New FIAU Guidance on Red Flags in Financial and Non-Financial Information

The guidance is based on the FIAU’s analysis of submitted suspicious transaction reports. It outlines common red flags that may emerge in both financial statements and broader corporate documentation. These indicators are not exhaustive, nor do they constitute evidence of criminal activity in isolation — they are intended to support a contextual and risk-based approach to reporting. 

When submitting suspicious reports informed by this guidance, subject persons are encouraged to quote the reference code SA25-01.  

Common Red Flags Identified in the Guidance  

The document sets out examples of anomalies or patterns that may warrant further scrutiny:  

• Revenue anomalies: Sudden surges or declines without a clear business rationale, high ratios of cash sales compared to sector averages, or inconsistent sales demographics.  
• Purchases and inventory: Inflated stock levels, fictitious purchases, or unusual supplier activity that lacks documentation or economic justification.  
• Payroll indicators: Disproportionate staffing levels, unusually high or low wage costs, and payments to individuals with no discernible role or located in high-risk jurisdictions.  
• Consultancy and Professional Services: Payments for vague services lacking transparency or economic rationale or payments made to companies with no visible operations or online presence. 
• Marketing and advertising: Large budgets spent on promotions with little visibility or commercial output 
• Loan and Interest Payments: Loans from related parties with non-commercial terms or transactions between related parties without documentation or valid purpose 
• Rent and Leasing Arrangements: Property rentals involving rates outside market expectations 
• Sustained low profitability: Businesses operating at a loss for extended periods without clear justification, particularly if operations are expanding during that time.  

The document also draws attention to balance sheet items that can be manipulated to conceal the flow of illicit funds:  

• Shareholder loans and related party balances that lack transparency  
• Unusual accounts receivable or payable transactions  
• Suspicious valuations of assets, both tangible and intangible  
• Unexplained cash balances or investments in high-risk instruments  
• Irregular equity movements or capital injections from unknown sources  

Non-Financial Indicators  

In addition to financial statement reviews, the guidance encourages subject persons to examine corporate records for further context. These include:  

• Objects clauses: Business activity that falls outside the stated purpose in the company’s Memorandum and Articles of Association.  
• Lack of sector experience: Directors or shareholders with no clear link to the industry in which the company operates.  
• Rapid business scale-up: Newly incorporated entities generating disproportionate revenue volumes soon after formation.  
• Changes in ownership: Frequent or opaque changes in shareholders or beneficial owners.  
• Audit concerns: Qualified, adverse or disclaimed audit opinions or sudden changes in auditors may point to deeper issues worth investigating. 

This guidance is intended to assist subject persons in applying a more targeted approach to identifying suspicious behaviour. It does not replace existing obligations under AML/CFT legislation and should be used alongside applicable laws and regulatory documents. 

How BDO Malta Can Help 

Our AML advisory team supports subject persons in strengthening their due diligence frameworks and interpreting financial and non-financial indicators in line with regulatory expectations. If you require assistance in assessing red flags or aligning your internal procedures with the latest FIAU guidance, get in touch with BDO Malta’s AML and Compliance specialists. 


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