Malta’s road ahead for de-listing 

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by Alfred Zammit, Deputy Director, Financial Intelligence Analysis Unit

Financial crime has long posed a deep-rooted challenge for international financial jurisdictions; however, it has become much more complex in recent years with the rise of technology. Online and often complex financial transactions and products and cryptocurrencies have opened new opportunities for criminals. 

International institutions have rushed to adapt to these developments, with a wave of regulations being developed over the past decade. In recent years, international standards have also been revised in line with the risk-based approach to strengthen the requirements for higher risk situations, allowing countries to take a more focused approach in areas where high risks remain or where implementation is not effective enough. 

For long years, Malta had demonstrated conformity with such requirements and even the most-recent Moneyval assessment confirmed that the country has a high level of technical compliance with the international standards and has the right legislation in place. Yet, the Financial Action Task Force (FATF)’s decision to place Malta under increased monitoring (the so-called grey list) indicated that further efforts are needed to ensure that the Maltese anti-money laundering system is effective and yields the intended results. To achieve this objective, an action plan has been agreed between Malta and the FATF, together with a political commitment to implement it within agreed timeframes. The implementation of the FATF action plan is backed by the commitment of all Maltese authorities to take a significant number of actions resulting in deliverables that are intended to achieve the level of effectiveness expected by the FATF, and to do so sustainably. 

In this context, it is heartening that a mere few weeks after the original decision by the FATF, a recent follow-up assessment by the same taskforce found that Malta has shown serious commitment and has made swift and encouraging progress in implementing the agreed action plan. Although further work is needed to reach the levels of effectiveness desired, Malta is on the right track. 

It is also encouraging that it noted good progress in the only two issues, i.e., monitoring of beneficial ownership and combatting money laundering of illicit funds arising from tax crimes. These were highlighted in the original assessment which led to Malta’s grey listing. The issues are the key elements in the action plan devised and agreed with the FATF. 

Malta has also put in place a wave of reforms at institutional and governance level, which are aimed at strengthening Malta’s jurisdictional reputation. It is encouraging that the string of reforms at different levels are capturing the attention of international institutions. In her recent State of the Union address, European Commission President Ursula von der Leyen praised Malta for reforms undertaken in the field of rule of law, particularly regarding judicial reform. This included the introduction of new, more transparent, and independent systems for the appointment of members of the judiciary, the President, and the Commissioner of Police. 

This was followed-up by the International Monetary Fund, which in its Article IV assessment on Malta remarked how the authorities have been implementing the recommendations of the Council of Europe’s Venice Commission and the Group of States Against Corruption (GRECO). A few days later, an in-depth assessment by German credit rating agency, Scope, noted in its research that Malta had made good progress in strengthening its AML/CFT frameworks highlighting specifically the allocation of significantly more resources to regulatory, supervisory, and investigative agencies. As one example, the FIAU has registered an increase in its operational budget from Eur 1.6 million in 2018 to Eur 8.5 million this year and has increased its staff complement from 70 at the end of 2019 to 116 by end 2021. 

All authorities involved in the fight against money laundering and other financial crime are working hard to address the issues raised by the FATF to enable Malta to exit the grey list within the shortest time possible. There is also an increased recognition by subject persons, practitioners, and other stakeholders that a collective effort will yield the desired results for the common benefit. This collective effort requires that gatekeepers to the financial and corporate services industry only let in clean and reputable business. All subject persons, whether individuals or large financial institutions are expected to comply with their AML/CFT obligations without fail, including obtaining and providing accurate beneficial ownership information and reporting suspicions of money laundering and proceeds of crime, including tax evasion. AML/CFT supervisors are expected to monitor compliance and to impose proportionate, effective, and dissuasive sanctions where they identify compliance failures. This is what the FATF expects, and this is what the authorities are committed to. Working together during the upcoming weeks is crucial to ensure a timely withdrawal from the FATF’s monitoring procedure and grey list.

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