Financial Crime World

Malta’s Money Laundering Risks: What’s Behind the Country’s Low Ranking?

Recent headlines have raised concerns about money laundering risks in Malta, with many questioning why the Basel AML Index rates the country as a relatively low-risk nation for money laundering despite a critical assessment by the Financial Action Task Force (FATF). The answer lies in new data that was not factored into the index’s latest public edition.

New Data Reveals Increased Risks

The FATF issued a new Mutual Evaluation Report for Malta on July 18, which significantly impacted the country’s ranking in the Basel AML Index. According to the report, Malta’s overall risk score jumped from 3.94 to 5.38 out of 10, with risks related to the quality of its money laundering and terrorist financing (ML/TF) framework increasing from 4.48 to 6.70.

  • The dramatic change is not necessarily indicative of a sudden deterioration in Malta’s ML/TF risks, but rather highlights longstanding gaps in the country’s AML/CTF framework that have only recently been highlighted by the FATF.
  • Experts suggest that this increase in risk score reflects the complexity and nuance of money laundering and terrorist financing risks, which cannot be captured by a single snapshot or ranking.

The Importance of Reliable Data Sources

Experts advise using the Expert Edition of the Basel AML Index, which is updated quarterly and includes all 203 countries around the world. This edition allows users to dive deep into individual indicators and identify specific risks.

  • By using reliable data sources, financial institutions and investors can better navigate the complex landscape of ML/TF risks in Malta and other countries.
  • The case of Malta highlights the ongoing challenge in obtaining quality, up-to-date data to calculate country risk scores for ML/TF. While FATF reports are the most comprehensive data sets available, they are issued too infrequently.

A Complex Picture

Malta’s ranking in other indices also paints a complex picture:

  • The Financial Secrecy Index evaluates Malta as a high-risk country for financial secrecy.
  • The US State Department International Narcotics Control Strategy Report does not label it a major money laundering country.
  • Transparency International’s Corruption Perceptions Index and TRACE Bribery Risk Matrix indicate medium-level risks related to corruption and bribery.

Analysis of the Mutual Evaluation Report

An analysis of Malta’s latest Mutual Evaluation Report reveals that the country has moderate shortcomings in relation to:

  • Preventive measures
  • Regulation and supervision of financial institutions
  • International cooperation

The report also highlights low effectiveness in understanding ML/TF risks, coordinating actions to combat money laundering, investigating and prosecuting ML offenses, and confiscating proceeds of crime.

Conclusion

Experts emphasize the importance of using reliable data sources to assess specific country risks related to ML/TF for compliance or policy purposes. By doing so, financial institutions and investors can better navigate the complex landscape of ML/TF risks in Malta and other countries.