A joint effort by all stakeholders to fight financial crime

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The fight against money laundering and other financial crime, has over the past years, been strengthened as a result of significant changes and improvements across both regulatory and investigative authorities and the private sector. The relevant competent authorities have increased human and technological resources and revised processes and procedures. But not only this many financial and non-financial service providers subject to AML/CFT obligations, particularly those with the largest exposure to possible proceeds of dirty money, have become more vigilant and compliant, upping their game and strengthening their position as a first line of defence against illegal financial activity.

Over the past couple of years, important reforms and investment have taken place at an institutional level to strengthen the tools available to authorities to fight such crime. Two notable developments reflecting such efforts relate to the strengthening of the Malta Business Registry and the setting up of a Centralised Bank Account Register (CBAR) a data base system managed by the Financial Intelligence Analysis Unit (FIAU).

The Malta Business Registry, after demerging from the Malta Financial Services Authority (MFSA), has strengthened its regulatory oversight through the implementation of several innovative internal and external initiatives which improved overall governance and compliance with the requirements of ultimate beneficial ownership register. The purpose of this register, in simple terms, is to improve corporate transparency and trust in Maltese-registered companies by making it clear – to law enforcement agencies, regulators, obliged entities, other businesses and the public – who ultimately owns and controls these same entities.

The Registrar of Companies has also been granted stronger powers, namely the right to refuse to register any company document relating to a company in respect of which the beneficial ownership information was not accurate or up to date. As of last year, the Registrar may also restrict a newly proposed company from being incorporated if the proposed directors already act as directors in other Maltese companies that have failed to submit information on beneficial owners.

Hundreds of company registrations are being refused because of such developments. Furthermore, failure by a Maltese company to disclose its beneficial owners will ultimately lead to its name being struck off the Register.

Another important development was the establishment of a Centralised Bank Account Register (CBAR) which serves as a data retrieval system for information on accounts identifiable by IBAN, safe deposit boxes and safe custody services provided by credit and financial institutions within the Maltese territory.

The information stored in CBAR is accessible exclusively to the FIAU and specific national competent authorities, including the Police and the Asset Recovery Bureau among others, allowing them to promptly access financial information as part of their investigations into money laundering, its associated predicate offences, funding of terrorism or any other serious criminal offences.

However, resources and new technology are not only available to all those on the side of justice but also to criminals who have no difficulty in spending significant sums of money to up their game.  Cutting-edge technology and globalisation have offered and will continue to offer more sophisticated means to convert criminal proceeds into clean money. This has made the task of tracing ill-gotten funds more complicated, requiring jurisdictions to be more dynamic, vigilant and resourceful. International cooperation is therefore key to fighting ML/FT, and the exchange of information paramount to successful outcomes.

No government, no regulator, nor other stakeholder can achieve this objective on its own.  Rather, success depends on the strengthening of a culture of compliance which rests on full coordination and cooperation between all players in the industry. In this context, no effort has been spared at the institutional level to drill the message home that a compliance culture is ultimately crucial to protect both the individual entity and the jurisdiction’s reputation, to ensure a flow of investment towards our shore. This is beneficial to all, as it guarantees a secure financial future for Malta, whilst also generating employment and investment opportunities.

Feedback given by the various entities involved in the fight against financial crime indicates that there has been a dramatic improvement in the compliance culture on our shores, with subject persons keen to play a stronger role in fighting crime and protecting Malta’s reputation.

As far as the FIAU is concerned, these efforts, which included outreach events, stronger communication and a significant increase in training events and seminars have been yielding clear results with subject persons submitting a significantly higher number of suspicious transaction reports (STRs). Some 5,175 such reports were made in 2020, a 208% increase over 2018, when the figure stood at 1,679 reports. The majority of these were filed by gaming companies and banks and highlight the relevance in the assertion that subject persons are the first line of defence in this important challenge to financial criminality.

At an institutional level, prudential supervisors like the MFSA and the Malta Gaming Authority (MGA) are constantly fine-tuning their operations and cooperation between the FIAU, MFSA and MGA is ongoing and ever increasing.  The Financial Crimes Investigative Department within the Police Force has been substantially bolstered to be able to act more efficiently on the intelligence it receives.  Furthermore, the establishment of the Asset Recovery Bureau (ARB) with new functions and powers and the investment made in it, is another important step in the fight against ML/FT. The investment in the ARB is critical to ensure it has the necessary resources to perform its role to further block criminal activity by seizing illicit proceeds and in preventing illegal funds from finding their way into the economy.

Recent developments and the efforts made by all these entities, even in increased outreach to the public, have served to promote a mentality that the safety and soundness of the Maltese financial system is a shared objective.

It is ultimately in everyone’s interests to keep crime at bay and its proceeds out of Malta’s economy and financial system. In the end crime and the laundering of its illegal funds if not controlled by all the gate keepers at play, be they public or private institutions, will eventually erode the fundamental principles of society and debilitate the economy; with each and every one of us becoming a victim in one way or another.