News

Editor’s Note: In the 18th installment of our series, the ACAMS moneylaundering.com legal team reviews Malta’s efforts to stay off the Financial Action Task Force’s “gray list” of countries with strategic AML/CTF deficiencies.

On Sept. 12, 2019, Moneyval, FATF’s representative in Europe, published the results of its latest evaluation of Malta’s anti-money laundering and counterterrorist financing regime, finding shortcomings in the nation’s efforts to trace and seize illicit assets, levy penalties in response to violations, investigate graft and properly resource risk-based supervision.

Despite Malta’s continued insistence on its commitment to fight financial crime, the country now faces the prospect of being added to FATF’s list of high-risk jurisdictions, or gray list, which would place the country under the group’s enhanced follow-up procedures and severely restrict potential investment.

The Mediterranean nation has consequently sought to address its shortcomings.

In October 2019, the month after Moneyval published its findings, Malta’s Financial Intelligence Analysis Unit, or FIAU, proposed amending the Prevention of Money Laundering and Funding of Terrorism Regulations, or PMLFTR, which transpose the EU’s latest AML directive, 5AMLD, into national law.

Two months later, Malta’s Financial Services Authority, or MFSA, confirmed Moneyval’s findings in a report that flagged the prevalence of ineffective customer-risk assessments among the country’s financial institutions, inadequate due diligence and insufficient monitoring of transactions.

Malta significantly hastened its reforms in February by enacting the Prevention of Money Laundering (Amendment) Act of 2020, or PMLA, to update administrative penalties against AML violations and provide for information exchanges between Maltese supervisory authorities and supervisory authorities outside the country, and the PMLFTR, which identified several new obligations for businesses.

The PMLFTR were amended again in June 2020 to grant additional powers to the FIAU, including new authorities to administer a central register of bank account data and supervise implementation of any future legislation on cash restrictions.

July brought the introduction of the Proceeds of Crime Act, which would establish a new asset-recovery bureau for identifying, tracing and confiscating illicit assets, and this month Malta’s financial intelligence unit, FIAU, published amended rules for reporting suspicious transactions.

Financial technology has also been a focus of reform. In February, FIAU expanded AML program requirements to cryptocurrency firms and prepaid card providers, and in April entered into a memorandum of understanding with the Malta Gaming Authority, or MGA, and published revised procedures to increase cooperation and collaboration.

Other sectors targeted in the effort to stay off the gray list include company services providers, real estate and property firms, attorneys and complex investment schemes.

Whether Malta remains off FATF’s gray list, the impact of its reforms have already been felt: FIAU announced in March that the volume of suspicious transaction reports rose dramatically in 2019 from previous years, and announced in April that new funds had been earmarked for a significant staff increase by 2022.

MFSA disclosed in May that it conducted 25 AML-focused onsite inspections in 2019, and MGA claimed in an annual report in June to have conducted 28 AML-related audits for the year.

FIAU’s own annual report stressed the agency’s efforts to strengthen AML enforcement, including by fining Credorax Bank Limited, Sparkasse Bank Malta, Integra Private Wealth, FIMBAnk, several notary firms and company services providers, an investment services firm and a trustee services company, and multiple individuals who violated sanctions against Libya.

Malta has already received limited praise for the reforms but only time will tell whether the nation has done enough to keep itself off of FATF’s gray list.