Judge slams illegal FIAU fines as ‘convoluted, opaque and byzantine’

Malta’s anti-money laundering watchdog was dealt with the umpteenth judgement in which a superior court declares its fines and sanctions policy to be “completely illegal” because supervised entities have no fair right of hearing.

Mr Justice Toni Abela said the onerous fines issued by the Financial Intelligence Analysis Unit (FIAU) were punitive and “quasi-criminal”, and should be issued by a court or juridical body that gives such companies the basic right of being tried by an independent and autonomous tribunal.

A Court of Appeal had already declared in 2023 that the FIAU could not assume on itself the power to issue onerous fines against the firms it regulates. The financial services firm Insignia had been fined a record €1.2 million over its due diligence shortcomings, but it won €10,000 damages after finding that the FIAU’s powers to act as prosecutor, judge, jury and executioner, breached fair hearing rights.

This time, Mr Justice Toni Abela said that the FIAU’s punishments were “completely illegal because they are not sanctioned by any law and the law reigns over everyone.”

Mr Justice Abela was ruling in a case brought by gaming company Online Amusement Solution, fined €387,000 in 2022 by the FIAU for breaching anti-money laundering rules following an on-site inspection carried out in 2019.  

The FIAU said the company, which owns betting sites Champions Bet, Tip Bet, and Bet 14, had failed to report suspicious activity or properly monitor politically exposed players on its gambling sites.

After challenging the FIAU decision in court, the company not only got the fine imposed by the FIAU but won €20,000 in compensation for breaching its rights.

The Appeals Court found that the fine breached the Maltese Constitution and the European Convention of Human Rights which afford independent and fair hearings and the protection from being found guilty of a crime that did not exist.

“The court cannot understand by which stretch of the imagination the FIAU continues to argue that this fine was not punitive in nature,” Mr Justice Abela said. He referred to an FIAU internal document which expressly states that “The fine should be punitive and act as a deterrent to non-compliance”. It also stated that “The fine should be effective in the sense that the subject person should not consider as a ‘mere cost of doing business’ and it should be significant enough to impact on the annual income.”

The court said the fine was so punitive that it could have forced the appellant company to wind up operations.

The judge said punitive fines could only be issued by bodies that offered the necessary legal protections and that those who did not, would not find the court as their defence.

He also described the FIAU’s sanctions policy, through which the fines are calculated, as “convoluted, opaque and byzantine”.