Trends in Filing of Suspicious Reports
December 2, 2024
As we begin to prepare to draw 2024 to a close and look at ways to empower businesses in the fight against money laundering and the financing of terrorism in the coming year, we found it was a good time to revisit the Financial Intelligence Analysis Unit (FIAU) annual report. This document provides a snapshot of Malta’s anti-money laundering (AML) efforts, as well as a direction for the island’s future endeavours in this field.
The 2023 edition of this report, which came out earlier this year, is of especially high quality, and plays an important role in safeguarding the country’s economic well-being. Our review, however, focuses on one particular aspect of this report: the trend of suspicious reports being filed with the AML regulator.
Over the past years, I have attended a number of seminars and other training events. I clearly recall that when senior executives from the FIAU were present, they have always indicated that the number of reports filed was low and much below their expectations. This empirical argument seems now to be supported with the benchmarking done against other jurisdictions.
The filing of a suspicious report stems from Regulation 15(3) of the Prevention of Money Laundering and Funding of Terrorism Regulations. Over the years, we have seen a sharp increase in the number of Suspicious Transaction Reports, known in the industry as ‘STRs’.
The FIAU reports that the number of STRs filed between 2019 and 2023 has steadily increased, from 2813 in 2019 to now 9157 in 2023. 2020 saw an increase to 5207, while in 2021 that number rose to 7323, and 8740 in 2022. This means that between 2019 and 2020 there was an 85.10% increase in STRs, which dropped in percentage points to 40.64% in 2021, to 19.35% in 2022 and to 4.77% in 2023.
Thus, while there has been a growing trend in reports being submitted, it is also evident that the rate of the year-to-year increase is in steep decline. Over a four-year period, the number of reports increased by 325% while the figures for 2023 are only showing a small increase of less than 5% when compared to the previous twelve months.
The number of reports is only part of the story, however, since the reports for 2023 were ‘in relation to over 16,000 natural persons and more than 5,000 legal persons (FIAU Annual Report 2023, page 49).
Reporting by sector
The annual report also gives us a breakdown of the sectors from where the reports are originating, which provides a very interesting picture of the changing risk trends in Malta’s financial sector. Whereas, say, ten years ago, reports from Banks were dominant and even, at times, amounted to more than 50% of total reports, we are now witnessing a much lower contribution from the banking system. On the other hand, we are seeing emerging sectors playing a more significant role in the annual STRs statistics. The Remote Gaming sector, which has been added as a Subject Person only some years back, is by far the leader now. For the year 2023, this sector filed nearly 46% of total reports.
A quick look at the statistics identifies of what is being called a ‘core group’ of four main contributors: Remote Gaming, Virtual Financial Assets (VFA), Credit Institutions (Banks), and Financial Institutions – electronic money.
The number of Remote Gaming STRs increased from 1445 in 2019 to 2485 in 2020, 4822 in 2021, 5049 in 2022, and 4205 in 2023. For VFA, the number rose from just 8 STRs in 2019 to 61 in 2020, 411 in 2021, 965 in 2022 and finally 1476 in 2023. Credit Institutions reported 962 STRs in 2019, a number that increased to 1975 in 2020, lowering to 873 in 2021 before rising again to 942 in 2022 and to 1308 in 2023. Financial Institutions (electronic money) reported 22 STRs in 2019, 115 in 2020, 191 in 2021, 565 in 2022 and 1042 in 2023.
This means that the total for this “core group” rose from 2437 in 2019, to 4636 in 2020, 6297 in 2021, 7521 in 2022 and 8031 in 2023. The total number of STRs filed, however, was reported to be 2813 in 2019, 5207 in 2020, 7323 in 2021, 8740 in 2022 and 9157 in 2023. Which means that the total STRs for the “core group” as a percentage of STRs filed has risen from 86.63% in 2019 to 89.03% in 2020, lowering to 86% in 2021, before rising again to 86.05% in 2022 and finally to 87.7% in 2023.
There is a clear trend of two new emerging sectors, VFA (Virtual Financial Assets) and Financial Institutions -Electronic Money, which are now featuring quite high in the list. In fact, for 2023, the combined total for these two sectors is nearly twice as much than for the Banking sector.
It is therefore fair to conclude that the lower contributions from Banks are the result of de-risking activities in this sector, and also the consequence of a much more robust onboarding and ongoing monitoring approach being applied. Meanwhile, other emerging risk sectors are being identified and this is undoubtedly creating new challenges to both the first line of defence and also to regulators and competent authorities.
