Banks in Malta Must Toughen Up Against Money Laundering, Warns ECB Chief
Andrea Enria, chair of the supervisory board of the European Central Bank (ECB), has visited Malta to discuss money laundering and terrorist financing concerns with local authorities. The visit comes on the heels of a string of scandals involving Pilatus Bank and Satabank.
Money Laundering Risks Pose Significant Threats
Enria emphasized that money laundering and terrorist financing pose significant risks for banks, which can ultimately impact not only their viability but also the reputation of a country’s financial system. To combat this threat, there must be a continuous exchange of information between the ECB and anti-money laundering (AML) authorities.
ECB’s Role in Supervising AML Legislation
The ECB does not have the legal power to directly supervise AML legislation, but it can withdraw a banking licence if requested by national authorities due to money laundering concerns.
Weaknesses in Malta’s Banking Sector
When asked about the main weakness in Malta’s banking sector, Enria noted that while the sector is well-capitalized and asset quality is sound, profitability has weakened. He also stressed the need for stricter management of non-financial risks such as:
- Conduct risks
- Compliance risks
- Reputational risks
- IT risks
Concerns about Bank of Valletta (BoV)
The Bank of Valletta (BoV) has been a subject of concern in recent months due to its risk profile, corporate governance issues, and weak IT infrastructure. Enria urged BoV to prioritize effective governance arrangements and risk management frameworks to ensure decisions remain within their own risk appetite.
Cyber Security: A Top Priority
Enria also highlighted the importance of cyber security, citing the reliance on technology in modern banking. He emphasized that while managing cyber risk is primarily a bank’s responsibility, it remains a top priority for the ECB.
Malta’s Challenges in Improving its AML Regime
Malta has recently failed an AML assessment by Moneyval and faces significant challenges to rectify the situation. Enria expressed confidence in the country’s ability to improve its AML regime and stressed the need for closer cooperation between prudential supervisors and AML authorities.
ECB’s Power to Take Over Supervision
In cases where local regulators fail to properly regulate their banks, the ECB has the power to take over supervision. While there have been instances of this in the past, Enria emphasized that it is ultimately up to national authorities to uncover AML deficiencies and breaches of relevant rules by banks.