Cap on cash transactions leads fight against money laundering
June 13, 2021 5 min read
Malta has recently introduced a cap of €10,000 on cash transactions for the sale of property and valuable items. Introduced into law last March, this cap is new to Malta – as previously, any amount of cash could exchange hands, a practice favoured by criminals looking to conceal the source of their gains. While the law applies to everyone, it is not aimed at being punitive towards law-abiding citizens, but rather to try to control those who want to launder illegally earned cash or undeclared cash from tax evasion through high value purchases.
This cap which arose from a government policy discussed in parliament in 2019, will be enforced by a dedicated team from the FIAU.
How does the €10k cap on cash transactions help combat money laundering?
A common way of laundering money is through the purchase of luxury and high value goods in cash. This is because unlike cheques or bank transfers cash is not traceable. Whether cash derives from the proceeds of drug trafficking, fraud, robberies, corruption, extortion or undeclared profits, it can easily be laundered and enjoyed through the purchase of luxury or high value goods.
The cash restriction is therefore aimed at reducing the risk of money laundering and tax evasion through this method.
What role did MONEYVAL play in the introduction of this regulation?
In its 2019 Mutual Evaluation Report, MONEYVAL noted that Malta has a significant shadow economy with cash being widely use. The report stated clearly that the size of the shadow economy in Malta, which is exacerbated by the widespread use of cash and tax offences, puts Malta and its economy at a high risk for money laundering.
One of the recommendations made in this regard was for Malta to consider introducing measures to counter this risk. Thus, the MONEYVAL assessment played a significant part in the introduction of the cash restrictions, furthermore, the EU is currently discussing that this use of cash restriction, be introduced across the member countries in a uniform manner.
What does the €10k limit apply to?
Actually, the limit is of €9,999.99 since the restriction applies from €10,000 upwards. This applies to any payment in cash made or received for the purchase or sale of the following items:
Antiques (a work of art or an object of antiquarian importance which is at least 100 years old)
Works of art (includes paintings, drawings, etchings, decorative plaques, engravings, lithographs or other prints, sculptures and ceramics, tapestries, photographs signed by the photographer, including limited edition prints made from the exposure)
Jewellery (made in whole or in part, or plated with gold, silver, platinum or other precious metals and, or, set with diamonds, precious stones or pearls, and wrist watches)
Precious stones (including diamonds, sapphire, ruby and emerald)
Motor vehicles, including previously owned
Sea craft, including previously owned
The restriction applies to both sides of the transaction, therefore, both buyer and seller are held responsible for the transaction and covers not only payments in euro but also payments of the equivalent amount in any other currency, and irrespective whether made in one transaction or in several linked transactions.
What are the penalties for breaching the cap on cash transactions?
Anyone who breaches the restriction commits a criminal offence and if found guilty by a court will be liable to a fine of not less than 40 per cent of the amount paid or received in cash, in excess of €9,999.99.
An agreement on administrative settlement cannot be entered into where the cash payment exceeds €100,000 or where the person had already been found guilty of breaching the regulation or had already entered into an administrative settlement in the past, unless three years have elapsed from the date of the judgement or previous settlement agreement.
How will this law be enforced?
The monitoring of compliance with the regulations has been entrusted to the FIAU. The FIAU is currently setting up a new section with a team of officers specifically for this purpose. The regulations empower the FIAU to require any trader or notary subject to the regulations to provide it with information or documentation as may be required to monitor compliance and to answer any questions as the FIAU may reasonably require. The FIAU has been given the power to carry out on-site examinations on any trader and notary subject to these regulations, with the aim of monitoring compliance and ensuring adherence to the regulations.
The regulations also provide that the FIAU may request the assistance and can cooperate and exchange information with other national authorities and government departments as necessary, including the Police, Attorney General, and Commissioner for Revenue, for the purpose of monitoring and ensuring compliance with the regulations, and in any investigation or prosecution of any person who has breached the regulations.
So in what manner can transactions of over €10k be made?
Payments and other transactions of €10,000 or more can be made by means of any other legitimate means of payment such as by cheque, bankers draft, electronic transfer, and credit cards.
Does this limit on cash payments exist in other EU member states?
Yes, most EU member states have a limit on cash payments. This ranges from as high as €15,000 in Croatia to as low as €500 in Greece. Belgium and Lithuania have a cash transaction limit of €3,000, while France and Portugal have a limit of €1,000. The European Commission is also considering proposing a restriction on payments in cash, with the limit being set very close to the Maltese one.