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A transparent economy - Aaron Farrugia

As the seventh edition of the Basel AML Index hits with its list of 129 countries ranked according to their risk of money laundering and terrorist financing, many countries have started pointing fingers at each other.

The Basel AML Index is a report issued by the International Centre for Asset Recovery, which is a part of the Basel Institute on Governance. The index takes into consideration the frameworks of anti-money laundering and those that counter the financing of terrorism (AML/CFT) by fighting forces like corruption in the economy.

Malta, which ranked at only 118th on the fatal list, has been subjected to criticism by the Opposition and some quarters in Brussels and beyond as a tax haven that could not care less about rampant money laundering in its jurisdiction.

But the Basel AML Index shows that, in their haste to target Malta, some of our biggest critics  appear to have overlooked the initiatives taken by the government to tackle money laundering. For the effectiveness of a government is not mapped by its fallouts but by the actions it takes to tackle them.

Earlier this year, we demonstrated our determination to take corrective measures for the security of the Maltese economy by establishing the National Coordinating Committee for Anti-Money Laundering and Financing of Terrorism. This committee, as stated by Finance Minister Edward Scicluna, is part of “an institutional framework to supervise, gather intelligence on and take all necessary action against financial crime”.

The effectiveness of a government is not mapped by its fallouts but by the actions it takes to tackle them

The underlying principle behind the establishment of the committee is the National Anti-Money Laundering and Combating the Financing of Terrorism Strategy, which, essentially, comprises seven initiatives to be implemented in Malta over the course of three years.

In a nutshell, these involve  establishing a national coordination mechanism, strengthening and clarifying the supervisory framework, enhancing the internal capabilities of the financial intelligence unit, enhancing investigation and prosecution capabilities, establishing an effective asset recovery unit, increasing transparency of legal entities and arrangements and building on the existing international cooperation set-up.

If some high-profile critics are now willing to entertain the idea of giving the government its due credit, they should not forget to talk about the advent of the MiFID II in the European financial market in the beginning of this year. The directive is a response to the financial crisis of 2007 and aims to establish absolute transparency across all financial markets.

The Markets in Financial Instruments Directive is a step towards the restoration of faith and confidence among the community of retail investors who have been stuck hard in the past due to the lack of regulations in the market.

Experts believe that strict regulations will not just curb unfair and illegal practices but will also redefine the market as a more responsible and safe space for investors, businesses and consumers.

It cannot be argued that the MiFID will go a long way in supporting the cause of Malta to put an end to money laundering and financing of terrorism. The only way such activities survive are lack of transparency and untraceable responsibilities in the market. And as the MiFID hits the very foundation of these malpractices, it is not unrealistic to believe that a re-organisation of the Maltese market is not a far-fetched dream.

Looking again at the Basel AML Index, it is evident that, when compared to neighbouring economies Malta has managed to be the least risky jurisdiction in terms of money laundering and financing of terrorism. And when we juxtapose its current position with the current initiatives to purge the market of such practices, the road to a clean economy seems nearer than ever before. This has only been made possible with the joint efforts of the government of Malta and the financial services authority. Which, again, goes on to substantiate the earlier argument that a government is indeed known by the measures it takes to improve the quality of life and work of those under its jurisdiction.

Aaron Farrugia is Permanent Secretary for European Funds and Social Dialogue.

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