Malta told to beef up police units with rise in gaming and crypto fraud

Rise of gaming, finance and crypto needs beefed-up economic crime police, Brussels tells Malta

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, with finance minister Edward Scicluna
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, with finance minister Edward Scicluna

Malta has been told by the European Commission that it needs stronger anti-money laundering enforcement at the rate of growth of its services economy.

The Commission, in its recommendations to member states for the use of EU funds, said that the size of Malta’s financial and gaming sector, and the efforts to attract crypto-currency operators required an effective anti-money laundering enforcement.

“The recent increase in the human and budgetary resources of the Financial Intelligence Analysis Unit as well as the enhancement of its procedures and processes are positive steps.

“Governance shortcomings, particularly in the fight against corruption, may also adversely affect the business environment and weigh negatively on investment. In particular, there is a risk of conflict of interest at various levels of government.

“Furthermore, the police’s Economic Crimes Unit is currently understaffed. In this context, it is important to couple a strengthened legislative framework with timely and thorough implementation.”

The European Commission also asked Malta to address features of its tax system which it said may facilitate aggressive tax planning.

The recommendation, one of the three, comes by way of the 2019 country-specific recommendations through which Brussels analyses each EU country’s investment needs and bottlenecks, to prioritise the use of EU funds.

“Malta has taken measures against aggressive tax planning, but the high level of royalty and dividend payments as a percentage of GDP suggests that Malta’s tax rules are used by companies that engage in aggressive tax planning,” the EC said.

“The absence of withholding taxes on outbound, that is from EU residents to third country residents, dividends, interest and royalty payments made by Malta-based companies may lead to those payments avoiding tax altogether, if they are also not subject to tax in the recipient country.”

The EC also said that although Malta’s sale of citizenship through the Individual Investor Programme and Malta Residence and Visa Programme do not automatically grant residence for tax purposes, if requirements are met, income may be exempt under the ‘non-dom’ regime when income is not remitted to Malta, without substantial physical presence requirements. “They may facilitate aggressive tax planning practices and have been listed by the OECD as having a potentially high risk for being misused to circumvent the automatic exchange of financial accounts,” the Commission said.

In the last decade, Malta experienced a pronounced shift towards the services sector, with a strong focus on internationally oriented areas such as financial services, tourism and remote gaming.

The Commission also recommended that Malta take to ensure the sustainability of the healthcare and the pension systems.

In 2018, the government made adjustments to include contributions made after pensionable age and allowed self-employed and part-time working pensioners under 65 years to pay contributions proportionate to their earnings, promoting longer working lives.

However, the statutory retirement age, gradually increasing from its current level at 62 years, is set to remain unchanged after 2027 at 65 years despite a projected further growth in life expectancy.

The Pension Strategy Group established in 2018 is expected to publish a report by December 2020, outlining recommendations for improving the adequacy and sustainability of the pension system.

Measures to decentralise services from hospitals to primary care and to improve the provision of long-term care services are also ongoing. Current plans to expand the capacity of public hospital outpatient care can help in tackling long waiting times for certain specialties.

Nevertheless, other measures to reduce unnecessary referrals to specialists and redirect inappropriate use of emergency care to outpatient have so far not been fully used, preventing improvements in efficiency of the system.

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