With Malta now greylisted by the FATF, banks have had to start adjusting to a new reality, including enhanced levels of scrutiny when dealing with foreign counterparties.
Lovin Malta has been informed that some bankers are already facing more delays and bureaucracy in their work when dealing with foreign banks, who are asking them more questions than they used to as part of an enhanced due diligence process.
With this in mind, we reached out to Karol Gabarretta, secretary-general of the Malta Bankers’ Association, to inquire whether banks should expect such problems moving forwards.
Gabarretta spoke in his own personal capacity and not on behalf of the Association.
“It is to be expected that financial institutions, particularly banks, of any country put on the FATF’s list of ‘Jurisdictions under its Increased Monitoring’ – usually referred to as the ‘grey list’ – as a result of strategic deficiencies in its regime to counter money laundering, terrorist financing, and proliferation financing, will consequently face a changed scenario in their transactions with their foreign counterparties,” he said.
Potential knock-on effects could include:
- De-risking by counterparties of local FIs as a result of the reduction of trust in the country
- Delays in payments due to increased scrutiny by counterparty banks, which could impact somewhat supply chains and trade flows
- Increases in cost of cross-border transactions
- Restrictions by correspondent banks on their downstream banking relationships with local banks.
“Thus, it is evident that the foreign counterparties of local banks will henceforth at the very least, have to apply enhanced due diligence to any transactions made by the latter,” Gabarretta said.
“This increased level of scrutiny will obviously be deemed as creating more bureaucracy for Maltese banks and ultimately for their customers.”
However, he said it may still be too early to develop a comprehensive view of the situation, given that banks’ foreign counterparties may still be developing their stances.
Malta was greylisted by the Financial Action Task Force last week, with the anti-money laundering global body flagging transparency issues related to beneficial company ownership information, and issues related to financial intelligence into criminal tax and related money laundering investigations.