The island’s laws are sound enough to fight money laundering and the financing of terrorism but their enforcement is rather lax and implementation not very evident, according to a Council of Europe report.

The enforcement activities are not commensurate with the island’s “large” financial market, the report adds, particularly when it comes to inspections by the Malta Financial Services Authority and the Financial Analysis Intelligence Unit.

The conclusions emerge from an inspection visit to Malta made last year by the Council’s committee of experts on the evaluation of anti-money laundering measures and financing of terrorism – known as Moneyval.

“The ongoing practice of joint inspections carried out by the MFSA and the FAIU is a welcome step that has certainly contributed towards strengthening the supervisory regime,” the report says. “However, the number of on-site visits remains low and not commensurate with the size of the financial market.

“In addition, the absence of a national risk assessment to identify the most risky areas for money laundering and financing of terrorism give rise to concerns with regard to the effective implementation of risk based supervisory activity.”

The report also criticises the lack of surveillance of non-profit organisations, which might be used as a tool for illegal activities.

The Council’s experts conclude that the Office of the Commissioner for Voluntary Organisations has to be strengthened. While welcoming the creation of this office, the report says the registration of non-profit organisations is still not compulsory in Malta and no specific risk assessment was undertaken to identify how they could be misused for terrorist financing purposes.

No awareness-raising measures have been put in place and public access to non-profit organisation information is impeded by the lack of an electronic form of the register.

On the legislative framework in place, the report praises the efforts of the Maltese authorities to counter illegal activities in the financial sector. Still, these laws need to be enforced and monitoring stepped up.

The police and the FAIU identified a number of national risks and vulnerabilities derived mainly from drug trafficking and economic crimes.

Representatives of the financial sector emphasised the risks related to foreign investment, that could possibly be made for tax evasion purposes, and the distinct risk of inward investment by foreign politically exposed people from Eastern Europe and North Africa.

However, Maltese authorities consider the risks to be low, the report states.