Beyond Moneyval, vigilance must remain strong

Passing the Moneyval test, which still requires the final stamp of the Financial Action Task Force, is not the end of the road

News that Malta has passed its Moneyval test allows the financial services industry and business operators to breathe a sigh of relief.

Failure to comply could have seen the country enter the money laundering grey list and that would have spelt serious trouble.

Malta has had a rough ride over the past five years not least because its anti-money laundering structures were found wanting at a time when the financial services sector and the gaming industry grew exponentially.

Regulatory authorities did not have the human resources, technology and will to crack the whip. And when they worked, the police failed to investigate and prosecute. The system was overcome by lethargy, which politicians in government found very convenient.

The Panama Papers in 2016 kicked off a series of events that exposed the country’s vulnerabilities. It may have been easy for government at the time to brush aside the wrong deeds of Konrad Mizzi and Keith Schembri despite having been caught opening companies in Panama.

But things changed radically after the murder of Daphne Caruana Galizia in October 2017. The linkages between the assassination and people with friends in government; the stories of questionable money flows and corruption that Caruana Galizia exposed; and large government contracts that were mired in controversy provided the backdrop for the intensive criticism Malta received in international institutions, including EU ones.

This context cannot be brushed aside when trying to understand why the European Parliament recently approved a rule of law resolution putting Malta in a bad light.

Government’s reaction was similar to that of jilted lover. Some of the frustration is understandable but it would be absurd not to realise that the wrongs of five years cannot be immediately forgotten because Malta has passed its Moneyval test.

This leader is not oblivious to the political games at play between the different blocks in the European Parliament, which penalise countries depending on who governs them. The international scrutiny may feel unfair – and at times it is a question of MEPs and institutions finding it easier to bully a small country – but this scrutiny was also part of the reason why Malta is today in a much better place.

Judicial, political and regulatory reforms enacted over the past 18 months have left their mark positively. But they would not have come about swiftly without intense international scrutiny.

Police have arrested, interrogated and arraigned people who until several months ago were deemed to be untouchable. Police have made more breakthroughs in the Caruana Galizia murder case and smashed an oil smuggling ring. The police financial crime unit has been beefed up.

The Financial Intelligence Analysis Unit has bitten the bullet and imposed serious penalties for anti-money laundering breaches or failures. The Malta Financial Services Authority has also stepped up its supervisory efforts.

These achievements cannot be underestimated. But vigilance must remain strong.

The will to clamp down on money laundering, tax evasion and corruption must remain steadfast.

Passing the Moneyval test, which still requires the final stamp of the Financial Action Task Force, is not the end of the road.

Economic operators that are complaining because of the tough hand being shown by the FIAU and MFSA must learn to adapt to this new reality. The fight against money laundering is an international one and it would be a mistake to return to the ways of old.

Politicians on the other hand must learn to value good governance for its intrinsic good and not for convenience. It is only then that Maltese MEPs and government will have the moral authority to preach to their European counterparts on serious problems in their own backyards.