Curbing Money Laundering Activities: Limit of €10,000 on Cash Transactions and other Valuables.

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In an effort to combat the ever‐growing need to regulate cash transactions for money‐laundering purposes, the government, in October 2019, announced a policy decision by which cash payments for certain high‐value goods were restricted. Subsidiary legislation 373.04 was published on the 9th of March 2021 as Legal Notice 81 of 2021, coming into effect on the same day of its’ publication. These regulations are the Use of Cash (Restriction) Regulations (“the Regulations”).

Through these regulations, it is now a criminal offence to carry out transactions of €10,000 or more in cash, in a single transaction or several linked transactions, when it comes to the sale of antiques, immovable property, jewellery/precious metals/precious stones/pearls, motor vehicles, sea‐craft, or works of art 1. The restriction also applies to transactions made in other currencies, as long as the amount paid in that currency is equivalent to €10,000 or more.

Which cash transactions are restricted?

‘Cash’ is defined as “legal tender currency notes and coins2. Thus, these Regulations effectively exclude from their scope, and do not restrict;

  1. transactions of any amount that involve other forms of payment such as cheques, card payments or bank transfers,
  2. cash payments below the value of €10,000,
  3. or, transactions of any amount involving goods other than those mentioned above 3.

It is also good to note that these regulations only apply to a buyer/seller relationship in a transaction of sale, and thus, do not apply to the depositing or withdrawal of cash from banks. The latter are regulated by other laws, such as the on‐going monitoring obligations under the Prevention of Money Laundering and Funding of Terrorism Regulations.

These Regulations therefore apply to all buyers and sellers who are transacting in cash, including non‐commercial transactions between private individuals, such as selling your personal used vehicle on a social media website. In addition, these Regulations also restrict a transaction involving multiple items purchased in a single transaction, which when valued individually do not exceed €10,000, but exceed said amount when valued collectively.

What happens if these Regulations are breached?

If a sale falling under these Regulations is to occur in cash, persons failing to comply with such regulations will suffer a fine of not less than 40% of the sum transacted, if it was in excess of €9,999.99 4. This penalty applies to both the purchaser and the seller.

In addition to this fine, the FIAU has the power to recommend to any relevant authority responsible for the licensing, registration or regulation of the trader concerned, to take any further action within its power.

When it comes to directors, managers, or officers exercising executive functions in a company or a body of persons, they may be held liable in solidum with the company,
undertaking or body of persons.

It is good to point out that transactions deemed to be in contravention with this Regulation, are still considered valid, therefore, the legal validity of the payment or transaction is not impacted, and the contractual obligations between the parties are still binding 5.

Settlement through an administrative penalty

It is possible for one to settle the matter through the payment of an administrative penalty, instead of going to court. However, the administrative penalty can only be resorted to when there has been the conclusion of a settlement agreement between the parties concerned, prior to being charged in court, with the Attorney General’s consent 6. This administrative settlement is prohibited when;

  1. The sum of the payment transacted in cash exceeds €100,000,
  2. When the person has already been found guilty of an offence under these Regulations, unless three years had passed from the judgment date, and
  3. When the person had already benefitted from an administrative settlement, unless three years had passed from the date of the settlement agreement.

In cases where an administrative settlement is offered, the administrative penalty to be paid depends on the sum transacted in cash. If the sum does not amount to more than €50,000, the administrative penalty shall be 10% of the sum transacted in excess of €9,999.99, but shall not be less than €1,000. If the sum paid in cash is of a value more than €50,000 but less than €100,000, the administrative penalty to be paid is 25% of the sum transacted in excess of €9,999.99.

The Notary’s Obligations

When it comes to transactions involving immovable property amounting to €10,000 or more, Article 7 of this Regulation provides for the required information which the notary drawing up the deed is now obligated to collect, namely:

  1. The buyer and the seller’s name and address,
  2. The type of and number of their official identification document,
  3. Where applicable, the name, address, and number of the official identification document issued by a government authority of the person or persons acting as agents of the buyer and seller,
  4. Where payment is made in whole or in part through the transfer of funds from a payment account, the payment account’s IBAN is required,
  5. Where payment is made in whole or in part by means of a credit or other payment card, the card number and the issuing institution are also required,
  6. Where payment is made in whole or in part by means of cheque, bank draft or similar instrument, the number of such cheque, bank draft or similar instrument and the name of the credit or financial institution on which it is drawn must be collected,
  7. Where payment is made in whole or in part through other methods or means, including payments in kind, the methods or means of payment and the exact amount so paid must be shown. 7

The notary who receives this information must keep it in a dedicated register, and the non‐retention of such information shall be deemed to constitute a breach of the provisions of article 12(l) of the Notarial Profession and Notarial Archives Act.

