The usage of excessive cash in normal legitimate purchases can increase the risk of facilitating money laundering, especially through cash generated from illicit activities such as drug smuggling, human trafficking, and tax evasion. Nowadays, especially with the increased use of electronic bank transfers and bank cards and the reduced used of cash and cheque payments, cash payments for excessive/high amounts are frowned upon in developed countries, and cash transactions over a certain amount are even illegal in some countries.
With this in mind, Malta published the Use of Cash (Restriction) Regulations (S.L. 373.04) on 9th March 2021, which prohibits cash payments under certain conditions.
This article will explore the salient aspects of this Regulation.
1. What exactly are the restrictions being mentioned?
Whilst the Regulation does NOT prohibit ALL cash transactions, it does prohibit cash transactions in certain situations. Cash transactions of €10,000 or more when purchasing the following items is prohibited:
- Motor vehicles
This includes both new as well as second-hand vehicles, and it captures all types of vehicles that are used on the road, such as cars, motorcycles, buses, trucks, and construction vehicles.
- Sea craft
A sea craft in this case includes any craft that is used for navigation in the seas, such as ships, boast, pleasure yachts and any other form of sea-craft.
- Works of art
- Antiques
Antiques here are objects that are at least 100 years old and that are of geological, paleontological, archaeological, or antiquarian importance.
- Immovable property
This includes land as well as any type of real estate.
- Jewellery, precious metals, precious stones, and pearls
The items here specifically refer to personal ornaments made in whole or in part, or covered with gold, silver, platinum, or other precious metals and/or, set with diamonds, precious stones or pearls, as well as wrist watches.
Therefore, any cash payment of €10,000 or more for items that are not mentioned above is not prohibited by the Regulation in question.
2. What does Cash mean in this context, and does the restriction apply to more than one transaction related to the same item?
First of foremost, cash in this context means exactly that – purely bank notes and coins. It does not include cheques or bank transfers.
Secondly, the restriction does apply to more than one transaction related to the same item, as long as they occur over the same 6-month period and involve the same parties.
There may be instances where the purchaser is carrying out a transaction on behalf of someone else in order to prevent detection of the linked transaction. In this case, if the trader (seller) is aware of this and knowingly takes part in such a scheme, then this will be a breach of the Regulation and both the purchaser and the seller will be liable to penalties and fines.
3. Do these restrictions still apply if I am an unregistered private seller?
The simple answer to this question is yes – the restrictions do apply to you even if you are an unregistered private seller. You do not need to be a commercial trader for these restrictions to apply to you.
You could simply be selling any one of the above-mentioned items via social media or online market places, or even simply two private citizens carrying out such a transaction in a public street or behind closed doors at a private residence. In this case, both the buyer and the seller will be committing an offence if a cash payment of €10,000 or more is made, both in a single transaction or in multiple linked transactions.
4. Are there fines or penalties in case of any breaches of the Regulation?
Indeed there are – fines for any breaches of the Regulation will not be less than 40% of any amount that exceeds the €9,999.99 threshold in that particular transaction. Such a penalty will apply to both the buyer and the seller.
In addition to the above-mentioned fine, the FIAU may recommend to any relevant authority, body or committee responsible for the authorisation, licensing, registration, or regulation of the trader concerned, to take any further action within its powers and remit as deemed suitable and appropriate by the said authority, body, or committee.
Also, if a person found guilty is the director or manager who exercises executive functions in a company, then that company shall be liable together with the individual found guilty.
Concluding remarks
Ultimately, the most important thing is to be aware of the restrictions and to abide by the Regulation both as a buyer and a seller. With the advent of the internet and social media, any one of us can easily be both a buyer and seller, so it is vital that these restrictions are known by not just commercial traders, but also by the average person in the street.
It is vital to remember that ignorance of the law is not an excuse for not abiding by it – as the Latin saying goes – Ignorantia juris non excusat.
Disclaimer: The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet with up with any of our representatives to seek further information, please contact us for an appointment.
