FATF lists three key issues Malta must fix to be taken off grey list

Why was Malta greylist­ed and what must it do to be tak­en off the list?

Malta must improve its imple­men­ta­tion of three key anti-mon­ey laun­der­ing issues before it can be tak­en off a glob­al watchdog’s finan­cial crime grey list.

The three points form part of an action plan that the Maltese gov­ern­ment has agreed with the Financial Action Task Force, which placed Malta under enhanced mon­i­tor­ing rules on Wednesday. All three points must be ful­ly imple­ment­ed before Malta can be tak­en off the FATF grey list.

At the heart of that plan is an improved com­mit­ment to effec­tive­ly fight tax crimes by using intel­li­gence to catch tax cheats, and bet­ter polic­ing of ulti­mate ben­e­fi­cial own­er­ship rules.

FATF pres­i­dent Marcus Pleyer pro­vid­ed an overview of Malta’s action plan at a press con­fer­ence held two days after the deci­sion to greylist Malta and three others.

He indi­cat­ed that while Malta had the right legal frame­work in place, its imple­men­ta­tion of these legal pro­vi­sions was not up to scratch.

Malta’s cryp­tocur­ren­cy reg­u­la­tion was “not an issue” for asses­sors, he said, appear­ing to con­tra­dict Finance Minister Clyde Caruana who on Thursday said that asses­sors had “sig­nif­i­cant issues” with the sector.

Pleyer declined to com­ment on when Malta could hope to be tak­en off the FATF grey list. 


What are the action plan key points? 

1. Showing that own­er­ship infor­ma­tion for com­pa­nies based in Malta is accu­rate, and that author­i­ties crack down deci­sive­ly when infor­ma­tion about com­pa­ny own­er­ship is found to be inaccurate. 

Where appro­pri­ate, the FATF expects effec­tive, pro­por­tion­ate, and dis­sua­sive sanc­tions, com­men­su­rate with the mon­ey laundering/terrorism financ­ing risks, are applied to legal per­sons if infor­ma­tion pro­vid­ed is found to be inac­cu­rate,” FATF pres­i­dent Marcus Pleyer said. 

Gatekeepers that do not com­ply with their oblig­a­tions to obtain accu­rate and up-to-date ben­e­fi­cial own­er­ship must be sanctioned. 

2. Enhancing the use of finan­cial intel­li­gence by the gov­ern­men­t’s Financial Intelligence Analysis Unit to sup­port author­i­ties pur­su­ing crim­i­nal tax and relat­ed mon­ey laun­der­ing cases.

This includes clar­i­fy­ing the roles and respon­si­bil­i­ties of the Revenue Commissioner and the FIAU. 

3. Focusing FIAU analy­sis on crim­i­nal tax offences, to get it to pro­duce intel­li­gence that helps Maltese law enforce­ment detect and inves­ti­gate cas­es in line with Malta’s iden­ti­fied ML risks relat­ed to tax evasion.

Which other countries were greylisted?

Addressing a press con­fer­ence, FATF pres­i­dent Marcus Pleyer con­firmed Malta had been added to the greylist, togeth­er with 

Haiti, the Philippines and South Sudan. 

Malta: Good on paper, less in practice

Pleyer explained how the FATF analysed not only the tech­ni­cal imple­men­ta­tion of laws on the statute books but also their effec­tive­ness on the ground. That dif­fers from the Council of Europe’s Moneyval, he not­ed, which is sole­ly focused on assess­ing a coun­try’s tech­ni­cal framework. 

The FATF first began review­ing Malta’s anti-mon­ey laun­der­ing regime in 2019. That assess­ment found that Malta failed in nine out of 11 cat­e­gories, called “imme­di­ate out­comes” by the FATF, in terms of their effec­tive implementation. 

What did Malta improve? 

Malta has since made good progress on sev­er­al issues first flagged. Pleyer said Malta had worked well at:

  • Improving the ana­lyt­i­cal process for finan­cial intelligence. 
  • Resourcing the police and empow­er­ing pros­e­cu­tors to inves­ti­gate and charge com­plex mon­ey-laun­der­ing in line with Malta’s risk profile.
  • Introducing a nation­al con­fis­ca­tion pol­i­cy as well as pass­ing a non-con­vic­tion based con­fis­ca­tion law.
  • Raising sanc­tions avail­able for the crime of ter­ror­ism financ­ing and capa­bil­i­ty to inves­ti­gate cross-bor­der cash move­ments for poten­tial ter­ror­ism financ­ing activity.
  • Increasing out­reach and imme­di­ate com­mu­ni­ca­tion to report­ing enti­ties on tar­get­ed finan­cial sanc­tions and improv­ing the ter­ror­ism financ­ing risk under­stand­ing of the non-prof­it sector.

Despite those improve­ments, oth­er seri­ous issues remain, the FATF pres­i­dent said. 

Pleyer said the Maltese author­i­ties “must not down­play the impor­tance of these mea­sures” and empha­sised that the Maltese gov­ern­ment has giv­en the FATF a clear polit­i­cal com­mit­ment to address the remain­ing deficiencies. 

During this week’s FATF ple­nary, Pleyer said its mem­bers were clear that Malta had not addressed all of its shortcomings. 

Government: we tackled 55 out of 58 issues

In a state­ment fol­low­ing the FATF press con­fer­ence, the gov­ern­ment reit­er­at­ed that it felt that Malta did not deserve to be added to the FATF grey list. 

It said that the ini­tial 2019 eval­u­a­tion had list­ed 58 rec­om­mend­ed actions and that over the sub­se­quent 18 months, all but three of those had been addressed.

The remain­ing three — the three points high­light­ed in the FATF action plan — had been addressed “to a par­tial extent”, it said. 

It nev­er­the­less pledged to work with the FATF to address the remain­ing short­com­ings “in the short­est pos­si­ble time­frames” as well as stake­hold­ers who had worked to tough­en up the coun­try’s anti-mon­ey laun­der­ing framework. 

The gov­ern­ment also hint­ed that sev­er­al FATF mem­bers had dis­agreed with the greylist­ing deci­sion, say­ing it thanked the “numer­ous juris­dic­tions that sup­port­ed Malta and put for­ward the view that Malta did indeed make suf­fi­cient and tan­gi­ble progress.” 

Rating agency: economic impact remains unclear

Rating agency DBRS Morningstar said the eco­nom­ic impact Malta would suf­fer as a result of the FATF greylist­ing deci­sion remained unclear and would depend on how quick­ly the Maltese gov­ern­ment moved to tack­le shortcomings. 

While the reper­cus­sions to the Maltese econ­o­my remain uncer­tain, if the under­ly­ing short­falls iden­ti­fied by the FATF remain unad­dressed, this could impact Malta’s attrac­tive­ness as a small finan­cial hub and a des­ti­na­tion for for­eign invest­ment. On the oth­er hand, more tan­gi­ble evi­dence of the effec­tive­ness of Malta’s AML/CFT frame­work could mit­i­gate the impact” said Javier Rouillet, Vice President at DBRS Morningstar.


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