Issue link: https://maltatoday.uberflip.com/i/846769
maltatoday, SUNDAY, 9 JULY 2017 17 News MATTHEW VELLA MALTESE banks have been tight- lipped over the extra expenses they will incur to perform addi- tional due diligence checks on po- litically exposed persons and their relatives, as part of the fourth An- ti-Money Laundering Directive. Hundreds of people across the Maltese islands are likely to be af- fected under tighter rules to fight money laundering, as the defini- tion of a politically exposed per- son (PEP) will now include not just people with political func- tions, but also their spouses and close associates and relatives. Under the new Europe-wide rules, not just PEPs but also family members and business associates, will come under closer scrutiny by banks and financial services pro- viders: opening a bank account will now be subject to enhanced due diligence measures. Not only politicians, or party executives and directors of gov- ernment entities will be subject to enhanced due diligence, but also their family members, such as spouses and partners, children, the PEP's parents, as well as 'close associates' who have business re- lations or joint ownership of com- panies. This will mean that institutions such as banks or insurance com- panies will have to obtain senior management approval to even establish a business relationship with such persons. One study by Consult Hyperion claims that an average bank in the United Kingdom will "waste" £5 million (€5.6 million) each year in manual know your customer (KYC) checks, which might rise to over €11 million in three years. Malta's banks have however been unwilling to put a price tag on these due diligence checks. Bank of Valletta said that its anti-money laundering policies and procedures are constantly evolving in line with regulatory requirements and market devel- opments. "Both the 4th and the forthcoming 5th AML Directive feature prominently in the bank's rule book. While we are not in a position to disclose figures, we can confirm that the costs of implementing the directives are substantial in terms of human resources, IT and operational changes." HSBC Bank Malta said it wel- comed the directives. "They fur- ther support our commitment to operate to the highest global standards of financial crime com- pliance. We believe the effective implementation of this important directive will be beneficial for Malta's financial system." But the bank refused to disclose any quantification of costs. APS Bank's money laundering reporting officer Dr Mark Sam- mut said the bank was still in the process of quantifying the costs to align with the 4AMLD. "Such costs should become clearer once the Directive is transposed into local law and the local Prevention of Money Laundering Regulations are amended accordingly." Both 4AMLD and the antici- pated fifth directive will increase the required frequency of these essential checks performed by banks and other financial institu- tions on PEPs and their relatives. This means that aside from the financial cost of meeting the requirements of 4AMLD and 5AMLD, there is a potentially much greater cost to banks due to the friction that enhanced due diligence might create when han- dling clients. When such process- es become cumbersome, clients may opt to leave. With some domestic banks al- ready adopting a cautious ap- proach and even putting PEPs' siblings under enhanced due dili- gence rules, as per FATF stand- ards, anything up to 2,000 people could theoretically be expected to fall under this new level of scru- tiny. The number could be even greater if banks adopt a strict ap- proach with people whose job in government was granted to them on a 'person of trust' basis – even though such placements include low-grade employees on security or cleaning duties. Under such procedures, entities like banks will have to make sure they can establish the source of wealth and funds that PEPs and their associates have, and then apply ongoing monitoring of the business relationship. Entities will also have to take reasonable measures to deter- mine whether the beneficiaries of a life insurance or investment policy are PEPs, and inform senior management before the pay-out of any policy proceeds, and carry out enhanced scrutiny of the re- lationship. Even after a PEP is no longer entrusted with a public function, banks will still have to continue applying their enhanced due dili- gence for the next 12 months at minimum, until that person can be considered to be no longer a 'PEP risk'. The same will apply to family members and people close to the PEP. Effectively, this tightens due diligence rules for PEPs entrusted with prominent public functions domestically, as well as those who work for international organisa- tions. Banks mum over millions in costs from stronger due diligence checks All banks will have to perform enhanced due diligence on politically exposed persons as well as stricter know-your-customer checks on PEP relatives and associates Tonio Fenech rips into PN: lack of free vote on gay marriage 'North Korea style' TIM DIACONO FORMER Nationalist finance minister Tonio Fenech has ripped into the PN and the Labour Party for failing to grant their MPs a free vote on the proposed Marriage Equal- ity Bill that will introduce gay marriage. Writing on Facebook, Fene- ch said that that if the two par- ties are "scared" to grant their MPs a free vote on Wednes- day, then it would truly mean that Malta "has become like North Korea, that punishes objectors, and not a true Eu- ropean country". "In this country, you can in- sult the Archbishop and ridi- cule pictures of Jesus all you like, but you aren't allowed to disagree with the destruction of the concept of marriage as we know it," he said, add- ing that both Labour and PN are supporting this Bill out of political convenience and not ideological conviction. Fenech said that the fact that the PN has proposed 80 amendments to the govern- ment's Bill proves that the Marriage Equality Bill wasn't the same law that the party had wanted to implement when it had included gay mar- riage in its electoral manifesto without discussion amongst the parliamentary group. "The argument that the PN can't grant their MPs a con- science vote [because gay marriage was in their mani- festo] therefore falls flat," he said. He questioned how the PN can continue call itself a party based on values when it ig- nored an objection to the Bill raised by one of its own MPs, a reference to Edwin Vassallo who voted against the Bill at its second reading this week. Tonio Fenech: former MP says dissenters being punished