Indicators of Tax-Related ML

Two of the three action points identified relate to tax crime. While ‘local’ tax evasion is a pressing issue, the FATF is however highly interested in cross-border criminal activity, such as tax crime, attributable to Malta as an international financial services centre.

On 30^th November  2021, the FIAU issued a fact sheet which details the money laundering typologies and red flags relating to tax crime. The document explains a series of techniques used to launder monies as well as pointers that indicate that money laundering and/or funding of terrorism may be occurring. Whilst the existence of a red flag does not necessary mean that money laundering is taking place, this should be used by subject persons to raise further questions and intensify the level of due diligence. The document also includes a number of case studies, based on real cases, which were investigated by the FIAU.

The red flags and typologies are grouped into the following 5 classifications: 

1. Customer’s Identification
2. Customer Interaction & Behaviour
3. Information Entity Structure & Governance
4. Source of Wealth & Source of Funds
5. Unusual or Suspicious Transactions

The role of subject persons in the fight against money laundering and the reporting of tax evasion is crucial especially in the light of Malta’s grey listing. Subject persons should have adequate systems, tools and procedures to monitor, detect and report instances of suspected or known ML/FT.