The notary as a subject person : where is the line drawn?

Abstract

Money Laundering started to gain ground when there was a public concern over organised crime and so governments thought it would be best to trace money and the movement of it in order to detect any suspicious activity. In essence, money laundering is best described as the process through which the illegal nature of criminal proceeds are concealed to give a legitimate and legal appearance. Traditionally, money laundering involves a three-stage process which include placement, layering and integration. Placement is considered to be the first stage of the money laundering process where money is derived from predicate offences. The latter is where an illegal activity takes place from which funds are also derived, for instance, drug trafficking. Drug trafficking is the predicate offence and the money derived therefrom is considered to be the laundered money. This stage is where subject persons have the best chance to identify such funds as being derived from illicit sources. The layering is said to be the most complex stage of the process. Its aim is to make it more difficult for subject persons and enforcement authorities to detect and uncover a money laundering activity by concealing the true origin of the funds. The process through which money is laundered may not be from an illegal activity such as the sale of movable or immovable property which were initially acquired through laundered funds. The last stage is that of integration and this is where the laundered money is integrated with the patrimony of the culprit in a manner that does not raise any red flags with subject persons. There are various ways in which integration could happen, for instance, refund from a life insurance policy which is directly debited to the personal bank account. This three-stage system, although it is widely used, is starting to be cast away due to the increase in monitoring and investigative techniques of Company Service Providers. In fact, throughout the years a shift has been seen as to how money launderers carry out their operations, as the banking sector was being thoroughly regulated, such criminals focused their operations on non-bank financial sectors amongst which is notaries. The notary may be used as a vehicle by criminals to facilitate their illicit acts; to this end, notaries have been placed at the pivot of these pre-emptive measures. In terms of the Prevention of Money Laundering and Funding of Terrorism Regulations (S.L 373.01) hereinafter referred to as the PMLFTR- , anyone who carries out financial activity is subject to anti-money laundering obligations. It is for this reason notaries, as subject persons, have the responsibility of scrutinizing their clients. Due to this, notaries find themselves at a crossroads, between professional secrecy and a position of trust and the legal obligations of Anti Money Laundering - AML. The research question focuses on the obligations of the notary as subject persons. Regulators in Malta dramatically stepped up in their enforcement of AML law and this effort was brought to light with the recent fines being imposed on subject persons. The interest in this research question stemmed from a recent seminar provided by a compliance advisory company where it was observed that notaries are rather lost when it comes to assessing the risk a customer poses. Through a qualitative and a black-letter law approach, the obligations of the notary will be analysed along with the lengths such a professional is expected to go to ensure that their services are not being used for money laundering purposes.