Most people would agree that the best way to prevent crime is to have proper legislation and effective enforcement by the relevant authorities. Financial crime prevention is no exception.
Malta has some of the best laws aimed at preventing money laundering and other forms of financial crime. Still, doubts have been raised as to whether there is the political will to ensure such legislation is enforced at all times.
Local and foreign media, as well as regulators, have in recent years expressed concern that Malta’s financial and electronic gaming industries are being used by some clients to bypass tight anti-financial crime processes in Europe and the US. While there are strong arguments to be made that small states, like Malta, should be allowed to use tax efficiency strategies to gain competitive advantage, closing one or both eyes to possible abuse of financial services and gaming industries will certainly not help the island to convince other EU countries that tax harmonisation should not be imposed on small states.
When concerns are expressed by people in the know about the effectiveness of the enforcement process of the country’s anti-financial crime legislation, it is time for policymakers and operators to engage in a soul searching exercise to determine whether Malta is indeed committed to support international anti-financial crime efforts that have become a high priority for the US government and the European Commission.
The director of the Financial Investigation Agency Unit has publicly declared he is worried about the effectiveness of the anti-financial crime process by questioning the lack of police prosecutions.
The public has both the right and an interest to know whether the criticism being directed at our financial services and gaming industries is justified. Claiming there is some sort of conspiracy against Malta by bigger EU countries that envy its economic success is at best fallacious. Yet, insisting that the island is no more than a tax haven that is only interested in boosting its GDP through shady tax evasion schemes is just as deceptive.
Given how lucrative both industries are and their contribution to the economy, all regulators involved but, especially stakeholders, need to allay fears and set the record straight when any allegations, of whatever sort, are made.
The Malta Financial Services Authority and the Malta Gaming Authority have a crucial role to play in this regard. And so do the police and those agencies whose task it is to compile the sort of information that would sustain any prosecutions or executive decisions.
Regulators should follow the anti-financial crime principles of proportionality and due process.
Proportionality means there has to be a risk-based approach when investigating alleged breaches of the law. The bigger the extent of a suspected financial crime, the wider should be the investigative effort to bring offenders to justice.
The police have the function of prosecuting suspects of criminal action. Due process is a fundamental legal principle demanding that decisions to prosecute are based on solid evidence, obtained through a robust investigation. The comments made by the director of the Financial Investigation Agency Unit raises fears that this may not be happening.
Of course, a perception that Malta tolerates financial crime, including money laundering and tax evasion, can only harm the country’s economy. It is therefore imperative the government would show a stronger political will to not only introduce tough anti-financial crime legislation but also ensure that regulators and the police have the necessary resources to carry out their functions effectively.
A bipartisan approach to this issueis indispensable.