Malta Added to Grey List by Financial Watchdog Amid Concerns Over Tax Crimes and Lack of Transparency

Malta, a member of the European Union (EU), has been added to the grey list by the global watchdog for money laundering and terror financing, the Financial Action Task Force (FATF). This decision comes amid concerns over tax crimes and a lack of transparency in Malta’s financial sector.

Background

The FATF’s decision is significant as it marks the first time a member of the EU has been labelled a jurisdiction of concern. The grey list includes countries deemed to have insufficient protections against dirty money, alongside Haiti, the Philippines, and South Sudan.

Efforts to Avoid Grey Listing

Before the vote, Malta lobbied hard with FATF members to avoid its fate. However, the United States, one of FATF’s more influential members, is a critic of Malta’s loose efforts to curb financial crime.

Local Reactions

According to local sources, there is a sense of “panic” among political, regulatory, and law enforcement officials since the FATF evaluators failed to give Malta a clean bill of health. Finance Minister Clyde Caruana has said that Malta did not deserve to end up on the grey list.

Malta’s Reputation as a Tax Haven

Malta’s reputation as a tax haven has long been known due to its low tax rates for foreign companies compared to other EU countries. The country was also prominently featured in the 2016 Panama Papers investigation, exposing illicit financial flows and launching tax probes and criminal investigations worldwide.

FATF’s Decision: A Wake-Up Call

The FATF’s decision is seen by some as a wake-up call for Malta, which has long been accused of ignoring financial crime. “We’ve been basically putting up our middle finger to the international community for years now,” said Jacob Borg, a Maltese journalist. “We’ve long operated as a jurisdiction that rewards people seeking to avoid taxes in their own countries, which has obviously pissed off a lot of other nations.”

Consequences of Grey Listing

The grey listing is expected to have significant consequences for Malta, including making it harder for the country to attract international banking and investment. However, Borg hopes that the decision will finally prompt the government to take financial crime seriously.

Government Response

In response to the decision, the Maltese government has said that it is unjust. Many believe that it is long overdue, as the FATF has highlighted Malta’s lack of will to fight tax evasion, which has been a long-standing issue in the country.

The Road Ahead

The consequences of the grey listing are still unclear, but many believe that it will be a turning point for Malta’s financial sector. As one government official said, “It’s been a long time coming, and now we need to roll up our sleeves.”