Greylist: a call for a new political will to clean up our act

FATF and the ‘ignominy’ of its greylist remind Malta once again that there is an international framework of rules that must be adhered to; and it has to be seen, domestically as well, that it is adhering to it

It is certainly unprecedented for a European Union member state to be placed on the FATF’s list of jurisdictions under increased monitoring, better known as the ‘greylist’. Malta’s recent history of growth on steroids, its financial centre’s advancement as a major clearing house for international transactions, and the dubious money-raker from the golden passports scheme, certainly helped to throw a harsh light on the islands.

Undoubtedly, Malta is a price-taker in international relations. Even though decision-makers might point their finger at the tax haven that is the United State’s Delaware, or even within the City of London and others of the European Union, the odds are stacked against a small economy like Malta.

But even inside the FATF plenary, where consensus was not reached despite an overwhelming vote in favour of Malta on two questions related to the island’s compliance on anti-money laundering frameworks, the words of the German civil servant who presided over the plenary, Marcus Pleyer, are a stark reminder of the lack of trust nurtured by the Maltese government on matters of governance.

This not just a matter of international remonstrance against Malta. For years now, Maltese of all hues and political affiliations keep remarking at the abnormal manner in which our system of prosecution and justice is functioning. Financial crime, for one, was rarely prosecuted before 2020; the financial regulator itself had for years been led without any widespread supervisory inspections being carried out in response to Malta’s growth as an international financial centre; the FIAU’s reports on money laundering lacked a positive response from the police, which is today equipped with its dedicated Financial Crimes Investigations Department; even countless reports of domestic tax avoidance, as evidence in MaltaToday’s report on a €1 billion tally of uncollected dues, shows little has been done politically to render the country’s citizens accountable.

What is certainly known is that Malta achieved high levels of technical compliance, in which it showed its counterparts abroad that its law books were all in order and ready to spring in action. But the question mark for the Maltese was whether they were politically committed to these rules. And herein lies the rub. Because it has taken the force of the FATF and the ‘ignominy’ of its greylist, to remind Malta once again that there is an international framework of rules that must be adhered to; and it has to be seen, domestically as well, that it is adhering to it. More heads on a stick, therefore, one might expect.

There is no doubt that Malta is a place where the wheels of justice can be slow and certain prosecutions leave much to be desired. A case in point is the Enemalta oil scandal of 2013: all its main protagonists have, since being charged, carried on with their main businesses, expanded, even issued calls for public financing, with nobody seemingly breathing down their neck. No wonder the sense of unfairness from Maltese justice seems pervasive. But even here, we can see structural problems that force us to ask: why have the police not forced this investigation through, why have the law courts not demanded a conclusion to this case, and why must one wait almost a decade for a court to decide on a corruption case?

Malta is not the only European member state with severe deficiencies in the implementation and enforcement of anti-money laundering rules and regulations. Of the 18 member states assessed by the FATF by November 2020, not one attained a high level of effectiveness on key anti-money laundering indicators. Belgium, Cyprus, Greece, Ireland, Italy, Austria, Czechia, Denmark, Latvia, Lithuania, Malta, Slovakia, Slovenia, Finland, Sweden, Portugal and Hungary were all rated as displaying a moderate or low level of effectiveness when it comes to combating money-laundering. This must be a wake-up call for Europe for all member states, not just Malta.

But that does not mean that Malta should just complain about other member states or point fingers at the international community. It must clean up its own house.