Malta’s Financial Intelligence Analysis Unit (FIAU) has slapped a hefty fine of €222,736 ($244,085) on Trannel International Limited, a subsidiary of the Kindred Group, for significant lapses in compliance with regulatory standards. 

FIAU Exposes Trannel’s Risk Analysis Shortcomings with Critical Compliance Deficiencies

The FIAU’s investigation revealed that Trannel had failed to conduct proper risk analyses for a substantial number of clients whose deposits exceeded €2,000, as mandated by law. Critical deficiencies in Trannel’s CRA methodology were identified, with a lack of a system to connect multiple customer accounts, reported Television Malta’s TVM News. Each account was assessed independently, disregarding the broader context of a customer’s overall activity.

In a proactive response to the compliance examination, Trannel rectified the deficiency by implementing an automated risk assessment model tied to account registration. Despite these corrective actions, the FIAU emphasized the gravity of the lapses in Trannel’s compliance measures.

The regulatory body highlighted instances where Trannel’s risk assessment heavily favored transaction risk over other crucial pillars such as customer and geographical risk. Inappropriately rated profiles accounted for 40% of the reviewed player profiles, neglecting factors like deposit amounts, transaction speed, and payment methods.

High-Value Player Profiles Unveil Trannel’s Inadequate Scrutiny of Financial Red Flags

Two specific player profiles drew attention due to Trannel’s failure to scrutinize transactions adequately. In one case, a player deposited €3.5 million ($3.8 million) within 18 months, engaging in non-closed loop transactions with discrepancies in declared income. 

The second case involved deposits exceeding €350,000 ($383,548) in three months, questionable income sources, and third-party e-wallet transactions. Trannel neglected to gather essential information to substantiate these players’ financial activities.

Furthermore, Trannel fell short in fulfilling record-keeping obligations, with 70% of player profiles lacking necessary documentation from open-source intelligence obtained from the internet. 

Malta is not the only jurisdiction where Trannel has been experiencing challenges. In June, Norwegian gambling authorities received legal affirmation as the Borgarting Court of Appeal rejected Trannel International Limited’s appeal against a compulsory fine of NOK 1.2 million ($108,600) per day. 

The legal dispute began in 2019 when Norway’s gambling regulator, Lotteritilsynet, urged Trannel to cease operations in the country, leading to rejected appeals, a suspension, and subsequent fines, with the recent court decision signaling the end of Trannel’s legal battles in Norway. 

Culture and Equality Minister Anette Trettebergstuen noted that the court’s ruling aligns with the Norwegian exclusive rights model, while Atle Hamar, director of Lotteritilsynet, anticipates Trannel’s complete withdrawal from the Norwegian market.

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The small Mediterranean island nation has long profited from its status as one of the world’s leading iGaming hubs but faces constant struggles with crime and corruption. In 2021, Malta was put on FATF’s greylist for systemic regulatory and enforcement failings, but a series of reforms managed to sway the financial watchdog. However, recent news indicates that the country’s woes are far from over.

Illegal Gambling Rings Launder Millions Each Year

A recent investigation connected to the 2017 murder of journalist Daphne Caruana Galizia uncovered an underground lottery ring that ostensibly accounted for an astonishing 30% of the total market share. The government managed to obtain the information thanks to the arrest of local criminal leader Melvin Theuma who shared extensive details about his organization in exchange for a presidential pardon.

Theuma’s input was instrumental in untangling the details behind the illegal lotto operation and its ties to the island’s construction and property markets. These businesses still operate primarily with cash, making them the perfect avenues to launder yearly lottery profits of up to €30 million. Despite the authorities’ efforts, the underground network allegedly maintains its presence across the island.

According to a detailed report by local news outlet MaltaToday, the parallel lotto operates parallel to the official national operator, using the same winning numbers. The underground organization offers tickets and substantial prizes, undercutting the legitimate lottery and using the accumulating gambling debts to undermine local communities.

Such Scandals Threaten Further International Sanctions

The rising controversy again draws attention to the Maltese authorities’ ability to enforce the law and crack down on organized crime. Despite Theuma’s cooperation, the underground lottery is ostensibly still alive and well. Perhaps the matter is not a priority compared to the country’s more pressing problems, but such public failings threaten to undermine what little goodwill the government has left.

2021’s FATF listing created a bureaucratic nightmare for companies dealing with financial services, banking, or gaming. The increased regulatory pressure disproportionately impacted smaller businesses and could have severely impacted the local economy if the government had not acted with alacrity. While updated laws and regulations are promising, the thriving underground lottery proves that enforcement is still sorely lacking.

Despite removing Malta from the greylist, the FATF maintains a watchful eye on the island nation. A return to past behaviors, lack of progress, or new regulatory failings can lead the country back into international trouble. The authorities and the public must work toward improvement across all levels of society to restore Malta’s damaged reputation and capitalize on its unique advantages.

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