Why was Malta greylisted in the first place?

There is a myriad of reasons why Malta was greylisted. For years, the country was digging its head in the sand over growing regulatory and enforcement concerns – spitting in the face of our EU counterparts who were working hard to close major loopholes in the financial system.

Malta had become a hotbed for financial crime with the country falling under the international microscope following the assassination of journalist Daphne Caruana Galizia. 

Malta had already begun working on reforms. Unfortunately, Malta only started getting in line once it was too late. The country did not enact reforms on its own accord but instead waited to fail a crucial Moneyval test before acting.

Scrambling to get in line with Moneyval within the space of a year and a half was an admirable effort. However, it clearly was not enough to convince key players in the FATF that Malta was serious in tackling money laundering and the financing of terrorism in the long term.

What did Malta need to do to get off the grey list?

Malta was put on a FATF action plan after its greylisting which had three key points to improve anti-money laundering regulation and enforcement before the country could be back in the clear.

At its heart, the plan asked Malta for better enforcement when it came to tax crimes, murky ownership structures and sharing information with both local and international authorities.

It demanded that the ownership information for Malta-based companies is accurate and that action must be swift for those who fail to comply. 

Financial intelligence at the FIAU was asked to improve, particularly in terms of supporting tax offences and money laundering cases, with specific references to the responsibilities of the FIAU and the Inland Revenue Commissioner.

The FIAU was also asked to beef up its analysis of tax offences to help Maltese authorities investigate money laundering risks related to tax evasion. 

Essentially, the FATF felt that while Malta was certainly good on paper, in practice it left a lot to be desired with the effectiveness of enforcing regulations seriously questioned. 

Admittedly, concerns over Malta were not as grave as others on the grey list and the country was already working on implementing similar reforms because of Moneyval. Still, the FATF wanted to see more commitment from Malta over the issue.

Has enforcement improved?

Malta got quick to work and made significant strides in the months that followed the greylisting. And while most of that work went unnoticed by the public at large, arrests and charges with regard to financial crime caught the eye of many.

While high-profile arrests began soon after disgraced former Assistant Police Commissioner Ian Abdilla was booted out of the door following years of inaction, they have continued with the Malta Gaming Authority seeing two of its former top officials face criminal charges. 

There has still been some criticism levied at authorities, particularly after major questions were raised over the failure to act on European Arrest Warrants for Ryan Schembri and Iosif Galea, who have links to Keith Schembri and Joseph Muscat respectively; and the inaction on allegations of financial crime involving politicians.

Major banks and companies have also faced hefty fines over money-laundering breaches. However, there are people who have argued that the police have become too overzealous with the law.

One major issue is police treating tax evasion as a predicate offence for money laundering, a crime punishable by an imprisonment term of up to 18 years or a fine of up to €2.5 million. While it certainly has its merits, it has opened up the door to bogus money laundering charges, which have helped inflate figures.

More often than not, self-employed workers or small-time business operators were facing the brunt of the crackdown, while the bigger fish continue to operate with relative freedom.

How was Malta affected?

For the most part, people did not feel the direct impact of Malta’s greylisting. However, the government and businesses will be counting their luck that the greylisting did not continue for longer. 

It has created a bureaucratic nightmare for many working in financial services, banking, or gaming, for example. Unfortunately, it was smaller companies who felt the bigger pinch with larger corporations already having enough resources to deal with the uptick in regulatory demands. 

It also had a major effect on business owners and self-employed individuals who found it difficult to open a bank account in Malta, a consequence of rigorous due diligence checks following Malta’s greylisting.

Meanwhile, the greylisting did nothing to help Malta’s attempts to rebuild its international reputation, something which could take years to recover from. 

Still, on the whole, people did not feel the pinch from greylisting, with attention more focused on the economic fallout of the COVID-19 pandemic and the Russian government’s invasion of Ukraine. 

What next?

While Malta may finally be off the grey list, it doesn’t mean we are in the clear. International authorities will continue to keep an eye on Malta’s progress and a return to past behaviours will likely lead to Malta being greylisted once again. 

This should not be a moment for the country to rest on its laurels. As we all know, the net of financial crime is cast wide over Malta with countless major inquiries and investigations still underway. The fight to dismantle it does not stop here. 

Authorities and the public alike must continue to act as a watchdog – demanding action and enforcement, particularly when it involves top officials in the country. 

Our future was already put at risk once, we cannot let it happen again.

Does Malta do enough to fight financial crime?