Malta: Grey, White or Black?

Malta is increasing its international presence as the financial services headquarters for many financial companies, including high risk industries such as gambling. As Malta is opening its doors to international commerce, how does the country’s Anti-Money Laundering (AML) Framework match up to international standards?

A recent article in the Times of Malta (https://bit.ly/2JC2ouJO) highlighted that there are many strategic deficiencies in the current Maltese AML framework. These findings prompted Moneyval, the Council of Europe’s Committee of Experts on the evaluation of AML and Counter Terrorist Financing (CTF), to conduct a thorough review of Malta’s approach to money laundering, resulting in a list of recommendations to aid in the enhancement of Maltese financial laws and their enforcement.

Malta has been given a year to remediate their existing frameworks by Moneyval and to build a more enforceable approach. On paper, Malta does appear to have a ‘good’ framework for AML. However, there are still significant issues surrounding the direct implementation of the laws. State organisations such as the Maltese Police, have said for quite some time, that there has always been a bottleneck when it came to combatting money laundering. Their view is that there is an ongoing deficiency in the enforcement of AML Law in Malta which has had a direct effect on business and banking relationships.

Based on the scores provided to the Maltese authorities by Moneyval, some sections rated ‘High or Substantial’ and wouldn’t therefore require any further supplementation. However, the majority of the review concluded that several areas were severely lacking and were rated as ‘Moderate or Low’, the latter being the worst possible rating possible.

As per FATF’s rating system of countries, currently Malta is sitting in the Grey-listing category allowing time to rectify the appropriate laws, although any failure in this exercise could see Malta drop into the ‘Blacklist’. Conversely, a successful re-vamp of their framework and implementation of the list of various recommendations could see them returned to the ‘Whitelist’.

Whilst this is just a caution for Malta to get up to speed with the rest of the EU, Malta’s experience should act as a warning to other similar jurisdictions to ensure enforcement and stringent AML laws and frameworks are firmly put in place, supported and upheld.

Regulated financial institutions throughout Malta and the EU need to warrant that they are compliant to and enforcing all relevant AML regulations to ensure a tougher regime in the fight against money laundering and terrorism financing is being build. This can be achieved through rigorous testing of AML frameworks and good governance. Firms should regularly undertake an AML Health Checks or Risk Control Self-Assessment (RCSA) of their frameworks annually to ensure they are constantly compliant with State Regulations.