“Cash in itself is not a method of laundering the proceeds of crime, nor is it an illegal commodity; rather it is an entirely legal facilitator which enables criminals to inject illegal proceeds into the legal economy with far fewer risks of detection than other systems.” – Europol.
Over the past few decades, there has been a pronounced global shift towards electronic payment systems. However, to date, the use of cash remains dominant. This is reflected in the continuous growth of the value of euro banknotes in circulation during the ten-year period between January 2008 and December 2017, throughout which, there was an average annual growth rate of 6.1% (ECB Economic Bulletin, Issue 6.2018). The financial crime risks relative to the pervasive use of cash, particularly for substantial or related transactions, emanate from the anonymous and traceless nature of cash transactions. Earlier this year, Malta introduced restrictions on the use of cash as part of its strategy to combat financial crime.
The Use of Cash (Restriction) Regulations (“the Regulations”, Subsidiary Legislation. 373.04) entered into force on the 9th March 2021 as Legal Notice 81 of 2021. The Regulations explicitly state their objective to be the introduction of “a restriction on the use of cash for certain payments and transactions, with a view to combating money laundering and other criminal activity.”
The Regulations prohibit any person from making or receiving payment or otherwise carrying out transactions in cash amounting to or exceeding €10,000 or its equivalent in any other currency, whether in one transaction or in several linked transactions, in respect of the purchase or sale of: (a) antiques; (b) immovable property; (c) jewellery, precious metals, precious stones and pearls; (d) motor-vehicles; (e) sea-craft; and (f) works of art.
Notably, the restrictions on cash transactions in the above-listed instances are not limited to a single transaction amounting to €10,000 but are also applicable to “linked transactions” which cumulatively amount to the said amount. According to the FAQs on the Use of Cash (Restriction) Regulations, published by the FIAU on the 3rd of August, 2021, “linked transactions” consist of two or more transactions which (i) are performed by the same individual(s), (ii) have a similar purpose, and (iii) are carried out within a six-month period. Indeed, this follows the definition of “linked transactions” included in the same Regulations.
The Regulations thus limit the use of cash in relation to the transactions referred to above, to €9,999.99. As well as, any such payment or transaction amounting to or exceeding, the amount of €10,000 may only be carried out through alternatives to the traditional use of cash.
A breach of the above-mentioned cash transaction limit constitutes an offence which renders the offender liable, upon conviction by the Court of Magistrates in its criminal jurisdiction, to a fine (multa) of not less than 40% of the sum paid, received, or otherwise transacted in cash in excess of €9,999.99, or its equivalent in any other currency.
The Regulations also provide for an alternative to criminal proceedings in the event of a breach. Thus, a person who violates the cash transaction limit may seek the route of an administrative settlement under very specific circumstances set out in the Regulations themselves. An administrative settlement requires the consent of the Attorney General and must be entered into by the offender prior to being charged in court. This entails an agreement to pay the administrative penalty as per the Regulations, which establish that where the sum transacted in cash amounts to not more than €50,000, the administrative penalty shall be 10% of the sum transacted in cash in excess of €9.999.99; meanwhile, where the transaction exceeds €50,000, the administrative penalty goes up to 25% of the sum transacted in cash in excess of €9.999.99. No administrative settlement may be reached with regards to cash transactions exceeding €100,000. The possibility of an administrative settlement is also barred at law in the cases where the person had committed an offence against the Regulations within the previous three years, whether such offence had resulted in a conviction or an administrative settlement.
It is pertinent to note that a breach of the restrictions established under the Regulations has no bearing on the legal validity of such payment or transaction, or on the contractual obligation in respect of which the payment or transaction was carried out. The Regulations expressly stipulate that notwithstanding such breach, all parties to the payment or transaction shall be bound by their contractual obligations.
The rules referred to above, as established in the Regulations, effectively introduce a new aspect in the AML/CFT regime which provides for a higher level of traceability of high value transactions by eliminating the possibility of the use of cash for transactions amounting to, or exceeding €10,000. This innovation in Maltese law is geared towards mitigating the inherent risks related to the use of cash and is thus another brick in the ever-expanding figurative wall intended to counter the risks of money laundering within the jurisdiction.
This article is not intended to constitute legal advice and neither does it exhaust all relevant aspects of the topic.