Our duty to protect a 30-year industry – Daniel Bilocca

Reading Time: 5 minutes

That Malta is a greylisted country is no news. What will make news is a solution that puts Malta back on the right track. But let us add some more context.

In September, the Basel AML Index 2021 ranked Malta as the worst country in the EU for money-laundering risk. A ‘ranking’ that not only does not augur well for our financial services sector but does no justice to the 30 years of hard work and the huge investment it took to place Malta on the map.

The result of all this is a kneejerk reaction of sudden over-zealousness that is excessive and damaging to our industry. Applying effective AML policies is important but there is a general feeling out there that in a flash, we just went from normality to an extreme, with fines being imposed to give the impression we are doing something to address the situation.

Regulation is there to provide clear and tangible guidelines. Unfortunately, the current situation is only forcing operators to see how to overprotect themselves from it. Over-providing for AML procedures is making the onboarding of even low or medium risk clients excessively detailed and laborious and is leading to unavoidable loss of business.

This is not going to get us far but to every situation, there is a counter-situation. We need to start by going back to our roots, by looking at what led us to establish a successful financial services sector. How as the EU’s smallest state, we made it against all odds.

We accurately drafted and enacted serious and detailed legislation; widened higher educational opportunities intended to prepare a new generation of practitioners, we set up credible regulatory bodies working alongside respected institutions and applied proper high-standard marketing of Malta until we achieved a sound international reputation.

This contrasts with a jurisdiction which from the heights of success has, in just a few years, become greylisted and ranked as the worst country in the EU for money-laundering risk. The legislation is still in place and practitioners still provide high levels of service but let’s face it, the institutions that matter have been weakened by instances of selective inaction.

While the main effort can only come from the government, the response to this national issue also has to be national. The government needs to engage, as openly and as comprehensively as possible, with all relevant sectors and professionals. The short-term plan needs to identify the way out of this greylisting classification and a longer-term plan needs to ensure we regain and maintain the impeccable reputation this country enjoyed up till not long ago.Sporadic hefty penalties overnight will not restore Malta’s tarnished reputation– Daniel Bilocca

If we are in search of a solution, I firmly believe it all boils down to culture. Our AML culture needs to not only apply to the financial services industry but also to society at large.

We need to start by explaining more what being greylisted means, how we got here and how the government, regulators and us operators must work together to have Malta removed from this grey list. We must show the FATF that we are all truly working in synergy, that the controls being applied, which were also applauded by Moneyval, can give us hope.

Persecuting the self-employed or small to medium firms will not suffice. The government and regulators must show that Malta is addressing the elephant in the room.

Effective and properly applied AML policies and procedures are a valuable and precious tool for any practitioner working within a reputable and strong financial-services jurisdiction. But over-zealousness is excessive and damaging. We need to call a spade a spade.

The current situation was not caused because of breaches in the application of AML policies but by an international feeling that we have seriously slipped in our national reputation because of perceived inaction on grave issues.

Let’s not forget that Moneyval has been issuing reports on Malta for many years. Throughout all this time, AML policy was introduced because the industry acknowledged it would bring credibility and make Malta attractive to more reputable investors. AML policy kept being updated and amplified without any shattering effect not with any overzealousness but reasonably and professionally.

Our colleagues abroad are now applying more in-depth due diligence on anything Maltese and at the same time, long-established businesses here are finding it increasingly difficult to carry out even regular banking transactions internationally, as foreign banks have likewise started to treat Malta as a greylisted country. This scrutiny did not start now, but the greylisting was the cherry on the cake.

Bottom line: we need to avoid at all costs a management-by-crisis approach. Prosecuting tax dodgers is a duty, but sporadic hefty penalties overnight will ceretainly not restore Malta’s tarnished reputation.

Our institutions need to show that they work, that they are effective and that they can be strong with the strong, not only with the weak. Being strong with the smaller firms is counterproductive and will only lead to loss of jobs.

Engagement with all relevant sectors and professionals should become an urgency and a national priority. Flexing muscles every so often will not impress the FATF but will only cause irreversible damage more than the greylisting itself! We need to learn from the past, and work collectively towards one ultimate goal – that of restoring Malta’s reputation.

Daniel Bilocca is governance, risk and compliance director at NOUV.

Once you're here...

%d bloggers like this: