Why Malta will rise to the FATF challenge

The week before the plenary vote of the FATF deciding whether to put Malta on a grey list, Opposition Leader Bernard Grech wrote an open letter to the FATF saying the Nationalist Party, as an alternative government, would work with it to restore the reputation which Malta has lost.

Prime Minister Abela was dumbfounded by Grech’s letter as it seemed to imply that the opposition wanted the country to end up on the greylist. Abela said he had never expected Grech to turn the FATF evaluation process into a petty political exercise.

The issues flagged by international anti-money laundering experts had not begun when Labour came to power but were systemic shortcomings stretching back decades. Previous administrations had simply swept these issues under the carpet. The current administration had introduced a raft of legal reforms across a number of areas to address these shortcomings.

Malta was eventually greylisted by the FATF, a decision which Abela described as unjust, given that most of the concerns flagged by global assessors had been addressed. The decision could have serious repercussions for the country’s economy.

A majority of countries had not agreed with the FATF’s verdict. The vote followed the positive MONEYVAL report which had recognised the major advances made, concluding that Malta had addressed the majority of its recommendations and was no longer “non-compliant” with financial crime standards.

The FATF vote was widely seen as political and a case of “being strong with the weak, and weak with the strong”. The three countries that insisted on greylisting Malta, the US, UK and Germany, are certainly not in a position to point fingers when it comes to money laundering.

The three countries that insisted on greylisting Malta, the US, UK and Germany, are certainly not in a position to point fingers when it comes to money laundering.

Half of the money laundered annually through international banks and financial institutions, estimated between USD 500 billion and USD 1 trillion, is conducted through banks in the USA.

The FinCen Files shone new light on how the U.S became a magnet for money launderers from around the world, from drug cartels and human traffickers to Russian oligarchs and African kleptocrats, due in good measure to systemic regulatory problems.

Th US is one of the last advanced economies not to require company ownership information that could help crack down on terrorists, drug kingpins, and sanctions evaders. The issue was only addressed last January.

In Germany, suspected cases of money laundering and terrorist financing jumped by 50% in 2019. FIU Head Christof Schulte noted that the prosecution of money laundering in Germany is not traditionally well established. €30BN of illicit funds were funnelled into German real estate in 2017.

In March, two senior lawmakers from Merkel’s conservative alliance resigned after accusations they profited from the coronavirus pandemic through alleged kickbacks for state purchases of face masks.

The FinCEN Files highlighted the role of the UK’s financial system in helping money launderers, exposing London as a money laundering hub.

Over the years, journalists and NGOs have highlighted the ease with which companies can register companies in the UK. Most are shell companies, existing only on paper, often a way to obscure the source of money made from bribery, embezzlement, kickbacks and political donations.  

The book “The Great Tax Robbery”, written by investigative journalist and former tax-inspector Richard Brooks, charts how the UK has become a global tax haven that serves the super wealthy, all with the Government’s help. He cites how British companies strongly influence tax laws, shows why multinationals can operate almost tax-free in the UK, and how the taxman turns a blind eye to billions in illegally evaded tax in secret Swiss bank accounts.

Notwithstanding the hypocrisy, the government accepted the FATF decision with humility and pledged that it would implement the necessary changes to make Malta’s anti-money laundering regime more effective in the shortest possible time.

Prime Minister Robert Abela reassured business stakeholders that they will continue to find this government at their service to generate business and investment.

Finance Minister Clyde Caruana confirmed that the government would not be modifying its GDP growth targets, despite the FATF decision, and reassured us that the decision would not have a serious impact on the country’s economy.

One of the strong points of this government is its determination to turn challenges and threats into opportunities.

The Prime Minister is determined that the FATF’s verdict, which is a serious challenge, will leave the country with a strong will to fight financial crime. He expressed confidence that the country will emerge from the FATF grey list as a more effective and attractive jurisdiction.

The latest DBRS report acknowledges the significant progress made by Malta to address these challenges and expressed confidence that this could serve as a catalyst to accelerate the push to improve AML/CFT effectiveness, corruption control, and enhance further the governance of Malta.

This endorsement of Abela’s positivity and track record fills us with courage that he will deliver on his promises, and that the satisfaction expressed by local Quislings will only be temporary, to be punished by those of good will at the appropriate time.

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