[WATCH] Malta first EU state to get FATF greylisting, PN: ‘a national punishment’

BREAKING | Shockwaves for Labour administration after expected greylisting by FATF crowns years in which Malta was cavalier about its international reputation on financial governance

Photo: Hervé Cortinat/OECD
Photo: Hervé Cortinat/OECD

Malta has become the first European Union member state to be grey-listed by the international Financial Action Task Force, in what is a shock decision for the Labour administration.

Malta was placed on the money laundering grey list today when 39 members of the FATF decided its fate, in a consensus that was marked by stiff resistance from the United States, the United Kingdom and Germany.

The decision was taken at around 2:30pm, after Malta failed to garner the necessary support from FATF members. Romania, another EU member state, was also greylisted.

In a press conference with finance minister Clyde Caruana, Prime Minister Robert Abela described the FATF's decision as "unfair" but insisted Malta would continue engaging in dialogue.

“What I can and will say today is this: we will never be uncooperative or obstructive. We will continue working with a determination greater than ever before,” he said.

Abela insisted that Malta would overcome this challenge, just as it had managed the COVID-19 pandemic.

Caruana said the government would continue building on the good that was there, "while strengthening what needs to be strengthened".

The FATF's decision comes despite Malta’s adherence to a Moneyval assessment in which it achieved a high compliance rate on various recommendations.

But the decision comes at the tail-end of years in which Malta’s Labour administration presided over a weakening of anti-money laundering rules: from the sale of citizeship to high net-worth individuals, criticised by the European Commission; to the harsh light on its Financial Intelligence Analysis Unit and inaction on the Panama Papers when the prime minister’s right-hand man was revealed to have set up a secret offshore firm, Malta was never too far off from international scrutiny.

Under the German Presidency of Marcus Pleyer, delegates representing 205 members of the FATF global network and observer organisations including the International Monetary Fund, the United Nations and the Egmont Group of Financial Intelligence Units took part in the virtual meeting of the FATF Plenary.

During five days, they discussed key issues to strengthen global action against the financial flows that fuel crime and terrorism.

The wording of the recommendation FATF members were asked to vote on was not made available to MaltaToday by the international organisation, which said its internal discussions are confidential.

The organisation, which serves as a watchdog against money laundering and terrorist financing, is currently run by the German presidency.

Finance Minister Clyde Caruana expressed disappointment earlier this week that despite clearing the anti-money laundering Moneyval test last month, “some countries” were still pushing for Malta to be grey-listed.

A senior source within one of the island’s regulatory authorities said it was “unfortunate that the decision-making process had taken a political twist”. He insisted that Malta had implemented all the technical and legal recommendations made by Moneyval.

The sentiment was reflected by financial services practitioners. In a statement on Monday, the Institute of Financial Services Practitioners (IFSP) said Malta made substantial progress over the past years to address concerns about the effectiveness of its anti-money laundering regime.

“The IFSP and its members expect that the demonstrable improvements made by the country will form the basis for any decisions taken by FATF as it deliberates whether to place Malta under increased monitoring (the grey list) or not,” the organisation said.

Opposition leader Bernard Grech called the decision a punishment for the entire Maltese people, and said he wants the government to set up a task force that includes all major stakeholders so that Malta can exit the FATF greylist as soon as possible.

A first reaction came from Nationalist MEP David Casa said the decision was the result of years of high-level corruption and money laundering accusations. “Government members were caught stealing from the people and laundering money: Panama, Montenegro, 17 Black, Electrogas... and yet no action was taken by the authorities. Instead of taking action against the powerful, the lives of ordinary people have been made miserable just to open a bank account.”