Record €1.18 million FIAU fine and 10-year ban on company directors

A financial services shuttered by the Maltese financial regulator has been 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 and value 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. The MFSA cancelled MPM’s licence and appointed an inspector to investigate and report on the affairs of MPM.

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.

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. Such record keeping failures also resulted in the company providing an incomplete client list to the FIAU and incomplete transaction data.

Multiple payment transactions were being carried out on behalf of customers who were not present in the MPM client list. When FIAU officials requested the bank statements of a selected bank account, MPM failed to provide it even though the company had obligations at law to keep such transactional data.

MPM’s own director, and owner, was acting as both financial director and money laundering reporting officer. The FIAU said this meant he unable to fulfil an important role with such a conflict of interest. “The conflicting nature of the MLRO’s position is further aggravated by the fact that no independent member of staff was part of the decision-making process of the company as all members of staff were relatives of the MLRO.”

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.

In another file, three deposits were made by the customer amounting to €75,000, €100,000 and €186,679; however no additional information was obtained to explain the source and origin of these funds when the customer’s annual income was declared to amount to €35,000.

“Albeit the invested amount is far from what one would expect from a person with such annual income, the company proceeded with accepting and investing the amounts without substantiating the source that were funding such investments.”

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.

In another file reviewed, the FIAU noted that one of the customers’ employment was marked as ‘technician’ in some documents, and ‘real estate director’ in others. The customer’s annual income €50,000 while two statements of affairs dated 2009 and 2010 showed a yearly income of €11,347 and €12,678 respectively. The total assets pertaining to this customer were marked to amount to €5.6 million.

“The company failed to understand how a customer with a yearly income ranging between €11, 347-€12, 678 could have generated such substantial wealth. The Company also tried to explain that the €5.6 million wealth related to €2.7 million worth of investments and €2.2 million worth of real estate property.

“Although the Company provided a series of contracts of sale and documents pertaining to loans the customer had in order to substantiate this explanation, these documents could not substantiate how the customer managed to generate such substantial amounts. Moreover, in its representations, the Company further clarified that most of the customer’s wealth related to inheritance, however this explanation was not substantiated with any documentary evidence.”

MPM also held no information as to whether its customers are politically exposed or otherwise some 23 files. Many of the customers were on-boarded prior to 2016 and therefore the company would have still been in breach of its obligations as it failed to establish whether its customers were politically exposed at the start of the business relationship. While the FIAU acknowledged that PEP searches dated 2018/2019 were found on file, MPM was found to have been servicing customers without knowing whether they are politically exposed or otherwise.