appeal after an inquiry found evidence of money laundering 

A Maltese financial services provider that was at the heart of a government inquiry after a police investigation into its clients and money laundering was halted, has had a €30,000 fine for regulatory breaches confirmed on appeal.

The CapitalOne inquiry was launched after MaltaToday revealed that in January 2013 – right at the start of the general election campaign that year – police did not investigate leads on alleged money laundering through the company CapitalOne Investment, whose ownership was held in Malta by Baltimore Fiduciary as nominee.

At the time, Nationalist parliamentary assistant Beppe Fenech Adami, was a director of the fiduciary. He resigned the fiduciary’s directorship in January 2014.

The police investigation was launched after a Dutch drugs bust on properties owned by one of the owners of CapitalOne Investment Group, in November 2012. In the course of executing a freezing request for Dutch police, the Maltese police started investigating CapitalOne’s operations in Malta, finding that it was owned nominally by Baltimore – a firm owned by Richard Abdilla Castillo and which had Fenech Adami as non-executive director. On 13 January, 2013, in his report to superiors, now former police inspector Raymond Aquilina requested that he forward information on Baltimore to Europol. But the case was not pursued by police top brass, postponing any investigation until the election was over with a note on the file saying “B U in 3 months” – “bring up, in three months”.

The inquiry headed by three retired judges after the MaltaToday story, could not establish with certainty why the case was never pursued, and why the case was finally dropped in December 2013.

FIAU fine and appeal

Baltimore was already under the scrutiny of the MFSA in March 2013; a second audit requested by the FIAU started in May 2016 by the MFSA’s enforcement unit. In 2018, the FIAU reprimanded Baltimore Fiduciary Services and imposed a €30,000 fine over failures to implement proper due diligence and anti-money laundering setups.

The company filed an appeal but on 20 January 2021, the Court of Appeal upheld the decisions taken by the FIAU and the administrative penalty imposed.

The administrative penalties were imposed after a compliance examination revealed that the company had fallen short of its obligations to identify and verify ultimate beneficial owners, including the details necessary to identify and verify their residential addresses.

The compliance review revealed that Baltimore had failed on numerous occasions to obtain sufficient information to establish the purpose and intended nature of the business relationships it maintained with its customers.

The FIAU’s Compliance Monitoring Committee found that all reviewed files contained no information to understand the source or sources of wealth, source of funds and anticipated level of activity of the customers. As a result, the company had failed in all instances to collect the necessary information on its customers.

Baltimore had also failed at carrying out ongoing monitoring, by ensuring that the documents, data or information held are reviewed and kept up-to-date.

The company had also “failed to establish and implement effective customer acceptance policies that are conducive to determine the PEP exposure of its customers and/or beneficial owners.” As a result, the company did not have measures in place to establish whether customers and beneficial owners are PEPs, family members of PEPs or close business associates of PEPs.

In the appeal filed by Baltimore Fiduciary Services, Mr Justice Lawrence Mintoff dismissed all grounds of appeal put forth by the company. The court did not revise the FIAU’s conclusions with respect to the breaches identified.

It also considered that the information provided throughout the FIAU’s supervisory and enforcement process was sufficient to allow the company to determine to which files reference was being made to in the findings report and therefore to exercise in an unencumbered manner the FIAU’s right to submit representations to the Compliance Monitoring Committee.

In the absence of any justifiable reasons, the Court said it failed to understand on what basis it could somehow consider the administrative penalty imposed by the FIAU to be excessive and revise the value thereof.