Malta FIAU to launch new Enforcement Guide after court rulings on fines

By Elena Tabone, Head – Enforcement of Malta’s Financial Intelligence Analysis Unit

Remediation is a powerful tool for achieving compliance, but its effectiveness relies on both thorough supervision and equally rigorous enforcement capacity.  With this in mind, between 2018 and 2020, Malta’s Financial Intelligence Analysis Unit (FIAU) embarked on a program of transformation to overhaul its supervisory and enforcement measures with the aim of strengthening its functions and powers when it comes to the regulation of Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF). This has led to a substantial increase in the number and intensity of supervisory examinations and, as a result, related administrative enforcement actions. Supervisory interventions rose from 55 in 2018 to 870 between 2019 to 2024 and fines increasing from €990,000 in 2018 to over €29.5 million since 2019. Following recent Constitutional Court rulings reaffirming the FIAU’s ability to institute such penalties, the authority is now in a stronger than ever position to act, promote conformity with both domestic legal principles and contemporary international standards, and as a result, ensure proportionate, effective and dissuasive administrative measures aimed at restoring compliance and safeguarding the jurisdiction from ML/FT risks.

Constitutional Court Challenge

The FIAU is empowered to carry out on-site and off-site examinations to assess compliance by subject persons. When subject persons are not in conformity with such laws and obligations, it has the power to take actions and impose several administrative measures in line with the requirement for all EU Member States to implement minimum harmonisation EU Directive 2015/849. This includes the issuance of penalties, which can reach up to €5,000,000 or 10% of the turnover. For the non-financial sector, the maximum amount of penalty that can be imposed is €1,000,000.

Administrative penalties in excess of €5,000 may be appealed by subject persons. Out of a total of 914 penalties imposed since 2019, 72 appeals have been filed, 40 of which have been decided. However, in September 2020 the FIAU faced its first ever case in the Constitutional Court on the matter. Along with subsequent cases, this centred around the question of whether such penalties could be rightly issued by the FIAU, an authority having both supervisory and enforcement powers, rather than a Court of law, with the applicants contending that the value of the administrative pecuniary penalties imposed were so significant that the penalty should be considered as criminal in nature, rather than administrative. As Malta’s constitution stipulates that persons charged with a criminal offence shall be afforded a fair hearing within a reasonable time by an independent and impartial Court established by law, if such penalties were deemed to be criminal then they could only be issued by a Court of law.

Landmark Rulings

In November 2024 the Constitutional Court of Malta ruled that the AML/CFT enforcement framework does not violate one’s right to a fair hearing, but rather the process goes hand in hand with what is expected in terms of the constitution.

In arriving at this conclusion, it carried out an exercise to determine whether an AML breach would be tantamount to a criminal offence. The Court assessed that a criminal offence may be punished by imprisonment or detention. In its assessment the Court also considered whether the non-payment of a fine may be converted into imprisonment or detention, as well as whether repeat offenders can be punished with imprisonment or detention. Ultimately, the Court observed that the FIAU’s power is limited to the imposition of penalties, and there is no power to imprison or detain.

While the Court acknowledged that AML/CFT penalties are classified as administrative, it noted their punitive and deterrent nature, especially given their potential scale and impact on subject persons. It also noted that while the FIAU does not have powers to imprison, this becomes irrelevant for legal entities, as were both cases being decided by the Court. It considered that these penalties, though not imposed for hard-core criminal offences, can carry serious consequences. Ultimately, the Court held that while the penalties are criminal in nature, they do not stem from criminal offences in the strict sense, highlighting the need to distinguish between hard-core and soft-core criminal sanctions.

The Court also confirmed that the FIAU, while ensuring the necessary segregation is in place between its supervisory and enforcement function, cannot ensure complete independence and impartiality since the various sections are part of the same Unit. In its decision, the Court referred to several European Court of Human Rights (ECtHR) judgements, extending key fair trial guarantees to cases beyond traditional criminal law, including administrative penalties. ECtHR case-law affirms authorities that imposed penalties were deemed to still safeguard the right to a fair trial, even if these authorities are neither courts nor tribunals, but they afforded a right to a full review before a tribunal or a court on both points of law and fact; a right also afforded to subject persons in Malta for AML/CFT administrative penalties. In the Maltese context, the Court of Appeal in its Inferior Jurisdiction may admit any testimonies or documentary evidence and can conduct an independent examination. This independently of the FIAU’s decision and the Court is therefore not bound by the FIAU’s conclusions both as to whether a breach was committed as well as on the administrative penalty to impose.

Resolution & Progress

The two landmark rulings by the Constitutional Court have provided much-needed clarity on the longstanding debate surrounding the enforcement powers of public authorities. While it has taken time to reach this stage the value of allowing for such processes is central to the future success and efficacy of bodies such as the FIAU. After all, oversight enhances public trust in the legal system, showing that power is exercised carefully and subject to review. The appeals process strengthens the rule of law by ensuring that decisions by the FIAU are subject to thorough and independent scrutiny.

While additional cases are pending, the FIAU has been fostering a more transparent and just enforcement process in response to concerns raised by subject persons when filing their constitutional cases. Throughout 2025, the focus has been on ensuring a more transparent enforcement framework that is better explained and easily accessible, with an ‘Enforcement Guide’ due to be published in early 2026. The Guide will clearly set out what types of enforcement action can be taken by the FIAU, when these will be taken, and the considerations that inform decisions to pursue enforcement. More specifically, it will include:

• An explanation of the risk-based approach to enforcement, ensuring that the actions taken are proportionate, effective, and dissuasive.

• An overview of the enforcement process; from the moment a case is escalated for enforcement, to the receipt of representations (both written and oral), notification of the start of the enforcement process, the subsequent preparation and presentation of the case before the Compliance Monitoring Committee (CMC), and notification of the outcome.

• An explanation of the FIAU’s Sanctions Policy, which underpins considerations by the CMC in determining the appropriate administrative enforcement measures. This includes details on the Sanctions Calculation Tool, which calculates the appropriate value of the administrative penalty.

• The procedure and timeframes from the moment a potential breaches letter is issued, up to the determination of the administrative measure to impose, and their  publication.

The FIAU is also in the process of implementing a settlement framework, allowing for settlements to be reached between the FIAU and the subject person. Legislative amendments supporting the same have been concluded and are in the approval process, which is expected to conclude in the coming months. The change in the regulations will allow the FIAU to enter into settlement arrangements. A Settlement Policy shall also be publicly available, providing clarity both as regards the considerations taken by the CMC to enter into a settlement agreement as well as the conditions to be satisfied and the process to be followed. This shall be afforded to both current and pending appeal cases before the Court of Appeal, as well as new cases determined by the CMC. The process will, save to a determination by the CMC that it is willing to enter into a settlement agreement, allow subject persons and the FIAU to enter into settlement agreements, contingent on a number of measures including acknowledgement of breaches of the law by the subject person and forfeiture of the right to appeal the FIAU's decision. The incentive for settlement is that the administrative penalty may be reduced by up to 50%, with the reduction granted varying depending on when the subject person acknowledges breaching its legal obligation and the extent of remediation already undertaken, planned or committed to. The FIAU will strive to retain its effectiveness by conditioning any reduction in penalty on the subject person’s implementation of remedial/corrective actions.

Together with the recent Court rulings, these efforts are the basis on which we are building trust and ensuring a cohesive approach to administrative enforcement that safeguards both the rights of all subject persons and the integrity of our jurisdiction.

This article originally appeared in AML Intelligence.