It’s been two months since Malta was greylisted by the Financial Action Task Force, and Graham Bencini is already encountering new hurdles in his day-to-day work.
“What people don’t understand is that the current effects are being felt by people who practice in the financial services industry, particularly on a banking level,” Bencini said when interviewed on Lovin Daily.
“Nowadays processing banking transactions is practically impossible, it’s become very very difficult.”
Bencini, who was recently appointed president of the PN’s administrative council, is also managing director of a corporate services firm and as such regularly witnesses the realities of greylisting.
“Recently I had to make a transaction from a company’s Maltese bank account to the VAT Department, a regular transaction to pay VAT,” he recounted.
“The bank asked me to provide every sort of documentation under the sun to prove that VAT payment was legitimate, which is ridiculous. I had to show VAT returns, flow of funds, give a reason for the transaction and explain certain legislations to the bank about why this VAT payment was necessary.”
“This is just one transaction from a local bank account to the Central Bank, let alone overseas transactions. Nowadays we can see clients’ bank accounts closed for no particular reason, with the bank just blaming it on compliance.”
“We’re then left to explain to clients why their accounts were closed and we can’t give them a reason because we aren’t given a reason. We’ve also seen cases where we’ve had problems processing US dollar transactions and BOV has lost its various correspondent banks after the Panama leak.”
He warned that while the government has placed a lot of pressure on the financial services industry through new compliance rules and KYC legislation, the country’s problem has from the start been a lack of enforcement.
“We can have the best rules and legislation on paper but unless it’s being enforced against the people who caused the problems, then it’s pointless and that’s what the FATF sees.”
“It’s becoming impossible, and it’s unfair on people in the industry who are being subdued to what I think is an overkill of KYC and compliance requirements.
“There many professionals out there who carry out their daily tasks in a professional and ethical and legal manner, but they’re still being placed in a situation where they’ve had to face these ridiculous compliance measures. It’s becoming harder to conduct transactions than the Vatican City.”
Bencini is adamant that Malta’s greylisting largely has its roots in the Panama Papers scandal back in 2016, when then Minister Konrad Mizzi and OPM chief of staff Keith Schembri were revealed to have owned Panama companies.
“We had the only EU minister caught redhanded with a hidden company in Panama, a country which was blacklisted as a high-risk jurisdiction by the EU and no action was taken,” he said.
“Imagine the message given across when the Prime Minister defended one of the country’s top ministers even after he was caught redhanded. It wasn’t the only reason [behind Malta’s grey listing] but it was a main reason that brought a lot of heat on us. Then they started investigating our country and found that other high corruption cases were left uninvestigated.”
“If the Prime Minister had taken action back then, we probably wouldn’t be in the situation we are in today. But he defended them till the very end, one thing led to the other, international organisations cast a massive spotlight on Malta, this got worse when Daphne Caruana Galizia was assassinated, and things went downhill very fast.”
“We got a lot of heat and a lot of negative international press; we were called a mafia state and a corrupt country where you can launder your money. You don’t need to be a financial services expert to see the sequence of events.”
Bencini warned that while the impact of greylisting has so far been largely contained within the financial services industry, it could have a domino effect on the rental market if it turns Malta into a less attractive jurisdiction.
“We must realise that many people have taken out home loans to rent apartments and are paying back their loans through their rental income. If the rental market collapses because Malta is no longer seen as a viable destination for investors, gaming, financial services pharmaceutical companies, funds and other companies based in Malta for purposes of our beneficial tax rate, then a number of those apartments will be left empty and the people who took out a loan will have a problem.”
“The rental market is expensive but prior to greylisting, foreign nationals had no problem paying the rent. COVID-19 might have had an impact to be fair, but we can’t deny that greylisting will have a massive impact.”
“The worst thing is that Robert Abela is delaying taking action because he doesn’t want to ruffle anyone’s feathers.”
Have you been impacted by Malta’s greylisting yet? Feel free to reach out on [email protected]