Malta risks ‘very serious’ grey-listing by Financial Action Task Force

Malta risks being placed on the Financial Action Task Force’s (FATF) money laundering grey list and could face numerous sanctions as a result, a spokesperson for Malta's financial services watchdog has said.

MFSA Chief Officer for Strategy, Policy and Innovation Chris Buttigieg said that being placed on the grey list of the FATF - an intergovernmental organisation which fights money laundering - would be "very serious" for Malta.

“Malta risks being placed on the FATF grey list. This is very serious. We need to raise the bar and ensure that there are certain standards and we need to convince our peers and international institutions that we’re serious in the way we carry out our supervisory financial processes and our enforcement,” he said.

Buttigieg was speaking at a conference organised by the Institute of Financial Services Practitioners on Friday.

There are currently thirteen countries on the FATF blacklist: Botswana, Bahamas, Iran, Cambodia, North Korea, Ghana, Iceland, Mongolia, Panama, Pakistan, Trinidad and Tobago, Yemen and Zimbabwe. North Korea and Iran joined the list last month.

The FATF grey list is a warning that a country might be blacklisted (uncooperative tax havens), a yellow card notice that if a jurisdiction does not curb terror funding and money laundering risks, it might face serious sanctions. 

Sanctions might include those from international institutions like the World Bank and the International Monetary Fund, difficulty obtaining loans from said institutions, an overall reduction in international trade, and international boycotts and embargoes. 

Buttigieg said that Malta’s poor financial crime laws and enforcement could damage Malta’s economic growth to a serious degree and many industries in the process.  

“To raise the standard, we need resources, and this is something we are working on, especially in terms of supervision. Unfortunately, financial supervisors don’t grow on trees, which is why we are launching the supervisory academy on 11 March of this year,” he said.

Buttigieg insisted that Malta needed to urgently address the Moneyval report and its recommendations, and to also heed an International Monetary Fund report issued last week on Malta’s financial forecast. 

The report reads that if Malta hopes to sustain a strong economic performance, it will need to address key challenges.

“First, if not tackled in a timely manner, deficiencies in Malta’s anti-money laundering and countering the financing of terrorism framework could result in further pressures on correspondent banking relationships, damaging the country’s attractiveness for investment and threatening financial stability. 

“Second, economic growth has relied on large inflows of foreign labour, exacerbating pressures on housing, infrastructure, natural resource management. Third, while the public debt burden has decreased markedly, fiscal risks associated with contingent liabilities and long-term age-related spending pressures remain,” the report said. 

Buttigieg said that both the MFSA and the FIAU were doing their part but that if stakeholders refuse to pull the same rope in an urgent manner, problems like banking are going to get worse.

“We either address this now or we’re going to have a serious problem in the future,” he said.

Buttigieg added that the MFSA was focusing on supervision and enforcement but also coming up with new proposals to develop the industry. 

He announced that a Fintech strategy and a Capital Markets Strategy will be launched in the coming months and that the MFSA was holding meetings with fund managers to come up with an asset management strategy. 

“But none of this will have an impact on the industry unless we address the Moneyval report. All of this will be useless because the banks will continue to refuse opening bank accounts,” he said. 

Juanita Bencini of the Institute of Financial Service Practitioners described Malta as no longer being a nimble financial jurisdiction. 

“We are not nimble. We are very defensive, that is the mood out there. It’s a toxic environment and we are dodging arrows and justifying our existence with clients. We haven’t been seeing a lot of proactiveness recently. 

“We need to see more regulation and there’s going to be a lot more of it, I’m sure. I would personally invest in a Corporate Service Provider that will be taking the regulation on board,” she said.