Relief for FIAU as Malta is kept out of latest EU infringements round

A fresh round of infringements notices served on EU states by the European Commission was conspicuous for having omitted further action against Malta’s Financial Intelligence Analysis Unit.

The Commission issued a warning to 10 EU countries for not having completely transposed European laws fighting money laundering and terrorist financing.

In November Malta’s Financial Intelligence Analysis Unit was given ten working days upon receipt of a reasoned opinion to inform the Commission and the European Banking Authority of the measures it intends to take to comply with obligations to fully comply with the fourth Anti-Money Laundering Directive and effectively supervise financial institutions on its territory.

Earlier in July, the European Banking Authority (EBA) investigated and concluded that the FIAU was breaching Union law for failing to correctly supervise financial institutions and ensure their compliance with anti-money laundering rules.

Brussels diplomats told MaltaToday that the FIAU had gone “on a full-on offensive, getting their act together and ensuring the Commission is an integral part of the modernisation process. Much is yet to be done, but the FIAU’s efforts are not going unnoticed.”

Since then, the FIAU’s budget has exploded from just €1.6 million in 2017 to an unprecedented €10.6 million in 2018 as the intelligence unit scrambled to address its shortcomings with an onerous to-do list.

A recent parliamentary question by Nationalist MP Chris Said revealed that the increased budget had been used to improve internal security measures on confidential information, FIAU physical security and for employees’ security; an increase in human resources and other changes in line with a human resources plan; the engagement of international skilled persons to assist the FIAU on anti-money laundering and terrorist financing monitoring, and in drawing up its plan of action and prepare for Moneyval supervisory visits.

In his reply, finance minister Edward Scicluna said the budget increase had been addressed at implementing the necessary reforms to reach institutional obligations and future operational requirements.

A Maltese source in Brussels insisted that the FIAU’s thorough presentation of its action plan had “made it evident that Malta was being wrongly scapegoated… there are bigger concerns that need to be addressed. Today’s actions by the Commission speaks for themselves.”
The same source said that all indications were that once the plan is fully delivered, “the FIAU is home and dry”.

While Malta was not featured in the list of actions announced by the Commission this week, Brussels sent a letter of formal notice to Germany; reasoned opinions to Belgium, Finland, France, Lithuania, Portugal; and additional reasoned opinions to Bulgaria, Cyprus, Poland, and Slovakia for failing to completely transpose the 4th Anti-Money Laundering Directive into national law.

“Despite these Member States having declared their transposition to be complete, the Commission concluded after assessing the notified measures that some provisions are missing. Transposing the rules timely and correctly is crucial for an effective fight against money laundering and terrorism financing, as several recent money laundering scandals in the EU have shown,” the EC said.

“Gaps in one Member State can have an impact on all others. All Member States had to transpose the rules of this Directive by 26 June 2017. Belgium, Bulgaria, Cyprus, Finland, France, Germany, Lithuania, Poland, Portugal, and Slovakia now have two months to respond and take the relevant action; otherwise, the European Commission may pursue the next infringement steps.”

Following the closure of the privately-owned Pilatus Bank in Malta after the arrest of its owner in the United States, Malta was warned by the EC to improve the FIAU’s methodology to assess money laundering and terrorist financing risks, enhance monitoring and supervision, and revise its sanctioning procedures.

It was the first time that the Commission used its power to request the European Banking Authority to investigate potential breaches of Union law by an authority of a Member State. The EC has since also requested the EBA 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 had then opened infringement procedures for non-communication of transposition measures on the 4AMLD against 21 member states.