BOV justified in closing money remittance company's accounts due to high money laundering risk

A Maltese court has ruled against a company’s bid to have Bank of Valletta reverse its decision to close the company's bank account.

Judge Christian Falzon Scerri, presiding over the First Hall of the Civil Court, rejected a request by Mohammed Hanif, the director of African Eagle Import Export Limited, which held a licence to provide 'money remittance' services.

The court’s decision highlights the importance of due diligence in preventing financial crime, particularly in the case of high-risk transactions such as 'money remittance.' It also underscores the need for banks to carry out continuous supervision of their commercial relationships with clients and to ensure that their internal procedures are robust enough to prevent money laundering.

Over the course of several hearings, it had emerged that clients of the company who were sending money abroad, came from jurisdictions that are considered high risk for financial crime, including some African countries and the Philippines. The bank stated that it had closed the account due to African Eagle Import Export Limited's poor internal procedures and the risk of money laundering associated with the company's clients.

'Money remittance' refers to the transfer of money between two groups, whether people, companies, or bill payers. It is a term commonly associated with workers who send money back to their families from abroad. The BOV argued that it was not acceptable for it to make transfers of this type because the measures implemented by African Eagle Import Export Limited were insufficient to prevent money laundering.

The court held that the BOV had a duty to ensure that African Eagle Import Export Limited carried out transactions that were within its risk profile. It stated that a bank that is keeping open an account in the name of a 'money remittance' business must ensure that the money going into the account does not originate from any criminal activity. The bank also had an obligation to verify the identity of its customers and carry out continuous supervision of the commercial relationship with them.

African Eagle Import Export Limited was found to have failed in its regulatory obligations by not verifying the source of the funds being deposited by its clients. Mr. Justice Falzon Scerri stated that the company could have asked its clients to provide their employment contracts to allow it to check that the amounts of cash deposited by them made sense compared to their monthly earnings. However, the company had failed to do so, in clear violation of its regulatory obligations.

The court concluded that African Eagle Import Export Limited was aware of the reasons behind the bank's decision to close its account. It said that Hanif could not claim that his interest in making a profit from his business should prevail over the public interest, which was to prevent the crime of money laundering.