The blacklisting of a jurisdiction is a very serious issue, as it can severely restrict a country’s dealings with others, bringing with it irreparable reputational damage, hitting its major industries. In a country like Malta, which is heavily dependant on its financial services sector, blacklisting is a terminal blow which will lead to the ruin of this industry and others, together with all the employees engaged.
Malta’s current regime of anti-money laundering has failed a review by Moneyval, a monitoring body which gave the country about a year to get its house in order, otherwise may face blacklisting procedures. The assessment took a year, and the results do indeed require careful review. The rating was classified as “poor” overall.
The review by Moneyval measures the effectiveness of the way a country combats money laundering across eleven key areas. In order to achieve satisfactory ratings, countries need to adopt the necessary laws and regulations and prove that these are being sufficiently enforced. The grades of effectiveness are four-fold consisting of “high”, “substantial”, “moderate” and “low”. In order to pass the test, a country needs to acquire “substantial” in at least three of the eleven sections. Malta only managed to secure this in two sections. Malta was given low grades in risk management, money laundering, investigation and prosecution and the prevention of financial crime.
Following this result, Malta will be monitored by another international body, the Financial Action Task Force. The bright side would be the fact that there have been other EU member states who went through this process. What is for sure is that there is a lot of work to be done.
If not, a serious possibility of Malta becoming a high-risk jurisdiction would be on the cards, thus impacting the financial services industry. Apparently, experts undertaking this review identified shortcomings when it came to legal professionals and other financial services practitioners in terms relating to the prevention of money laundering.
The assessment undertaken by Moneyval covered the period between 2013 and 2018. In this regard, any legislation or reforms implemented after were not considered, when establishing the final rating.
Apparently, the government has already started working to turn around the situation with consultancy fees extending to millions of Euros. It is understood that the government has reached out to such consultants to avoid a scenario where Malta is blacklisted.
Obviously, the recent controversies plaguing the country did not help. Such include the Pilatus bank saga and the Panama papers scandal involving Konrad Mizzi and the Prime Minister’s Chief of Staff, Keith Schembri.
One will indeed need to monitor to see how this situation develops. Malta needs to prove that it has established legal frameworks in place which prevent money laundering and satisfy the criteria of such regulating bodies.