FIAU reports must be followed by prosecutions, former boss says

Stakeholders at an Institute of Financial Services Practitioners conference insisted on the urgent need to implement the recommendations of a 2019 Moneyval report so that Malta can start recovering its financial reputation. 

Financial Intelligence Analysis Unit spokesperson Clara Borg Bonaci, told stakeholders that the FIAU did not have enough resources in the past to carry out risk-based supervision and monitoring and that Malta achieved a low rating when it came to anti-money laundering investigation for this reason.

“With just under 60 recommendations, we need to work with a sense of urgency and build a lot of momentum. Right now, the FIAU has a massive focus on increasing resources. We ended 2019 with just 70 employees but will aim to increase this to 153 by 2022, based on a three-year plan. 

“The only measures which were taken by FIAU in the past were pecuniary penalties, but it’s not the best way to drive compliance and effectiveness. Our sanctioning powers were very limited in previous years,” she said. 

Former FIAU boss Manfred Galdes echoed Borg Bonaci’s call to urgency. “How can we expect anyone to take us seriously when one looks at the Moneyval report? When you look at a table of assets confiscated, you see that in 2013, no assets were confiscated, and so on until 2017, when just €14,000 were confiscated, plus a bank card which was subsequently scrapped,” he said. 

He added that rarely has any report of the FIAU led to a prosecution.

“There was not one corporation that was ever charged with money laundering. What we have is domestic cases related to drug trafficking. Law enforcement is an issue. The authorities need a massive overhaul in the legislation to send the right messages to the Financial Action Task Force that we are taking things seriously,” he said.  

“We are attending Moneyval plenaries three to four times a year and we do not even have the basics in place.”

Speaking ahead of the panel, shadow finance minister Mario D eMarco said that while he would not be using the platform to score any political points, it was necessary to address the “elephant in the room” and that the current challenges to Malta’s international reputation needed to be addressed urgently.

“Our attractiveness to investors depends on this fundamental question: how are we perceived as a jurisdiction by the international community? To put it mildly, this has been tarnished,” he said.

Tax Justice Network chief executive Alex Cobham had described Malta’s financial services as a “race to the bottom” following the damning reports, including the Moneyval report which said that Malta was weak when it came to the practical application of measures to fight money laundering and the financing of terrorism. 

“This does not mean that our reputation has been damaged beyond repair. It’s imperative that government, Opposition and all stakeholders work together to start urgently implementing the recommendations of the Moneyval report. We need to obtain a positive assessment, which is critical to Malta’s reputation,” De Marco said. 

De Marco said the Opposition was in favour of retaining Malta’s current tax regime to maintain its international competitiveness and said that the distorted perceptions of reality about Malta need to be combated for the good of the country’s status. 

“This remains a country of professional people trying to do work in an honest manner. But our words need to be accompanied by action. Our leaders need to give the right examples of seriousness. Our institutions and regulators need to show that they are truly institutional, autonomous and independent,” he said. 

Finance Minister Edward Scicluna said that Malta, being an island, has very limited development choices. “Some islands, like the Channel Islands, for example, have built a financial sector which provides a haven from watchful eyes. Malta was given the advice to follow suit as well many years ago, but it refused it. Malta chose manufacturing and tourism as the two sectors to develop,” he said.

He argued that there was intense pressure from the Organisation for Economic Cooperation and Development to introduce a global corporation tax but said that he did not foresee an agreement on this issue.

“Financial services can be very rewarding but they are no piece of cake, so let’s stop badmouthing our country with outsiders. This is no time for any person to take a moral high-ground. All financial practitioners of goodwill need to work together,” he said.