In the land where cash is king, new restrictions will bite hard

Boats of all sizes are one of six luxury goods for which it has become illegal to trade in cash if the amount paid is €10,000 or more.

The new rules apply to private individuals as well as companies, which means that using the internet to sell your boat will not exempt you from the cash restriction.

Ignoring the law would incur a penalty on both the seller and buyer equivalent to 40% of the amount paid in cash in excess of €9,999.99.

And forget trying to go around the law by requesting two payments of less than €10,000 because they will be considered as linked payments and subject to sanction.

As of March this year new regulations came into force, prohibiting cash payments of €10,000 or more for antiques, property, jewellery and precious metals, cars, sea craft and works of art.

Cash payments are defined as physical notes and coins and the rationale behind the regulations is to stamp out money laundering.

The regulations do not apply if payment for the listed goods is made by cheque, bank transfer or card – all of which have traceability.

But the new rules are expected to bite hard in a country where cash is still king.

High cash usage

A 2018 survey carried out by the Central Bank of Malta showed that Maltese households were more inclined to use cash and paper-based payment instruments as the primary payment channel.

The love for cash, according to the reasons given by survey participants, is based on the premise that cash is easy and fast to use, and helps avoid fraud and theft.

The reasons are incomprehensible since it is universally accepted that fraud is more likely with cash as a result of counterfeit notes and is also very attractive to theft.

But on a more sinister level, cash is the preferred choice of payment where its provenance is from illicit activities. Paying in cash for luxury and expensive items is one way of laundering money because it cannot be traced.

Tighter screws on dirty money

The new regulations introduced five months ago seek to tighten the screws on this avenue of cleaning up dirty money.

The rules place the onus on both the seller and the buyer. They also define what linked transactions are to prevent multiple small payments that fall below the threshold for the same object.

Two or more cash transactions which are performed by the same parties, having the same or similar linked purpose or purposes, and which are carried out within a period of six months are considered to be linked and fall within the scope of the prohibition.

An FAQ released last week by the Financial Intelligence Analysis Unit explains that it is possible for someone to buy a second-hand vehicle for a value of less than €10,000 using cash. But, if within six months, the same person buys a second car of similar value from the same trader, the two transactions will be considered linked and the penalties applied accordingly if cash is used the second time around.

The FIAU says that if the purchasers are not the same person, then the transactions are not deemed to be linked. But in those instances when a buyer is carrying out a transaction on behalf of someone else, the transactions will still be linked.

The FIAU lists the following example: If Person A buys a vehicle from Trader B in March 2021 and three months later, Person C buys a vehicle from the same Trader B, but registers the vehicle under Person A, the transactions are considered to be linked and any amount paid in cash above the €10,000 limit will fall foul of the law and incur a penalty.

The cash restrictions apply for any currency that can be used to trade in the listed items and the threshold will be equivalent to €10,000.

The regulations do not apply when depositing or withdrawing cash from a bank.

Criminal proceedings for offences against these regulations shall be barred after a lapse of five years.

Definitions

Antique A work of art or an object of a geological, paleontological, archaeological, or antiquarian importance and which is at least one hundred years old

Immovable property Includes all things, rights and actions which are immovable by their nature

Jewellery Personal ornaments made in whole or in part, or covered with gold, silver, platinum or other precious metals and, or, set with diamonds, precious stones or pearls, and wrist watches

Motor vehicle Any self-propelled road vehicle which is normally used for carrying persons or goods on the road, whether it was previously owned or not

Precious metal Gold, platinum, palladium and silver in the pure state and their alloys

Precious stone A substance with gem quality and market-recognised beauty, rarity, and value, and includes diamond, sapphire, ruby and emerald

Sea-craft Any ship, boat, pleasure yacht and any other form of sea vessel used in navigation