Malta has recently earned the unenviable reputation of closing an eye, and, often, both, to charges of money laundering practices. The Pilatus Bank saga is just one example of this sad reality. While local anti-money laundering legislation is robust, enforcement remains weak with both the Malta Financial Services Authority and the Financial Intelligence Analysis Unit failing to show in practice they use their autonomy from the government to ensure financial services and electronic gaming abuses are curbed in the bud.

International institutions, like the European Banking Authority and the European Commission, and MEPs sitting on the European Parliament’s Civil Liberties Committee have shown serious concern about the systematic failures of Malta’s regulatory framework. But the government continues to adopt the ostrich mode as Malta suffers more severe damage because of an inadequate political will to bring about a radical change in regulatory supervision of banks and gaming companies.

MEP Sven Giegold made a controversial commitment to try and instil some sense of urgency in nudging the Maltese government to deal with lax implementation of anti-money laundering regulations. He promised to start a campaign to pressure HSBC to withdraw from Malta if the government did not improve its efforts to combat money-laundering.

He is right in denouncing the tolerance of money-laundering as a result of lax enforcement. But he is wrong in singling out a private bank that is regulated by the European Central Bank and the EBA as a scapegoat to atone for the political ineptitude of the Maltese government in combatting money laundering. If Mr Giegold were to follow through with his threat to persuade HSBC to leave Malta, he would be punishing the Maltese people rather than the politicians who continue to drag their feet on curbing money-laundering effectively.

The condemnation of his tactics by various sectors of the local community is understandable. Perhaps the least convincing comment was that of the Finance Minister who accused the MEP of “political bullying”. What amounts to political bullying is the government’s attitude to brush aside the issue of money laundering, thereby putting at risk Malta’s reputation and the jobs of the thousands of people employed in the financial services industry.

The pressure on the local authorities to get their house in order will continue unabated. European Justice Commissioner Vera Jourova has told the Financial Times that “Brussels would publish a ‘formal opinion’ on action that must be taken by Malta after the financial conduct regulator failed to address concerns raised by the EBA, a pan-EU banking watchdog”.

Many Maltese want the EU’s institutions to protect their interests when local political authorities fail to do so. These institutions follow a due process of first investigating alleged abuses and then taking action to rectify the failures that result from their investigations. However, putting pressure on private businesses like HSBC to withdraw from a country is not part of this process. This bank’s management is more than capable of doing what it believes is best for the company, clients and shareholders.

The pressure by the EBA and the European Commission on the lethargic Maltese regulators and the government should continue for as long as they are satisfied that Malta is committed to combat money laundering effectively.

Punishing the Maltese people is not the way to keep up the pressure.

This is a Times of Malta print editorial

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.