Deep inside Malta’s FIAU

We’ve heard a lot about the Malta Financial Intelligence Analysis Unit (FIAU) in the news over the past years. Yet few of us know exactly what this unit really does and how it has developed over the years. went through the FIAU’s 2020 Annual Report published last week and found a stark contrast to how it operated just a few years ago.

The table below shows a comparative analysis of the main elements of the work carried out by FIAU in 2020 and 2012.

In 2012 the FIAU handled 120 suspicious transaction reports from operators around the island. Last year, it handled 5,175, or 43 times more. In the whole period between when Malta joined the EU and 2012, it handled 670 of such reports. In just a month and a half during the COVID pandemic, the FIAU handled more cases than in the 2004 – 2012 period.

Last year the FIAU sent to the Police around 4,500 reports, as against 74 in 2012. It made 741 requests for cooperation with foreign authorities, as against 179 eight years earlier. There were more requests for cooperation and information sent last year alone than in 2004 – 2012 period.

Back in 2012 the FIAU carried out 3 on-site examinations. Yes, 3. One every four months. In 2020, the number shot up to 206, nearly 69 on-site examinations every four months. As a result of its “comprehensive” surveillance of the Maltese economy, the 2012 FIAU imposed 11,150 in administrative sanctions. In 2020, administrative fines amounted to €4,651,311 or 417 times more.

There were more requests for cooperation and information sent last year alone than in 2004 – 2012 period.

In 2012, the Government allocated a staff complement of 13 people to the FIAU. By 2020, this number went up to 98.

Another significant contrast emerges when comparing budget allocation. The 2014 Budget Estimates indicate that in 2012 the Government had spent €380,000 on the FIAU, as much as it had spent to finance the hosting of a children’s art festival. By contrast, last year, the agency had €8 million at its disposal, or 21 times more funds.

The 2013 Article IV report issued by the International Monetary Fund (IMF) said that “the number of on-site visits remains low and is not commensurate with the size of the financial sector”. At the rate of one institution inspected every quarter, it would have taken FIAU more than a century to complete a full round of inspections of the sector. The IMF went on to state that “in light of the rapid growth in financial sector and online gaming activities, the implementation of the anti-money laundering framework should be further strengthened”.

The 2012 Moneyval report

The same IMF report noted how the 2012 Moneyval report had concluded that Malta’s framework, though nice on paper, was “largely untested” and that “sanctions have not been sufficiently used, and the financial penalties that have been imposed were not necessarily dissuasive”. Moreover, the 2012 Moneyval report added that “The absence of a national risk assessment to identify the most risky areas for money laundering/terrorist financing gives rise to concerns with regard to the effective implementation of risk based supervisory activity”.

Rather than arguing that Malta did not need to allocate resources because there was less financial crime, the Executive Directors of the IMF had concluded in early 2013 that “The increasing complexity of Malta’s financial sector also warrants further strengthening of the anti-money laundering regime”. This was the same conclusion reached by European Commission experts in their 2012 European Semester Country Report when they had argued that “the very large size of the banking sector raises supervisory challenges”.

There is quite a limited leeway whereby one can toy around international regulatory institutions. After giving the Maltese Government the benefit of the doubt for several years, in recent years the chickens have come to roost. It has taken an extraordinary effort by the current administration to regain the trust lost over the years. It is thus vital that in the coming years, the FIAU does not go back to how it was in 2012, but instead continues to expand its operations and improve its effectiveness.

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Albert Cassar
3 years ago

A good information write-up. Keep the good work