Publication of FIAU Interpretative Note for Lawyers

On 26 August 2020, the Malta Financial Intelligence Analysis Unit (FIAU) published its ‘Interpretative Note: Relevant Activity for Lawyers’ (the Interpretative Note) designed to guide legal professionals in determining the conditions under which a ‘relevant activity’ in terms of Malta’s AML/CFT legislative framework may arise. Being able to ascertain these conditions is of paramount importance, given that obligations under the applicable AML legislation will only apply where a legal professional carries out a relevant activity. When the activity in question falls outside the statutory definition of relevant activity, the legal professional carrying out such activity would not be considered a subject person for the purpose of the applicable AML legislation.

Where legal professionals are concerned, the term “relevant activity” under Article 2(1) of the Prevention of Money Laundering and Funding of Terrorism Regulations (“PMLFTR”)[1], refers to the activities of notaries and other independent legal professionals when they participate, whether by acting on behalf of and for their client in any financial or real estate transaction or by assisting in the planning or carrying out of transactions for their clients concerning any of the following:

• Buying and selling of real property or business entities;
• Managing of client money, securities or other assets (unless the activity is covered under a licence issued under the Investment Services Act);
• Opening or managing bank, savings or securities accounts;
• Organisation of contributions necessary for the creation, operation or management of companies; and
• Creation, operation or management of companies, trusts, foundations or similar structures, or when acting as a trust or company service provider.

This Interpretive Note, which was prepared in conjunction with the Malta Chamber of Advocates provides welcomed clarity in the application of this area of AML legislation, by providing specific explanatory guidance on a number of key terms central to a better understanding of the “relevant activity test”.

Provisions in the law such as “acting for and on behalf of a client” or the “planning or carrying out of transactions” are considered from the practical reality of the legal profession, and the Interpretative Note helps provide clearer and more concrete parameters within which a particular activity in question would satisfy the relevant activity test. By way of example, the ‘planning or carrying out of transactions’ criterion goes beyond the mere provision of legal advice and involves direct assistance in the arrangement or design of transactions (at the preparatory stage) and assistance in the implementation, execution and completion of the transaction (at a subsequent stage). Activities such as the drafting of the terms of the contract, assisting in the negotiations on the commercial terms of the transaction or helping to facilitate the transfer of funds as part of the transaction’s conclusion would be covered under the term ‘planning or carrying out transactions’.

Besides providing guidance on numerous other aspects of the relevant activity test under the PMLFTR regime, the Interpretative Note also helpfully highlights certain high risk matters which, although formally falling outside the relevant activity test, are of such a risky nature as to warrant caution and a heightened level of vigilance on the part of legal professionals when agreeing to provide services in relation to such activities.

The publication of this Interpretative Note is an additional step forward in the enhancement and further strengthening of Malta’s AML/CFT framework and should be treated as mandatory literature for all legal professionals practising in Malta.

The full document can be accessed at the following link: https://fiaumalta.org/wp-content/uploads/2020/08/Interpretative-Note-Relevant-Activity-Lawyers.pdf

[1] Subsidiary Legislation 373.01 of Laws of Malta.