This information must be kept by the notary for a period of five years from the conclusion of the transaction, during which it must be made readily available to the FIAU if any request for such documents is made 8. When it comes to linked transactions, the five years start to run from the conclusion of the last transaction.

Linked Transactions

‘Linked transactions’ are two or more transactions that are performed by the same parties, have a similar or linked purpose, and are carried out within a six‐month period.

To better clarify and to provide more concrete guidance as to what amounts to a linked transaction, the FIAU has provided the public with a number of scenarios on their website. 9

In fact, in its FAQs it noted that several items purchased in a single transaction are considered to be a linked transaction. Therefore, if Trader “A” is an antique dealer who collects Melitensia items and said trader accedes to the seller’s request to pay in cash, he would be breaching the Regulations if said items collectively exceed €9,999.99. Such breach persists even if said items individually fall below the €9,999.99 threshold.

Moreover, any of the goods listed under Regulation 3(1) purchased within the 6‐month timeframe from the same seller and are for the same purpose are also considered to be linked. Furthermore, if such linked transaction exceeds the €9,999.99 threshold then such payment would be in breach of the Regulations being discussed.

Several cash payments in respect to a single good is also perceived as a linked transaction if such cash payments involve the same parties and are made within the six month window. This also applies if such cash payments consist of a deposit or relate to bills of exchange.

For a transaction to be linked, the parties must remain the same, meaning that goods sold originate from the same seller and the goods are bought by the same purchaser.

Therefore, purchases made by different family members are still not considered to be linked as they consist of different individuals.

However, when it comes to linked transactions, some buyers may try to circumvent the law by carrying out a transaction on behalf of someone else with the aim of preventing the detection of linked transactions. When the trader is aware that such methods are being used by the person making the payment in order to circumvent the law, the trader must consider such a transaction as linked, as otherwise, the trader would also be in breach of the Regulations. One such example would be when Purchaser ‘A’ buys a vehicle from Trader ‘B’ and a few months later Purchaser ‘C’
buys another vehicle from the same Trader ‘B’ but does not register it under his name but under Purchaser ‘A’. Since Purchaser ‘C’ is buying the vehicle on behalf of Purchase ‘A’, these two transactions are considered to be linked.

It is good to note that the The Use of Cash (Restriction) Regulations do not have a retroactive effect, and thus only apply to those transactions carried out from the 9th of March 2021, onwards. Therefore, if for example, €9000 were paid in cash to buy jewellery before the coming into force of this Regulation and a further €5000 were paid in cash with respect to the same purchase after 9th March 2021 i.e. after the coming into force of this Regulation, do not constitute a breach as these transactions are not linked for the purposes of these Regulations, even if they appear to be ‘linked transactions’.

False Declarations or False or Incomplete Documentations

The Use of Cash (Restriction) Regulations, also provide for consequences if a person is found to have made a false declaration or representation, or produced false or incomplete documentation. Such an individual would be guilty of an offence, as per Article 8 of these Regulations, and would be liable to a fine of not more than €25,000.

The Role of the Financial Intelligence Analysis Unit – the ‘FIAU’

The FIAU is the entity responsible for the monitoring of transactions in order to ensure compliance with the Use of Cash (Restriction) Regulations 10. In performing its obligations, the FIAU may require any trader or notary to provide it with the documents required for monitoring compliance. It may also carry out on‐site examinations on any notary or trader subject to these regulations in order to ensure adherence with these provisions.

The FIAU may cooperate with other governmental departments including the Police, the Attorney General, and the Commissioner for Revenue. Article 12 of these Regulations also provides for certain binding procedures which may be issued by the FIAU. In fact, the Unit may issue procedures and instructions, including templates, for the carrying into effect of these regulations, which shall be binding on all traders and notaries subject to these regulations. Traders or notaries who fail to abide by these procedures issued by the FIAU, will be liable to an administrative penalty of not more than €5,000. However, the FIAU may instead choose to issue a warning in writing 11.

1 The Use of Cash (Restriction) Regulations, 2021, Article 3(1).
2 The Use of Cash (Restriction) Regulations, 2021, Article 2(2).
3 The Use of Cash (Restriction) Regulations, 2021, Article 3(1).
4 The Use of Cash (Restriction) Regulations, 2021, Article 3(2)
5 The Use of Cash (Restriction) Regulations, 2021, Article 6.
6 The Use of Cash (Restriction) Regulations, 2021, Article 5.
7 The Use of Cash (Restriction) Regulations, 2021, Article 7.
8 The Use of Cash (Restriction) Regulations, 2021, Article 9.
9 ‘Introducing the Use of Cash (Restriction) Regulations’ accessed on on 30th August 2021
10 The Use of Cash (Restriction) Regulations, 2021, Article 10.
11 The Use of Cash (Restriction) Regulations, 2021, Article 12.