A few days ago, Malta received the news that it was grey listed by the Financial Action Task Force (FATF). The repercussions of this decision are yet to be understood as developments unfold. Members of Government highlighted that not enough was done to convince FATF members to avoid the grey listing.
The first EU country to be grey listed
In view of the decision taken by the FATF, Malta is the first country within the European Union to have been placed in this list. It is believed that Malta failed to acquire the support of Germany, the United Kingdom and the United States.
Who’s in the list?
The grey list includes another nineteen countries. These include Albania, Zimbabwe, Syria, Yemen, Myanmar, Panama and the Cayman Islands. Many are disappointed that Malta has found itself in such a group of countries, which have tarnished reputations amidst the international community.
The outcome of this vote is undoubtedly one of disappointment. Studies about grey listing suggest negative implications for countries finding themselves in this predicament. Conclusions from these studies point to the fact that grey listing can hurt a country’s economy, negatively impact banking, hindering the growth of business and reducing the attractiveness of the jurisdiction.
The vote was held between thirty-seven countries and two regional organisations. During the sittings, Malta had no say however it is believed that the country lobbied in favour of a positive result.
The way forward
In view of the decision to grey list the country, Malta will be placed under enhanced monitoring, following a tailor-made action plan by the FATF experts. After these shortcomings are effectively addressed Malta will be in a position to justify its exit from the grey list.
The FATF holds three plenary meetings annually. Its function revolves around combatting money laundering by addressing loopholes within financial frameworks. The worst list that a country can find itself in is the black list, where strict measures are applied. The FATF would typically recommend against doing business with these countries or only do so under the highest scrutiny. North Korea and Iran find themselves in the black list.
Finding yourself on the grey list translates into having strategic weaknesses in the fight against money laundering and terrorism financing. It was deemed that Malta did not make sufficient progress in strengthening its framework to fight financial crime. This follows a positive result by Moneyval given earlier in the year.
A country may be taken off the grey list as quickly as one year, as was the case with Iceland. It was put on the grey list in 2019, however removed in October 2020.