A critical analysis of relevant activity in notarial services

Abstract

In light of increasing money laundering practices, an influx of laws and regulations have been introduced in order for subject persons carrying out relevant activities to identify customers, carry out thorough background checks and report any suspicious activities. The Prevention of Money Laundering and Funding of Terrorism Regulations (hereinafter referred to as “the PMLFTR”) provides that any ‘bona fide communication or disclosure made by a...subject person...shall not be treated as a breach of the duty of professional secrecy or any other restriction [whether imposed by statute or otherwise] upon the disclosure of information’ . Without further ado, in order to understand the scope of this paper, it is imperative to understand what constitutes and who carries out relevant activities. Subject persons are legal or natural persons who by way of their profession exercise certain services, which are considered as relevant activities. Legislators have, amongst other ways to combat money laundering, introduced legal and natural persons by which through their profession act as front liners, by assessing, observing and reporting suspicious activity. The PMLFTR has defined notaries as subject persons, however, only categorised a number of services as relevant activities. This created stringent anti-money laundering and counter financing of terrorism (hereinafter referred to as “AML/CFT”) obligations and regulations on the one side, and a complete or partial absence of, on the rest of the services, leaving it all up to the notaries’ discretion.

Does this automatically rule out the services which do not fall under the definition of relevant activity? Where do money laundering obligations actually start and ideally stop? This paper shall primarily go through what is considered as a relevant activity, move on to the AML/CFT measures that are required to combat the illicit origins of ill-gotten gains, and lastly delve into services exercised by the notary public, which although are not considered as relevant activities, in the author’s opinion should definitely be considered as such. Notaries are not only left in the dark as whether to conduct AML/CFT measures or not, but are also left with a lot of grey areas as to what measures are to be adopted. Carrying out AML obligations should never be a consideration but an obligation, especially if its lack thereof would be perceived as negligence rather than misinformed conduct. Relevant Activity is defined as “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 the: i. buying and selling of real property or business entities; ii. managing of client money, securities or other assets, unless the activity is undertaken under a licence issued under the provisions of the Investment Services Act; iii. opening or management of bank, savings or securities accounts; iv. organisation of contributions necessary for the creation, operation or management of companies; v. creation, operation or management of companies, trusts, foundations or similar structures, or when acting as a trust or company service provider”. The Financial Intelligence and Analysis Unit (hereinafter referred to as “the FIAU”), a government agency established under the Prevention of Money Laundering Act, Chapter 373 of the Laws of Malta, and the Notarial Council, issued an interpretative note which highlights which notarial deeds and acts fall under the above mentioned services, and hence require AML/CFT measures to be carried out. The FIAU also identified certain services, which although not considered as relevant activities, are still high risk matters and constitute common money laundering typologies, and notaries should nonetheless be “vigilant and consider applying appropriate measures” . However, the question still remains as to what is considered as appropriate measures, and whether leaving it open to notaries’ to decide whether or not AML/CFT measures should still be conducted is in fact a margin of safety for money launderers.