A cloudy forecast on FATF

Be it grey-listing or enhanced follow-up Malta is struggling in the wake of stronger governments whose voice at the FATF is a political tool that could make an example of the smallest EU member state. 

A letter from the Opposition leader to the FATF earlier in the week, pledging a future PN government’s cooperation on matters of financial governance, exposed the immaturity of the Maltese political system in its ridiculous game of one-upmanship. 

At such a delicate moment in Malta’s verdict before the FATF, for which grey-listing will have severe banking and financial consequences for the jurisdiction, Bernard Grech’s tone-deaf letter read like a postcard from a tribal leader. He would have been politically better off placing the Opposition in a far more supportive role of a national effort – mistrustful though one might be of the Labour government – that ultimately affects thousands whose livelihoods depend on the Maltese financial jurisdiction. His voters, included. 

Be it grey-listing or enhanced follow-up (and before drawing up that charge sheet against the Muscat administration and its surviving Cabinet members) Malta is struggling in the wake of stronger governments whose voice at the FATF is a political tool that could make an example of the smallest EU member state. 

Malta’s low-tax regime and its golden passport scheme have been amply criticised by this newspaper and widely documented for its unfairness: the former reflects a global order of profit-shifting designed to reduce tax exposure in the countries where productive gain is registered, and the latter rewards the global rich at the expense of other worthy taxpayers and workers. Both carry discriminatory elements that allow the rich and powerful to exercise their freedom of movement, of capital and human movement. 

For island-nations like Malta at the edge of the European Union, they also represent one of the few methods of attracting FDI inside a single-currency zone in which a high import bill sucks all currency to the centre of the EU bloc – Germany, for example, with its high surplus. This trade imbalance creates the need for resource-less economies, like Malta, to put its human capital at work. This is why the financial services, remote gaming, shipping, and other service industries gained such an important foothold in the Maltese economy. 

Not everyone seems convinced that the changes Malta has enacted over the past 18 months in Moneyval are enough. The probability is that at FATF level, it is not just about legislative changes and action but also political will to fight financial crime with no ifs and buts. 

The Americans in Malta were particularly vocal about the new political leadership delivering ‘heads on a stick’. In meetings with the press, and with Cabinet ministers, where demands of the most powerful country in the world cannot be simply brushed aside (Status Of Forces Agreements, US business interests like Steward Health Care...) arrests and investigations were always on a to-do list. Robert Abela has to be at least commended for refusing to stick his head in the sand, making 2020 and 2021 a tour de force of money laundering arraignments, apart from political sackings that served to exorcise, partly at least, the disastrous consequences of the Muscat administration’s shortcomings. 

Yet there is a reality of big brother politics at stake with much larger countries that carry clout at the FATF finding it much easier to make it tougher for Malta. 

Of course that can only explain part of the story and is no consolation if Malta ends up on the grey list. The damage from grey-listing is much harder to fix than the frustration caused by bullying politics. Grey-listing will mean that the jurisdiction’s risk level will increase, making it harder and more laborious to attract quality investment. Businesses will have an additional burden to deal with in their linkages with foreign counterparts. 

Malta must show that the laissez-affaire attitude towards financial crime displayed under the Muscat administration is a thing of the past. But FATF countries must be ready to hear out Malta. 

The lack of action against former minister Konrad Mizzi and Joseph Muscat’s chief of staff Keith Schembri when their names cropped up in the Panama Papers, the serious allegations of corruption and impropriety linked to major public projects, the assassination of journalist Daphne Caruana Galizia, the murky links between big business and politics being exposed in court proceedings linked to the murder, created serious repercussions domestically and abroad. 

Today there has been significant progress on the Caruana Galizia murder case with several prosecutions. Although it is now high time that these move on to the next stage and go to trial. And apart from ensuring that regulatory authorities such as the MFSA and FIAU continue to perform fearlessly, the government has to deal with other ‘political’ realties. 

Good governance and the rule of law are essential ingredients for business to thrive in a healthy environment that encourages enterprise, innovation, new investment and competition. 

FATF must be convinced but Abela’s government must persist in its drive to ensure the rule of law prevails and the highest ethical standards are demanded of those in power at all times.