Malta has taken new measures for stricter due diligence checks on IIP applicants and comply with CRS standards of tax exchange for CBI/RBI schemes in Malta.
These new proposals were outlined in Draft Budgetary Plan 2020 of Maltese Government.
IIP Agency
Since May 2018, the Individual Investor Programme (IIP) is being administered by an independent Government entity specifically focused on the operations of Malta’s citizenship by investment programme. The Malta Individual Investor Programme Agency (MIIPA) is the sole entity responsible for the processing of applications, the carrying out of an indepth due diligence, involving law enforcement authorities, and international renowned due diligence service providers.
Following a multi-tiered evaluation, the Agency puts forward recommendations to the Government regarding the granting of citizenship. In the coming weeks, a new legal notice will be enacted to continue enhancing the Malta IIP. Amongst the several elements it will tackle, the legal notice will:
1. Make it clearer that the Agency has to conduct due diligence on the source of funds – whilst this is already being done, it will now be given legal powers;
2. Make it clearer that the Agency has to conduct a risk analysis on every applicant – similar to point 1, this is already being done, but now it is being given legal powers;
3. It gives the power to the Agency to conduct due diligence on its agents; Malta: Draft Budgetary Plan 2020 49 4. It lists a number of responsibilities and conditions that the agents should abide with; 5. It gives the power to the Agency to sanction and or revoke licenses to agents in cases of misconduct;
6. It provides for protected disclosures for individuals (whistleblowers) who have information on applicants, at any stage of the application;
7. It puts a responsibility on agents to provide all material information to the Agency during the application period;
8. It puts an obligation on agents to inform the Agency if they become aware of any material breaches, fraud, misinformation or any adverse information that may have an impact on the eligibility of an individual to hold Maltese citizenship, for the period of five years after the granting of citizenship;
9. It gives authority to the Agency to collaborate with the MFSA, FIAU, the Police and the Commissioner for Revenue in cases of investigations;
10. All applicants will, by law, be scrutinized against international sanctions and restrictive measures, taking into consideration EU, UN and US lists.
These changes, amongst many others, will continue to strengthen the Agency’s powers to investigate and collaborate with competent authorities on its findings.
IIP Regulator
The role of the regulator remains there to oversee the overall process of the Agency and ensure that it is evaluating applications according to law. Furthermore, the Office of the Regulator of the IIP is, inter alia, tasked with monitoring the correct implementation of the IIP as well as any other functions that may be assigned to the Regulator by the Prime Minister, through regulations, in relation to citizenship. In the discharge of his functions, the Regulator, who is appointed by the Prime Minister after consultation with the Leader of the Opposition, shall act in his individual judgment and shall not be subject to the direction or control of any other person or authority.
CRS Compliance
In 2019, OECD has identified Maltese citizenship and residence by investment schemes pose high-risk to the integrity of CRS. In order to comply with OECD, Malta has implemented new measures for tax compliance.
In order to mitigate the high risk of potential circumvention of the Common Reporting Standard (CRS) using Citizenship by Investment/Residence by Investment (CBI/RBI) schemes concerning the Malta Individual Investor Programme and the Malta Residence and Visa Programme, the following position/actions were taken, whilst continuously ensuring the proper application of the Standard:
1. The local CRS guidelines have been amended, to give a more comprehensive explanation to Financial Institutions (FIs) of such schemes and their potential misuse for CRS circumvention. Moreover, said guidelines now assist FIs in ensuring that due diligence obligations under the Standard are observed and enhanced, with additional questions which can be used during accounting opening procedures to ensure that all relevant jurisdictions of tax residence are captured and verified.
2. It is pertinent to note, that Malta’s CRS regulations and guidelines contain adequate instructions to FIs regarding the documentation required to determine the appropriate jurisdiction(s) of tax residence in carrying out due diligence obligations. The guidelines also place an obligation on FIs to confirm the reasonableness of self certifications, including cross-checking this with AML/KYC documentation and certificates of residency and/or government issued valid identification.
3. The Competent Authority in Malta will spontaneously exchange information about individuals that have obtained residence/citizenship through such schemes;
4. As per local CRS regulations and guidance, in order to determine whether a self-certification is correct/reliable, an FI must consider all relevant information which is available to it, including information collected and maintained for AML/KYC purposes. Consultations are under way by the Financial Intelligence Analysis Unit (FIAU) with respect to Amendments to its Implementing Procedures Part I. These amendments reflect the legislative amendments which took place between December 2017 and January 2018 to the Prevention of Money Laundering Act (PMLA) and the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) and focuses amongst other things also on consumer risk. In particular, one of the situations where customer risk is to be considered as high is with respect to situations where ‘the customer has benefitted from citizenship or residency by investment schemes or is a prospective applicant for such a scheme’. Should the overall risk resulting following the carrying out of the customer risk assessment be high, then a subject person would have to apply Enhanced Due Diligence measures. As one may note, the definition of subject persons as contained within local AML regulations is wide and comprehensive enough to incorporate any type of Financial Institution as defined under CRS.
5. Both local CBI and RBI scheme operators will, going forward, include the following wording as part of the application documentation, respectively:
. – By signing this form, I confirm that I am fully aware that the Permanent Residency granted under the Malta Residency Visa Programme does not provide any tax related status or benefits.
A minimum amount of tax liability amounting to €5,000 was introduced for persons that are resident but non-domiciled in Malta. The minimum tax liability for such non-domiciled individuals does not apply to individuals whose foreign income is less than €35,000.
