FIAU must be supported by lawmakers

The backlash against the FIAU by ‘critics’ who should know better – but whose friends in the financial services industry are too hard to shirk off – is simply symptomatic of the national hypocrisy that dominates such a debate

It was with some surprise to see finance minister Clyde Caruana and shadow finance minister Mario De Marco in apparent agreement over the scale of fines from the Financial Intelligence Analysis Unit (FIAU) that are ‘worrying’ the financial services industry. Rather than valuing an FIAU that carries out its work without fear or favour, both parties are now echoing the concerns of financial services practitioners who have been left smarting over the aggressive nature of the fines contemplated by Maltese law. Indeed, Caruana has confirmed that he will carry out a review of the policy by which fines are imposed by regulatory authorities. 

The backlash against the FIAU by some other ‘critics’ who should know better – but whose friends in the financial services industry are too hard to shirk off – is simply symptomatic of the national hypocrisy that dominates such a debate. The complaint by the industry is that now with increased manpower at the FIAU, the agency is attempting to impress decision-makers at Moneyval of its zealous fight against money laundering. 

To prop up certain opportunist criticism of the FIAU is simply giving support to the companies against which suspicious transaction reports are filed against and which are inspected by the FIAU. These companies have a right to appeal these fines, but to claim the FIAU is carrying out a witch-hunt over the impending Moneyval assessment, is simply a smokescreen intended to alienate the public from their own activities: a case in point was one luxury credit card provider, which recently recruited former Labour minister Chris Cardona, whose €373,000 FIAU fine was in part based on one client being a high-risk PEP due to adverse media links over ties to the Russian mafia. Understandably, the onboarding of new clients is a process fraught with risk; one never knows what a client might eventually do in actions that eventually will reflect on their financial services providers. But to criticise the FIAU for carrying out its job is throwing the baby out with the bath-water, a non-starter. 

The effective deterrent of the fines, so essential in any regime that must enforce the respect of anti-money laundering rules, is not only being challenged in the tribunals and courts by the industry, but is now being criticised by politicians, with these complaints filtering down to the press. The accusation is that the FIAU’s inaction for years (a situation predating Labour’s election but which intensified in the Panama Papers scandal and the subsequent revelations concerning Yorgen Fenech, Electrogas, and Keith Schembri) is now being reversed with such determination. And despite the necessity of this exercise, it has left financial services practitioners concerned at the new reality. 

The FIAU has already dismissed this view as being entirely unfounded – indeed, it is unfathomable that the media kowtows to such an opinion which does a disservice to civil service workers and investigators are tasked with such an important job. The pressure from the European Commission and the Council of Europe in the last years, effectively contributed to the allocation of increased budgets over recent years, which allowed for increased recruitment, investment in technology and training to enable the FIAU to perform its role as it is expected to. 

Additionally, the latest round of the CoE’s Moneyval’s mutual evaluation report recommended that the FIAU undertake a series of reforms that are now necessary for Malta to avoid its possible greylisting in the FATF, the Financial Action Task Force, towards mid-2021. This listing would mean that Malta is placed on a list of “Jurisdictions under Increased Monitoring” due to deficiencies in their Anti-Money Laundering and Counter-Funding of Terrorism (AML/CFT) regimes. A greylisting will make financial business in Malta more challenging and a costly affair, and in the run-up to this appointment with destiny, the FIAU has invested in the process that is necessary to bring Malta in line with Moneyval recommendations. 

Even simply dismissing recent actions by the FIAU as being a ‘PR exercise’ after years of inaction, betrays a long, and mistaken, tradition of extreme confidentiality inside the agency (the power to publish administrative sanctions was actually introduced in February 2015, and then only those which were not under appeal). 

The heavier fines are also the result of legal changes in 2018 that allowed for heavier penalties to be imposed, increasing more a maximum €12,500 in 2008 to €46,500 in 2014, and now €1 million for non-financial business and professions and even €5,000,000 for financial services operators. 

Some suggestions for reform appear to be pointing the two parties to agree that offending practitioners and institutions should only be fined according to benchmarks of turnover or revenues; although it has to be said that, firms that appear innocuous in size can be processing millions in transactions only to be left with a small portion of income from their services, an ideal setting for those who seek the covert compliance of errant practitioners. 

But lawmakers should not lose focus of the fight against money laundering and its role in aiding organised criminality in Malta and abroad. The government has already missed the chance to hit hard at organised crime with an unexplained wealth order. Now is the time to support the FIAU in its onerous mission to supervise and investigate suspicious transactions and AML shortcomings in Malta.