Malta is a socioeconomic miracle. Out of a rocky island, a nation of highly educated people, managed to establish an international corporate centre, a technological hub, a paradise for online gaming and a healthy leisure industry. Malta must be the only country in the world, where most placeholders for advertisement in the airport are occupied by recruitment agents, as demand for employment outstrips supply.
Naturally though, a shining star will eventually turn to a black hole after a long period of overheating. The common phrase; “it’s easier to find a liver than a Maltese accountant” reflects this fundamental weakness, since accountancy is the ultimate moderator of the financial ecosystem. In this environment, the impulsive exposure to the premature blockchain industry is the overheating element needed to get the country spiraling.
Apart from these meaningful metaphors, we have no data to assess the existence and the size of a shadow economy, neither the snootiness to oppose the assessment of a highly competent organisation such as the Financial Action Task Force (FATF). Nevertheless, to the best of any knowledge emerging from our international practice, as unbiased as the source can be, we have determined that Malta is close to the EU average.
The history of assessment
The Committee of Experts launched in July 2019 an evaluation of anti-money laundering (AML) measures and the financing of terrorism, according to which Malta’s supervision, money laundering investigation and prosecution as well as confiscation practices were low. In addition, its risk policy and coordination framework, which was in a higher ranking but not satisfactory, were improved through international cooperation.
Malta has made significant efforts to improve its AML framework since 2018. Especially since the adoption of the Mutual Evaluation Report (MER) in July 2019, Malta has made progress on a number of recommended actions to improve its system, including strengthening the risk-based approach to financial supervision and improving the analytical process for financial intelligence.
Malta has empowered the police and prosecutors to investigate and charge complex money laundering cases in line with the country’s risk profile; it has introduced a national confiscation policy as well as passing a non-conviction-based confiscation law.
They’ve introduced sanctions for the crime of terrorist financing (TF) and the capability to investigate cross-border cash movements for potential TF activity. They’ve also implemented immediate communication to reporting entities on targeted financial sanctions and improving the TF risk understanding of the non-profit organisation (NPO) sector.
Using other metrics, Malta was ranked 53rd globally for 2019–2020, based on the 9th public edition of the “Ranking money laundering and terrorist financing risks around the world”, contrary to a dreadful 113th position for 2018–2019 based on the 8th edition of Basel Institute on Governance. The higher the ranking the less progress the country has made in ML risks, so given the FATF marking, no improvement should be expected for 2020–2021.
With reference to this benchmark, Malta is neither nominated for AML awards, nor to compete in the same league with Haiti, Philippines, and South Sudan.
Turning monitoring to an opportunity
FATF marking is not as terrible as it sounds. The jurisdictions under increased monitoring are actively working with the FATF to address strategic deficiencies in their regimes to counter money laundering, TF, and proliferation financing.
When the FATF places a jurisdiction under increased monitoring, it means the country has committed to resolve swiftly the identified strategic deficiencies within agreed timeframes and is subject to additional checks.
The Maltese government and Malta Financial Services Authority (MFSA) is committed to improve AML/CFT requirements and exit monitoring as soon as possible.
The improvement pillars:
- Effectuating TP regulations in all commercial intra-group transactions; Tax authority should gain access to bank accounts of individuals and cross check if the transactions comply with tax filings;
- Accountancy body to educate expat-accountants and determine the criteria for the eligibility of professionals;
- Enforce the statutory auditors to issue a tax compliance statement, along with an AML compliance statement whereas both should qualify the annual accounts; and
- Government to employ EU tax policy experts and develop automated tools to monitor the audit procedures.
These actions may be irrelevant to FATF, but they come with a Greek sophistication, as they had a material effect to repel tax evasion and establishe a fertile environment for AML actions.