Malta presented the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, with an action plan to secure its removal from the FATF ‘grey list’ of jurisdictions subject to increased monitoring during a virtual meeting on 9 September.
The FATF announced in June that it was adding Malta to its ‘grey list’, reflecting significant deficiencies in Malta’s anti-money laundering and funding of terrorism framework (ALM/CFT). It was the first time that an EU Member State had been included on the list.
Malta faces increased monitoring and will need to demonstrate progress on a list of recommendations to be removed from the list.
The action plan was drawn up by Malta National Coordination Committee, which is chaired by Alfred Camilleri, the permanent secretary at the finance ministry, and includes the heads of the island’s main regulatory and law enforcement entities in the financial sector.
Since the adoption of its FATF Mutual Evaluation Report in July 2019, the FATF said Malta had made progress on a number of the Report’s recommended actions to improve its system, such as:
- Strengthening the risk-based approach to Financial Institution (FI) and Designated Non-Financial Businesses and Professions (DNFBP) supervision.
- 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 Terrorist Financing (TF) and capability to investigate cross-border cash movements for potential TF activity.
- Increasing outreach and immediate communication to reporting entities on targeted financial sanctions and improving the TF risk understanding of the Non-Profit Organisation (NPO) sector.
However, FATF president Marcus Pleyer said that lack of transparency on ultimate beneficial owners of companies and weak financial intelligence on tax crimes were the main “serious strategic deficiencies” that led Malta to the grey list.
“It is crucial for Malta to make sure that systems are in place which are strong enough to address money-laundering and terrorist financing and serious organised crime,” he added.
In May 2021, the Council of Europe’s anti-money laundering body (MONEYVAL) identified substantial progress in technical compliance regarding previously identified deficiencies but “failed nine of eleven of its objectives in terms of effectiveness”.
Following the grey-listing, Malta has made a high-level political commitment to work with the FATF and MONEYVAL to strengthen the effectiveness of its AML/CFT regime and to implement its FATF action plan by:
- Continuing to demonstrate that beneficial ownership information is accurate and that, where appropriate, effective, proportionate and dissuasive sanctions, commensurate with the ML/TF risks, are applied to legal persons if information provided is found to be inaccurate and to gatekeepers when they do not comply with their obligations to obtain accurate and up-to-date beneficial ownership information.
- Enhancing the use of financial intelligence by the government’s Financial Intelligence Analysis Unit (FIAU) to support authorities pursuing criminal tax and related money laundering cases, including by clarifying the roles and responsibilities of the Commissioner for Revenue and the FIAU.
- Increasing the focus of the FIAU’s analysis on these types of offences, to produce intelligence that helps Maltese law enforcement detect and investigate cases in line with Malta’s identified ML risks related to tax evasion.
While the FATF does not itself require enhanced due diligence (EDD) when dealing with individuals and entities from grey-listed countries, certain countries may specify that firms take appropriate actions to minimise the associated risks when dealing with such grey-listed countries.
The UK, for instance, does not draw a distinction between the FATF’s black and grey list jurisdictions and has designated all countries on the two FATF lists as of March 2021 as ‘high-risk third countries’ rendering EDD requirements.
“Sovereign Malta’s provision of trust, corporate and retirement planning services has always strived to apply the highest standards of regulatory compliance, especially in respect of AML/CFT, and will continue to keep up to date with any changes in legislation as they occur,” said Stephen Griffiths, Managing Director of Sovereign Trust (Malta) Limited.
“The FATF decision has raised the risk of reputational damage to Malta, and it is essential that the Maltese authorities now respond by working as hard as possible to get off the list and minimise the impact. Any improvements to its regulatory regime will be a positive move for Malta and the financial services industry as a whole.”