Finance Minister Edward Scicluna has announced Malta’s first-ever anti-money laundering and terrorist financing strategy and vowed to “take all necessary action against financial crimes”. If the political will of a government to combat financial crime is to be judged solely on declared good intentions, then the minister’s initiative is to be welcomed.
Strategies are essential, and blueprints for model anti-financial crime processes are readily available. But such processes are not just about putting the right structures in place. They are about ensuring that they produce the desired results. Many financial practitioners both locally and internationally are less than impressed by the present administration’s results in fighting financial crime with the necessary determination.
International regulatory bodies like the IMF, European Banking Authority and Moneyval regularly review the country’s anti-money laundering processes to ensure they are fit for purpose. The fact that since 2013 the police have investigated only 92 potential money-laundering cases, a drop of about 20 per cent over the previous five years, is not going to impress independent regulators about the government’s willingness or competence to combat financial crime.
The process of fighting financial crime is owned, among others, by the banking system, the anti-money laundering agency and the police. The local and international media have reported several cases of money laundering schemes operated by companies based in Malta.
The Italian media featured some cases where the criminal organisation ’Ndrangheta used Malta-based gaming companies to launder the criminal proceeds of illegal activities in Italy. Another matter relates to the illegal exportation of oil from Libya by Maltese nationals who are now being investigated by the Italian authorities. Another high profile issue is the licensing of Pilatus Bank in Malta in 2014 when it is now being alleged by US authorities that the chairman of this bank was at the time involved in breaking US sanctions against Iran.
The response of the Maltese regulators and the government has so far been limited to withdrawing the licences granted to certain Italian gaming companies operating from Malta and suspending the operations of Pilatus Bank. This reaction is not enough. Malta’s image internationally has been gravely damaged. No amount of proper regulation and model governance structures are likely to wipe out this adverse publicity unless the government and all those involved in the anti-financial crime process show they are prepared to metaphorically bite anyone who uses our financial system to launder money gained from illegal activities committed anywhere in the world.
Malta had missed the June 2017 deadline to implement the fourth anti-money laundering directive enacted by the EU. Admittedly, this regulation is complex and puts substantial burdens on banks and other institutions to ensure that their processes are indeed effective in combating financial crime.
Malta’s economy increasingly depends on the gaming and international financial services industries. The financial crime risks that this entails are significant. A more convincing effort to abide by EU anti-money laundering regulation is needed to mitigate the damage that has been inflicted on Malta as a result of the abuses of a few high-profile economic operators licensed by local regulators.
The cornerstone of an excellent anti-money-laundering process is the hardwiring of the autonomy of regulators from the political administration. For too long many financial services operators have suspected an invisible but real link between government-appointed heads and the government.
It is good to see that certain heads of regulatory agencies now have to be approved by a cross-party parliamentary committee. One can only hope that the effectiveness of these regulatory bodies will henceforth be judged on a technical assessment of performance rather than a political blessing.
The minister would do well to commit the government to investigate more thoroughly the granting of operating licences to economic operators who have been linked to alleged abuses of Malta’s financial services and gaming regulation. Burying one’s head in the sand by claiming that all licences were granted to bona fide operators and that the due diligence process was flawless, will only perpetuate Malta’s image problem.
International regulatory bodies will not be hoodwinked into believing that Malta’s new anti-money laundering strategy is all that is needed to win their respect for the island’s anti-financial crime processes. And the local and international media will keep up the pressure on Malta despite the claims of some local political diehards that they are motivated by envy for our economic success.
As in other instances in life, concrete action is much more effective than words aimed to reassure.
This is a Times of Malta print editorial