According to a recent report by the United Nations Office on Drugs and Crime, money laundering and terrorism financing are financial crimes that threaten the world’s security, economic stability and the integrity of the financial system.
It estimates that the annual amount of money laundered reaches two to five per cent of global GDP, or $800 billion to $2 trillion. The huge margin between these estimates indicates the difficulties in detecting and quantifying money laundering.
Europol estimates that less than 2.2 per cent of criminal financial flows are seized and less than 1.1 per cent are effectively confiscated. The task of combating money laundering is more urgent than ever.
The Maltese government is deeply committed toward this global effort to stem financial crime by strengthening further its already sound institutional framework to prevent, detect and deter money laundering and the financing of criminal activities.
Malta’s legal regime for combating money laundering has been unjustly criticised for not being sufficiently robust to cope with its rapidly expanding financial services sector.
The Maltese government had to deal with allegations that it was dragging its feet in the transposition of the EU’s 4th Anti-Money Laundering Directive, and that it lacked the political will to elaborate a far-reaching and coherent national plan in this area.
In the space of a few months, government effectively responded to these allegations by taking concrete and determined action. On December 19, 2017, it enacted legislation to transpose fully the Anti-Money Laundering Directive, and on April 11, it launched Malta’s national strategy and plan for combating money laundering and terrorism financing.
These developments did not occur overnight, rather they were the result of months of preparation and consultation, and coordinated action by the Ministry of Finance, the Central Bank, the MFSA, the FIAU, the MGA and all the other institutions and stakeholders involved in the financial services sector.
The main objectives of the Anti-Money Laundering Directive, adopted by the EU in 2015, with the transposition deadline of June 25, 2017, are to improve upon the third directive by removing previous ambiguities and consolidating anti-money laundering rules across all the EU member states.
The directive also considers recommendations made by the Financial Action Task Force (FATF), intended to bring European legislation up to international standards and to strengthen the integrity of the financial system and the single market as a whole.
The directive has been transposed into Maltese law by virtue of amendments to the Prevention of Money Laundering Act, the enactment of new regulations, and the setting up of beneficiary ownership registers. The new regulations, which entered into effect on January 1, 2018, upgrade the existing regulations through several concrete measures intended to remedy what have been considered vulnerabilities in combating money laundering.
The scope of the new regulations has been widened to include remote gaming. The Malta Gaming Authority already enforced a number of conditions on online operators set out in the Remote Gaming Regulations. However, the application of the Anti-Money Laundering Act to remote gaming significantly raises the level of monitoring and risk assessment of online operations.
Among the other key changes that have been introduced are further clarity in the definition of “beneficiary owner” and more transparency on beneficiary ownership. Anonymity will no longer be acceptable.
The MFSA will be keeping a register of beneficiary owners of companies and other legal entities. The register will be accessible to competent authorities, financial intelligence units, other operators when exercising customer due diligence measures, and anyone who can prove legitimate interest.
A more rigorous sanctioning regime has been introduced for breaches of anti-money laundering obligations which will empower the FIAU to deal more flexibly and effectively with breaches according to whether they are serious, repeated or systematic.
The transposition of the EU Anti-Money Laundering Directive by itself constitutes a solid response to the current threats to Malta’s financial sector arising from spurious allegations of slack supervision and lack of enforcement.
However, the government went further to safeguard the reputation of Malta’s financial sector. On April 11, the government launched its National Anti-Money Laundering and Combating the Financing of Terrorism Strategy and Plan.
This reaffirms Malta’s deep commitment to preventing, detecting and prosecuting money laundering activities. The process involved all key stakeholders and was based on the World Bank National Money Laundering and Terrorism Financing Risk Assessment Tool.
The government is deeply committed toward this global effort to stem financial crime by strengthening further its already sound institutional framework
The strategy is composed of seven key initiatives, which together will significantly strengthen Malta’s anti-money laundering capabilities. The initiatives include the establishment of a national coordination mechanism, and concrete measures to strengthen supervisory, investigative and prosecuting institutions.
These initiatives are broken down into approximately 50 actions which will strengthen each of the bodies that lead Malta’s fight against money laundering and terrorism financing. These include the MFSA, MGA and FIAU, as well as the National Coordination Committee, law enforcement agencies and the Assets Recovery Unit.
An ambitious but realistic time table has been set to ensure that all the initiatives and actions are carried out by the end of 2020.
In spite of the ongoing vacuous allegations, the European Commission in its official reporting about Malta’s financial sector actually found very little amiss and made few recommendations. In its report on the National Reform Programme for Malta, published last year, the Commission merely remarked that Malta’s small supervisory authority was under pressure to oversee a large sector consisting mostly of international-oriented business. The same point is made in the Commission’s Malta financial semester report published on March 7.
However, the overall assessment of both reports is extremely positive and highlights Malta’s robust economic growth and the far-reaching social and economic measures that are sustaining a strong growth momentum in both the short and longer term.
The national strategy that has just been launched goes well beyond what the Commission has recommended. It will ensure that Malta remains a safe country with a stable and trustworthy financial services sector.
It will put to shame all those who persist in their efforts to damage Malta’s reputation following a purely vindictive personal agenda.
Edward Zammit Lewis is a Labour Party MP and chairman of the Foreign and European Affairs Parliamentary Standing Committee.