We know now that Malta is to be placed on the list of “Jurisdictions under Increased Monitoring”, the so-called “greylist” maintained by the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog.
Greylisting will have negative impacts on the country, including the lives of ordinary citizens.
No, greylisting will not suddenly bring our economy to a halt. Greylisting is not equivalent to a sanction or embargo. However, Greylisting will impact your life. Some of these impacts will be small, but very visible and annoying. Others will be big, but more subtle and less visible.
It will be harder to do business abroad
If you are a Maltese business and you need to deal with foreign financial institutions for any reason, then you can expect to be subject to significant procedural burdens.
Why? Because the FATF greylist acts as a signal to the international financial community, indicating that Maltese business brings with it higher levels of financial crime risk. Therefore foreign financial institutions will be more careful and methodical about dealing with you than they otherwise would have been.
Costs will increase
Regulators, under pressure to ensure that Malta exits the Greylist as soon as possible, will look more closely at local financial institutions and other businesses subject to anti-financial crime rules (which we call “subject persons”). Regulatory scrutiny is disruptive and costly, and at some stage, those costs will be passed on to consumers of those services. This leads us to the next point.
You may end up being “derisked”
As we’ve just said, regulators will look more closely at the subject person, which in turn means that subject persons will look more closely at their own customers, since that is what regulators expect them to do.
Certain customer categories are more difficult to monitor than others, and therefore Banks and other subject persons may simply choose to stop offering their services to such customers.
Let’s say you run a car dealership. You’ve always run an honest business. But your Bank, knowing that car dealerships have been used by criminals to launder funds, may simply deem your business not worth their while, and terminate their relationship with you.
Jobs may be lost
Increased costs may impact the profitability of certain businesses. This is particularly true of certain industries which are more sensitive to the reputability of the jurisdiction, such as corporate services. In turn, this would impact the ecosystem of service providers that supports these sectors, which is anything from office equipment suppliers to food merchants.
Of all the impacts, this is the most elusive and difficult to quantify. But it may also be the most significant. Businesses that may have considered coming to Malta is less likely to do so. Investments that might have been made, will not be. Jobs that could have been created, will be created elsewhere.
Where do we go from here?
FATF greylisting will be painful. Exactly how painful, we will see.
As Finance Minister Clyde Caruana suggested, some of the negative impacts outlined above may have already been “priced in”, although we are yet to see whether they have been priced in full or not. But of course, that is cold comfort, for it only confirms that we have already started suffering as a country.
But there could be a silver lining to the greylisting cloud. We have an opportunity to truly step up the fight against financial crime. Going beyond the procedures, formalities and legalisms, and truly addressing the criminality that has for too long infected our country. Putting real crooks in real prisons. The news that Malta will be greylisted should serve as a wake-up call.
Charles Cassar is the founder and director of Shoulder Compliance, an anti-financial crime consultancy firm.
Lovin Malta is open to external contributions that are well written and thought-provoking. If you would like your commentary to be featured as a guest post, please write to [email protected], add Guest Post in the subject line and attach a profile photo for us to use near your byline. Contributions are subject to editing and do not necessarily represent Lovin Malta’s views.
Share with someone who needs to know how greylisting will affect them!