Greylisting is an opportunity, yes… to clean up our act

Addressing the press conference last Friday, FATF President Marcus Pleyer indirectly warned against political interpretations of the organisation’s decision to place Malta on its greylist.

“There are serious weaknesses that need to be addressed to combat money laundering,” Pleyer said. “I have followed the news and I can see that people are not happy, but government has given a clear political commitment to address the issues... in the long run having strong rule of law and effective anti-money laundering regimes will contribute to sustainable growth and a level playing field.”

Pleyer is certainly right that ‘people are not happy’ – it is not just the government of Malta, but also the association of Financial Services operators (among others) that have questioned the verdict, often on ‘political’ grounds.

But while it is legitimate to question the discrepancy between the FTAF’s conclusions, and Moneyval – a test which Malta passed, on the basis of compliance with international standards – it would be futile to disregard the reasons Player gave in his explanation of the decision.

Above all, Pleyer said that FATF did not only look at technical and legal compliance but also how the rules are implemented on the ground.

So while the greylisting certainly rankles – especially in view of Malta’s standing in terms of its technical requirements from the Council of Europe’s Moneyval - it is also understandable, in terms of the country’s clear reluctance to fully investigate all money-laundering and tax evasion crimes.

As Pleyer rightly noted, it is Malta’s problems with prosecuting the sharp edges of money laundering that has contributed to a global lack of trust in our institutions. This is a view that all civic-minded taxpayers must perforce respect.

Moreover, it would be futile to deny that the Maltese administration does require international scrutiny, at this juncture. To be fair, Prime Minister Robert Abela has shown willingness to defuse any escalation with key players: wary that lashing out at the FATF at home would be read by international circles as an act of bad faith in pending negotiation.

Nonetheless, he would be well-advised to correct the childish, jingoistic social media outbursts of prominent Labour supporters: who go as far as to blame Malta’s current plight on the ‘jealousy’ of larger countries.

That will simply not cut the mustard: Abela and finance minister Clyde Caruana most choose sobriety and technocracy, and address the warts inherited from previous Labour administrations. Yes, it is an imperfect system that has created a financial centre in Malta that critics liken it to modern-day ‘piracy’.

Somehow, Malta must balance out the problems of Eurocentric powerhouse trade bills, like Germany’s surplus sucking currency to the European centre, with its will to make its services economy the most competitive possible.

But this cannot be done by exposing ourselves so crudely as we have in the last decade, with the sale of citizenship immediately opening up Malta to international scrutiny.

Of course, ridiculous proposals such as that of Repubblika - which called for a national unity government, to replace a democratically-elected one - should be given short shrift. It pains one to note that Repubblika’s otherwise important proposals are often overshadowed by such fantasy-like solutions, that come across like a slap in the face of democracy itself.

Nonetheless, overcoming Malta’s greylisting will require that Abela ditches his populist arsenal of ‘best in the world’ buzzwords, and understand the proper response is to renew investment in our prosecutorial arms: the police and the Attorney General.

Abela must identify and addres Malta’s three major shortcomings: namely the weakness in gathering financial intelligence on tax evasion and money laundering, the lack of transparency and accuracy in the beneficial ownership register, and the blurred roles and responsibilities of the Tax Commissioner and the FIAU.

With that in mind, one cannot avoid the need for national reflection on what has actually put the international spotlight on long-standing problems like tax evasion.

For tax evasion has existed for ages; it is even structurally ingrained in the “ejja ha nirrangaw” culture, which pervades the Maltese way of doing things across the board: from planning and land use, to cosy tax arrangements.

This is, of course, not just a Maltese problem. But it takes a global network like the FATF to sanction corruption and organised crime in the EU (sometimes, even though in the bare-faced interest of ensuring its own global power, even the United States itself plays a more proactive role on this front).

Malta has to respond effectively to the challenge of FATF greylisting, or risk inviting a renewed impetus from an under-pressure European Commission to make an example of the EU’s smallest member state. With the launch of the European Public Prosecutor’s Office, a far-reaching mandate by the European Chief Prosecutor Laura Kövesi will mean an ability to prosecute money laundering also when it is not directly related to the EU budget.

Ultimately, Malta has to clean up its stables, before someone else does it for us. It is what taxpayers deserve.