[WATCH] Cosying up to crypto presented ‘significant issues’ for FATF, Caruana says

Clyde Caruana has said that “significant issues” in the cryptocurrency sector flagged by the Financial Action Task Force contributed to Malta’s greylisting by the organisation.

The Finance Minister said concerns were raised over the volume of certain transactions in the past, which may have been used to finance terrorism and other major crimes.

Cryptocurrency was championed by the Muscat administration that coined the term ‘blockchain island’ to describe the country’s drive towards digital innovation.

Muscat had also used his platform at the UN in 2018 to hail crypto as “the future of money” as Malta’s parliament approved legislation to regulate the sector.

But that cavalier attitude towards a very volatile and shady sector appears to have come back to bite the country.

Caruana adopted a very guarded approach when appearing on TVM’s Xtra on Thursday and would not elaborate on the reasons that underpinned the FATF decision to greylist Malta just 24 hours earlier.

Crypto was the only particular issue Caruana raised as he kept his lips tight in what is evidently government’s diplomatic approach on the matter.

“We submit ourselves to the outcome [of FATF] but we will continue the work to achieve the aims and targets others believe we have to achieve… the major issue is one concerning results,” Caruana said, insisting he will wait for the FATF report to be formally published before commenting any further.

“Everything needs its time. Introducing laws required time. For those laws to deliver results, it will take time. The final report will show us where we need to place more emphasis,” he added.

However, he did flag the cryptocurrency sector as problematic and one where government had to take some strategic decisions.

“Significant issues were flagged because of the volume of transactions done in the past.

We have to take decisions on this matter. We have to decide whether everything else should be sacrificed for this sector… we have to ask ourselves whether we should continue to regulate this sector,” Caruana said, hinting at a de-risking approach that could see Malta pull out of cryptocurrency regulation.

But that is as far the Finance Minister would go. Pressed whether there were other ‘political’ reasons underpinning the FATF decision, Caruana remained coy, reiterating that he will wait for the report to be public.

“I know what it will contain and have already sent out feelers to foreign counterparts to understand better what their expectations are and determine whether they are realistic or not and how they can be met,” he said.

Asked whether the US applied pressure for Malta to finalise the hospitals deal with Steward Healthcare and sign a Status of Forces Agreement that would grant certain privileges to American military personnel, Caruana was dismissive.

“At no time since I have been finance minister was there an official or unofficial indication by the Americans that they would put SOFA and Steward as stumbling blocks within FATF,” Caruana replied.

On Wednesday, Malta became the first-ever EU member state to be put on the grey list of jurisdictions that require enhanced monitoring of their anti-money laundering regime.

The decision came as a blow to Robert Abela’s administration that has over the past 18 months embarked on reforms to beef up the country’s fight against financial crimes.

But Caruana insisted it was not all doom and gloom because Malta still had in its favour the positive technical evaluation by Moneyval, a Council of Europe body.

“Ideally the changes we had to undertake would have been done over six years. We had a tight deadline of 18 months… that is a tight deadline to change mentalities and adapt to new procedures, especially for the private sector… Experience shows us that there were economies that continued functioning without problems after greylisting and others that suffered. We passed the Moneyval test, which works in our favour. The impact of the FATF decision on the economy will now depend on what we do and how we communicate the changes the country has done,” the Finance Minister said.

He ruled out Malta getting off the grey list in October when the next FATF plenary is scheduled to meet, adding that it was “an unrealistic” target.

Malta has to continue working to convince others that what it is doing is in good faith, he added. 

Political responsibility has to be shouldered – de Marco

Opposition finance spokesperson Mario de Marco

Opposition finance spokesperson Mario de Marco said the FATF decision appears to have been a political interpretation on Malta’s willingness to fight financial crime.

“What the FATF decision showed was that this was not a simple exercise of ticking the boxes. It concerned doubts raised by others on government’s ability to implement and enforce the laws it introduced on paper,” de Marco said.

He added that the decision was the result of all that happened in the last seven years. “You do not simply erase wrongdoing of the past because you’ve implemented new laws… the decision was a vote of no confidence in Abela’s administration and its political willingness and ability to fight financial crime, effectively implement all rules and cut all ties with its own past,” he said.

The Opposition spokesperson said the ultimate burden of the FATF decision will be shouldered by the financial services industry because their life will not be made easy. He called on government to shoulder political responsibility.

“People from Muscat’s Cabinet should shoulder political responsibility... [former finance minister] Edward Scicluna, who now sits comfortably as governor of the Central Bank, has a lot to answer for. There are people today in Cabinet who defended the excesses and decisions of the Muscat administration,” de Marco said.

He insisted that the next step is to get off the grey list as quickly as possible and the Opposition was ready to support the government’s efforts.

It boils down to prosecutions, confiscation of assets – Chamber president

Chamber of Commerce President Marisa Xuereb said the FATF decision-making process was not only about technical compliance but also about effective implementation.

“It boils down to prosecutions and the confiscation of assets of people involved in money laundering and financial crimes. Only these would send a clear message that we are good gatekeepers to prevent financial crime,” Xuereb said.

She added that it was a reality that small countries had little weight when it came to international lobbying but insisted it would be useless to say that Malta was greylisted because it is a small country.

“If until a few years ago we had Trump in the US and there was little dialogue with EU… the American administration has now changed and there is more dialogue. We have to decide how we shall position ourselves within the EU and rehabilitate our reputation within the EU.

It would be wrong to say we were greylisted because we are a small country but it is a reality that a small country has to have its house in order more than any big country because it can never match its bigger counterparts in lobbying,” she said.

Xuereb noted that the Daphne Caruana Galizia murder case created major problems for the country, especially within the international journalistic community that carries clout.