Updated | Brussels tells Malta’s FIAU to step up anti-money laundering supervision

Updated at 1.25pm with FIAU reaction

The European Commission has adopted an opinion requiring the Financial Intelligence Analysis Unit (FIAU) to continue taking additional measures to fully comply with its obligations under the fourth Anti-Money Laundering Directive. 

The European Banking Authority (EBA) had already concluded that Malta's FIAU was breaching Union law in July 2017 for failing to correctly supervise financial institutions and ensure their compliance with anti-money laundering rules. 

Since then, the FIAU has undertaken a step-by-step process to address its operational shortcomings, and communicated its next steps to the EBA and the EC.

On Thursday, the European Commission adopted a formal opinion on the basis of the EBA regulation, calling on the FIAU to take additional measures to effectively supervise financial institutions, together with an effective sanctioning regime. 

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Commissioner for Justice, Gender Equality and Consumers, Vera Jourová, said: “Europe has the strongest anti-money laundering rules in the world. But they need to be enforced with the same high standards across the EU to avoid creating any weak link. Malta and other countries must have well equipped authorities and fully implemented rules in place. The Commission will use all its powers, including infringement procedures, to close any loopholes in the fight against money laundering.” 

More concretely, the Commission called upon the FIAU to improve its methodology to assess money laundering and terrorist financing risks; enhance monitoring and supervisory strategy by aligning resources with the risk of money laundering posed by certain institutions; ensuring it is able to react in an appropriate time when a weakness is identified, including by revising its sanctioning procedures; ensuring that its decision-making is properly reasoned and documented; and adopting systematic and detailed record-keeping processes for offsite inspections. 

This was the first time the Commission used its power to request the EBA to investigate potential breaches of Union law by an authority of a Member State. 

The Commission has since also requested the European Banking Authority to conduct an enquiry on the competent authorities in Latvia, Denmark and Estonia, where recent cases have raised concerns about the effective enforcement of the anti-money laundering rules by national authorities. 

The Commission has opened so far, infringement procedures for non-communication of transposition measures on the 4th Anti-Money Laundering Directive against 21 Member States: three are currently at the stage of court referrals (Romania, Ireland and Luxembourg), with one on hold (Greece), nine at the stage of Reasoned Opinions, and eight at the stage of letters of formal notice. 

The FIAU has 10 working days to inform the EC of the measures it intends to take to comply with their obligations – this process under the EBA regulation is separate from and without prejudice to the Commission’ prerogative of launching an infringement procedure against Malta.

FIAU reaction

The FIAU has said that it will be responding to the Commission within the time period, adding that it had already taken steps to strengthen the effectiveness of its supervision activities.

The watchdog welcomed the Commission's acknowledgement of the positive results already achieved and the noticeable progress made to-date by the FIAU.

The FIAU said it was committed to cooperate fully with the Commission and the EBA.

FIAU Director Kenneth Farrugia said the organisation remained "deeply committed" to ensuring that Malta’s financial and other sectors were protected from the growing threats of money laundering and financial crime.

"The FIAU has undertaken significant reforms in its supervisory approach, including the enhancement of its resources and the adoption of new technology tools, to render it more efficient in its supervisory functions. We are committed to continue constructively working with the European Commission and EBA in addressing the new challenges that are being faced, not only by Malta but by the European Union as a whole," Farrugia said.

He noted that the FIAU had communicated its comprehensive action plan to the EBA on 25 July 2018 and subsequently kept the Commission abreast of developments during a meeting on 18 October.

Farrugia said the FIAU’s action plan showed its commitment to strengthen the supervisory processes in order to enhance and improve the organisation's risk-based approach to supervision.