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US Treasury Gives Candid Warning To Malta: ‘Urgent Need For Strong Signal On Financial Crime’

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Malta needs to send “a very strong signal” that corruption and criminal misuse of the financial system will not be tolerated, according to a top US treasury official who said his country was offering “the full range of support” to help government fight these crimes.

“We feel that this is urgent to protect both the Maltese financial system and the correspondent banking ties that the islands need,” said US assistant secretary for terrorism financing and financial crime Marshall Billingslea in an interview to The Sunday Times of Malta.

Malta recently lost its last US correspondent bank, creating uncertainty in the financial services and banking industries.

“For us, of particularly urgency is the need to see effective prosecution of money-laundering and tax evasion crimes,” he said. “There are perceptions, right or wrong, about the facility by which individuals can gain access to the Maltese financial system and we are working together to make sure this is no longer the case.”

He made specific reference to the case of Darren Debono, a former footballer under US sanctions.

“It would of course be unacceptable in our view for the Debonos to operate restaurants here in Malta. They are under United States sanctions, and we do expect all Maltese financial institutions to sever all ties with those individuals for their violation of the UN oil embargo related to Libya,” he said, pointing out that Debono was running restaurants through third parties.

Asked whether he felt Maltese authorities were afraid to get their hands dirty with such investigations, Billingslea said one had to be fair with Maltese authorities and acknowledge that many criminal syndicates operate on a global basis, or at least on a panregional basis.

“They do operate very sophisticated and complex networks. So cooperation between jurisdictions is vital. I would say very unequivocally that Malta is highly regarded in the international community for the way it cooperates internationally with other jurisdictions. They do deserve credit for that.”

But he added: “However, you make a good point. Maltese authorities on their own initiative do need to identify and bring forward prosecutions of these matters in domestic jurisdictions as well. That is one of the reasons why I am here, to work on how to support and bolster that capability.”

Asked about virtual currencies, Billingslea warned that there is a global risk posed by unregulated virtual assets.

“We are in a situation where a number of service providers can jurisdiction shop, without having to maintain standards or programmes on anti-money laundering or combating of terrorist financing. It is important that Malta, together with a number of other jurisdictions, implements the new FATF (Financial Action Task Force) standards. We are discussing that here. The Maltese government has taken a number of steps already. We expect all countries to rapidly adopt the new FATF standards.”

Asked to identify the key areas for improvement in Malta’s antimoney laundering efforts, Billingslea said it was important for investigations to result in “a successful prosecution and successful conviction and confiscation of illicit assets, to make it very clear to the underworld that Malta is not a place open for criminal business”.

Billingslea confirmed the US had concerns about Malta’s citizenship-by-investment scheme and questioned why Malta needed it given the fantastic GDP growth the country has achieved.

“The revenue [from citizenship schemes] might be nice to have, but we certainly hope the government recognises the risks that this brings with it. One only has to look at, for instance, the Pilatus case to see that citizenship-by-investment can be an enormously risky thing.”

“The key takeaway is that we have a partnership. Protecting the international financial system requires partnerships and close collaboration between countries. We believe that this government is a partner of the US. We are going to work together and continue to work together. We are not in a situation where we feel the United States needs to engage in any type of unilateral actions. At the same time, we are very concerned to help Malta tackle some of the systematic challenges that it faces. We feel that this is urgent to protect both the Maltese financial system and the correspondent banking ties that the islands need. We need to send a very strong signal together that corruption and criminal misuses of the financial system here will not be tolerated.”

He said “the full range of support is offered” and is being accepted.

“We want to work together on everything from cyber-crime being perpetrated against the banks to the use of shell corporations to establish and utilise front companies here. To support the Maltese government here, we will continue to work with them on a wide range of sensitive topics.”

Asked specifically about Malta’s loss of its last US correspondent bank, Billingslea said: “We think that, working together, if the Maltese government can address a number of the topics I have laid out, they should send a very clear signal to the banking community. No jurisdiction is free of risk. The key is whether the risk is properly appreciated and mitigated by a series of actions. I think the Maltese government is well on its way to both identify the risk areas and tackling them, but much more does need to be done.”

Asked about the recent failure in Malta’s Moneyval assessment, Billingslea said: “In essence, the issues that are being discussed in the press are widely understood, they are not new. The key is that the FATF now not only expects that you have all the necessary laws and regulations on the books. The FATF and Moneyval expect that countries will demonstrate effectiveness in implementing those standards. That is where the rubber hits the road, on effective implementation. That is why I am here and that is what we are going to work on together to achieve.”

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