A decision by Malta’s Constitutional Court to uphold the validity of large financial penalties imposed by the Financial Intelligence Analysis Unit (FIAU) has been described as “an important decision” by Shoulder Compliance Founder and Director Charles Cassar.

The FIAU’s fines had faced several successful legal challenges, with lower courts nullifying its penalties and throwing Malta’s entire financial crime enforcement framework into doubt.

It is worth noting that the FIAU’s shortcomings had been at the centre of the global Financial Action Task Force’s decision to greylist Malta in 2021, while the jurisdiction’s exit a year later was partly precipitated by improvements in the financial crime watchdog’s capabilities.

With the FIAU effectively rendered toothless by Court, the improvements in Malta’s anti-money laundering (AML) safeguards crucial to its international reputation as a safe hub for financial services had been at risk of being undermined.

Those initial decisions nullifying the FIAU’s penalties had been contested by the State Advocate, with the decision handed down on Monday (yesterday) by the Court of Appeal, presided over by Chief Justice Mark Chetcuti, Judge Giannino Caruana Demajo, and Judge Anthony Ellul bringing fresh clarity to the situation and renewed bite in the FIAU.

Mr Cassar hailed the “big” decision overturning lower court decisions that had found the FIAU’s enforcement process unconstitutional.

“This is an important decision which leaves significant enforcement related decision making and power in the hands of the FIAU,” he wrote in a reaction posted to LinkedIn.

“The core point appears to be this,” he continued. “The lower courts had nullified FIAU penalties on the basis of the notion that big enough monetary fines are effectively criminal penalties, and under the Maltese constitution only a court is empowered to validly impose criminal penalties.

“FIAU is not a court, and hence FIAU penalties were deemed invalid.

“The Constitutional Court however finds that the fact that an appeal from FIAU decisions is available before the Civil Court is sufficient and the FIAU process is therefore not unconstitutional.”

The case in question related to an initial ruling by the First Hall of the Civil Court dating back to 30th March 2023, which reinstating a €454,293 fine imposed on Phoenix Payments Ltd by the FIAU for breaches related to money laundering.

The State Advocate’s appeal argued that the FIAU operates with experts in specialised legal and financial fields and ensures separation between investigators and decision-makers to maintain procedural fairness – reasoning that contributed to the court’s reversal of the prior judgment.