Malta urged to enact safe harbour provision

The US Department of State's Bureau for International Narcotics and Law Enforcement Affairs feels that Malta should enact a safe harbour provision to protect those who report money laundering-related suspicious activity in accordance with Maltese government requirements.

A country report by the International Narcotics Control Strategy notes that a marked increase in the number of suspicious transaction reports, up from nine in 1998 to 76 as of the end of 2003, and the expansion of reporting institutions that have submitted such reports indicate Malta's determination to crack down on money laundering.

The report says that Malta has made significant headway to shed its image as an offshore tax haven and it does not appear to have a serious money laundering problem.

The report on money laundering and financial crimes was released by the Bureau for International Narcotics and Law Enforcement Affairs of the US Department of State.

It states that the Attorney General was currently pursuing an investigation into an alleged money laundering case involving an alleged smuggling operation.

Malta's recent acceptance by the Organisation of Economic Cooperation and Development was perhaps the best indicator that Malta was no longer considered a tax haven.

The report suggests that Malta should continue to enhance its anti-money laundering regime in particular and it should adopt cross-border currency transportation reporting, including the reporting of international wire transfer activity.

The report speaks of how Malta has spent the last decade preparing itself for accession to the EU, which, as a result, had toughened up its regulations to attract European investors and introduced several laws designed to shed its image as an offshore tax haven.

Malta has made significant headway, introducing EU-compliant legislation for the prevention of money laundering and strong financial services legislation.

Since 1997, Malta has been closing the loopholes on all offshore financial activities and as of December 31, 2003, 101 companies, down from 285 a year before, retain offshore status compared to some 30,000 that do not.

Offshore registration of banks and international business corporations (IBCs) was halted in January 1997. The number of IBCs declined from 417 in 2001 to 120 as of November 2003.

The government has legislated so that offshore businesses must close and has stated that all such entities will be completely closed down by this September.

Companies and trusts are now fairly well regulated and international entities are subject to 35 per cent tax.

Bearer shares or anonymous accounts are no longer permitted in Malta and the last of the offshore banks, Erste Bank, came on-shore in October 2003; presently there are no offshore banks in Malta.

The Maltese Financial Services Authority is the regulatory agency responsible for licensing new banks and financial institutions. Additionally, the MFSA has been responsible for monitoring financial transactions going through Malta since the supervisory function of the Central Bank of Malta was passed to the MFSA in 2002.

According to the report, there was presently an initiative, led by the Financial Intelligence Analysis Unit in corroboration with the relevant authorities and the industry, to consolidate all guidance notes for all of the covered financial services and other businesses. In 2003, the FIAU, together with the banking unit at the MFSA, updated the guidance notes for credit and financial institutions issued by the Central Bank in 1996.

The report recommends that enforcement should continue to be strengthened as the FIAU continues analysing suspicious transaction reports for referral for police investigation.

Malta has also moved to bolster the prosecutorial opportunities for financial crime investigations. The government has recently designated one of the country's five prosecutors to deal solely with money laundering cases, the report revealed.

Bank secrecy laws are completely lifted by law in cases of money laundering or other criminal investigations.

In January 2002, the Council of Europe's Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures conducted a second round mutual evaluation of the overall effectiveness of the Maltese anti-money laundering system and practices, including compliance with the FATF eight special recommendations on terrorist financing. The review found that Malta was in full compliance with special recommendations No. 2 through No. 7.

Malta was in partial compliance with special recommendation No. 1 (ratification and implementation of UN instruments), because it had signed and ratified the UN Conventions but had not yet fully implemented UNSCR 1269, 1373 and 1390, the report said.

It said the MFSA circulates to its financial institutions the names of individuals and entities included on the UN 1267 Sanctions Committee's consolidated list.

To ensure compliance, the list is posted on the MFSA website and the MFSA contacts every financial institution directly to confirm whether or not the institution has done business with any person or entity appearing on the consolidated list.

To date no assets have been identified, frozen, or seized as a result of this process.

Malta is a founding member of MONEYVAL and chaired the committee until December 2003.

The full report can be accessed on www.state.gov/g/inl/rls/nrcrpt/2003/index.htm.