Suspicious Transaction Reports

15 March 2019

A suspicious transaction report (STR) is required to be filed; when there is knowledge or suspicion that funds, regardless of the amount involved, are the proceeds of criminal activity or are related to funding of terrorism, or that a person may have been, is or may be connected with money laundering or the funding of terrorism.

Background

During 2017, Maltese accounting professionals and auditors submitted two Suspicious Transaction Reports (“STRs”) each to the Financial Intelligence Analysis Unit (“FIAU”) in Malta, amounting to 0.5% of the total number (778) of STRs filed that year[1]. At a Malta Institute of Accountant’s conference held in February 2018, during a panel discussion with the participation of a senior analyst from the FIAU, an Inspector from the Police Force and a number of professionals from the financial services industry, the overall feel was that this was not sufficient. What are these reports? Who can submit them? And, why are they important?

The private sector plays an important role in the global fight against money laundering and terrorist financing. Key stakeholders in the private sector are deemed to be gatekeepers to the legal economy and the financial system, and are seen as best-placed to deter and detect criminal financial flows. Consequently, they are placed at the forefront in the reporting chain.

 

What is an STR?

A suspicious transaction report (STR) is required to be filed when; there is knowledge or suspicion that funds, regardless of the amount involved, are the proceeds of criminal activity or are related to funding of terrorism, or that a person may have been, is or may be connected with money laundering or the funding of terrorism[2]

The impetus to this report is, therefore, the person (as described hereunder) who in the first instance became aware of facts, documents, information which lead to the knowledge or even suspicion that there are proceeds of illicit activity involved. The duty to report arises even where the person has reasonable grounds to suspect such instances. By way of example, if a client has paid dividends based on draft accounts and subsequent adjustments reduce distributable reserves to the extent that the dividend is now illegal: the obligation to report arises where there is suspicion that the client was fraudulent (which is a criminal act); on the other hand, if there is no such suspicion and such payment does not give rise to any other criminal activity, there is no duty to report.

This article first appeared in the Winter 2019 issue of the Malta Institute of Accountant's journal 'The Accountant'.

 

[1] FIAU: Annual Report 2017;

[2] Regulation 15 of the Regulations;