A combined effort
Going into 2025, I am confident that all players in the market are truly conscious of their responsibilities in safeguarding the reputation of Malta and will tow the same rope to share the FIAU’s vision of safeguarding the legitimate expectations of society and the business community, and thrive for a reputable financial system.
Victor Rizzo, InScope-AML
The 2023 edition of this report, which came out earlier this year, is of especially high quality, and plays an important role in safeguarding the country’s economic well-being. Our review, however, focuses on one particular aspect of this report: the trend of suspicious reports being filed with the AML regulator.
Over the past years, I have attended a number of seminars and other training events. I clearly recall that when senior executives from the FIAU were present, they have always indicated that the number of reports filed was low and much below their expectations. This empirical argument seems now to be supported with the benchmarking done against other jurisdictions.
The filing of a suspicious report stems from Regulation 15(3) of the Prevention of Money Laundering and Funding of Terrorism Regulations. Over the years, we have seen a sharp increase in the number of Suspicious Transaction Reports, known in the industry as ‘STRs’.
The FIAU reports that the number of STRs filed between 2019 and 2023 has steadily increased, from 2813 in 2019 to now 9157 in 2023. 2020 saw an increase to 5207, while in 2021 that number rose to 7323, and 8740 in 2022. This means that between 2019 and 2020 there was an 85.10% increase in STRs, which dropped in percentage points to 40.64% in 2021, to 19.35% in 2022 and to 4.77% in 2023.
Thus, while there has been a growing trend in reports being submitted, it is also evident that the rate of the year-to-year increase is in steep decline. Over a four-year period, the number of reports increased by 325% while the figures for 2023 are only showing a small increase of less than 5% when compared to the previous twelve months.
The number of reports is only part of the story, however, since the reports for 2023 were ‘in relation to over 16,000 natural persons and more than 5,000 legal persons (FIAU Annual Report 2023, page 49).
Reporting by sector
The annual report also gives us a breakdown of the sectors from where the reports are originating, which provides a very interesting picture of the changing risk trends in Malta’s financial sector. Whereas, say, ten years ago, reports from Banks were dominant and even, at times, amounted to more than 50% of total reports, we are now witnessing a much lower contribution from the banking system. On the other hand, we are seeing emerging sectors playing a more significant role in the annual STRs statistics. The Remote Gaming sector, which has been added as a Subject Person only some years back, is by far the leader now. For the year 2023, this sector filed nearly 46% of total reports.
A quick look at the statistics identifies of what is being called a ‘core group’ of four main contributors: Remote Gaming, Virtual Financial Assets (VFA), Credit Institutions (Banks), and Financial Institutions – electronic money.
The number of Remote Gaming STRs increased from 1445 in 2019 to 2485 in 2020, 4822 in 2021, 5049 in 2022, and 4205 in 2023. For VFA, the number rose from just 8 STRs in 2019 to 61 in 2020, 411 in 2021, 965 in 2022 and finally 1476 in 2023. Credit Institutions reported 962 STRs in 2019, a number that increased to 1975 in 2020, lowering to 873 in 2021 before rising again to 942 in 2022 and to 1308 in 2023. Financial Institutions (electronic money) reported 22 STRs in 2019, 115 in 2020, 191 in 2021, 565 in 2022 and 1042 in 2023.
This means that the total for this “core group” rose from 2437 in 2019, to 4636 in 2020, 6297 in 2021, 7521 in 2022 and 8031 in 2023. The total number of STRs filed, however, was reported to be 2813 in 2019, 5207 in 2020, 7323 in 2021, 8740 in 2022 and 9157 in 2023. Which means that the total STRs for the “core group” as a percentage of STRs filed has risen from 86.63% in 2019 to 89.03% in 2020, lowering to 86% in 2021, before rising again to 86.05% in 2022 and finally to 87.7% in 2023.
There is a clear trend of two new emerging sectors, VFA (Virtual Financial Assets) and Financial Institutions -Electronic Money, which are now featuring quite high in the list. In fact, for 2023, the combined total for these two sectors is nearly twice as much than for the Banking sector.
It is therefore fair to conclude that the lower contributions from Banks are the result of de-risking activities in this sector, and also the consequence of a much more robust onboarding and ongoing monitoring approach being applied. Meanwhile, other emerging risk sectors are being identified and this is undoubtedly creating new challenges to both the first line of defence and also to regulators and competent authorities.
A combined effort
Going into 2025, I am confident that all players in the market are truly conscious of their responsibilities in safeguarding the reputation of Malta and will tow the same rope to share the FIAU’s vision of safeguarding the legitimate expectations of society and the business community, and thrive for a reputable financial system.
Victor Rizzo, InScope-AML