Financial Crime World

Malta Faces Scrutiny Over AML Efforts: What’s at Stake?

Introduction

In a report released last year, MONEYVAL, a Council of Europe monitoring body, evaluated Malta’s efforts to combat anti-money laundering (AML) and the financing of terrorism. The results were not encouraging for the island nation, with regulators and industry stakeholders urged to take immediate action to address shortcomings.

AML: A Growing Concern Globally

AML, a complex and abstract topic, has become increasingly prominent on the commercial and political agendas globally. Financial institutions and businesses must now prioritize AML measures to avoid being deemed non-compliant. Malta’s position as an international business centre makes it particularly vulnerable to money laundering, with foreign stakeholders placing significant weight on country mutual evaluations.

MONEYVAL Report: Disappointing Results

The latest MONEYVAL report focused on the effectiveness of Malta’s preventative and law enforcement efforts, including:

  • Understanding of AML risks
  • Suspicious transaction reporting
  • Prosecutions and convictions

Unfortunately, the results were disappointing, prompting a 12-month deadline for Malta to rectify its shortcomings.

Evolution of Money Laundering: Increasing Sophistication

The evolution of money laundering has been marked by increasing sophistication, with criminals employing innovative methods to conceal their illicit activities. Some examples include:

  • Use of technologies providing anonymity
  • Piggy-backing on reputable individuals or organizations

Industry and Regulatory Response

Industry and regulatory bodies have responded to the growing threat by implementing robust AML measures, including:

  • Collecting extensive customer information throughout the business relationship
  • Increasing resources to combat financial crime
  • Focus on transaction monitoring and AML governance

Consequences of Failure

Some argue that money laundering is a “victimless crime,” ignoring the significant consequences for society. Unchecked money laundering can lead to:

  • Unfair competition
  • Reduced correspondent banking relationships
  • An environment conducive to criminal activity

Malta’s Response: Addressing Shortcomings

Malta has already begun addressing the shortcomings identified in the MONEYVAL report, with 90% of recommendations addressed by spring last year. However, it remains unclear whether these reforms will yield tangible results within a tight timeframe.

The Stakes: Reputation and Institutional Framework

The country’s failure to effectively combat AML could have far-reaching consequences, including damage to its reputation and institutional framework.

Mitigating Risk: Financial Crime Conference

To mitigate this risk, regulatory and risk professionals are encouraged to attend the upcoming Financial Crime Conference on February 13th, hosted by ARQ Group and the Malta Bankers’ Association. The event will feature renowned international experts and policy makers discussing the MONEYVAL report and potential solutions for Malta’s AML challenges.

Conclusion

As Dr Manfred Galdes and Mr Dominic Fisher noted in their article for the Times of Malta, “Just like all vessels rise and fall with the tide, we’ll all suffer if the country doesn’t succeed to take the collective action required to improve our reputation and our institutional framework.” It is imperative that Malta takes swift and decisive action to address its AML shortcomings and restore confidence in its financial sector.