The Financial Action Task Force has placed Malta on its 'increased monitoring list,' the so-called grey list.
The new head of the world's anti-money-laundering standard-setter, Dr Marcus Pleyer of Germany, recently announced at a press conference that Ghana had made significant progress in solving its AML deficiencies and that the African country - which had an on-site visit from FATF inspectors during the Coronavirus crisis - would no longer linger on the grey list. Ghana is a member of GIABA, West Africa's FATF-style regional body or FSRB.
Mauritius and Botswana are both on the list but have made improvements in their AML regimes and will receive inspectors as soon as possible, the Coronavirus permitting. Pleyer said that the FATF hoped to publish the subsequent reports in October.
Pleyer then turned with glee to the countries that he and his colleagues had just placed on the list - Haiti, the Philippines, South Sudan and Malta. They have all promised to complete 'action plans.' Pleyer singled Malta out for comment.
"Malta underwent a mutual evaluation or peer review in 2019 - that's the starting point. The final report outlined a large number of serious issues. Since then, Malta has made good progress in a number of areas. However, serious issues remain.
"These include issues concerning criminal texts and related money-laundering cases. Malta's financial intelligence unit [FIU] needs to support law-enforcement authorities to pursue these kinds of cases and focus their analysis there.
"The Maltese authorities also need to ensure that beneficial ownership information is accurate and up-to-date. This often relates to anonymous shell companies. If information regarding the true ownership of these companies is inaccurate, the authorities need to apply dissuasive sanctions."
Pleyer warned the Maltese authorities not to 'downplay' the importance of corrective measures.
Censure from the FATF has had no immediate effect on Malta’s ratings or those of its domestic rated banks, according to Fitch Ratings. The agency told Compliance Matters: "These weaknesses are captured in the ‘A+’/Stable sovereign rating and in our assessment of the operating environment for Maltese banks at 'bbb' with a negative outlook. However, the FATF’s decision also highlights the risk of reputational damage, which could reduce investment. The effectiveness of the authorities’ response will be important in assessing any potential credit impact.
"Empirical research studies provide mixed evidence on how greylisting can affect capital flows and growth. Repeated greylisting of Panama and greylisting of Iceland in 2019 and 2020 had limited economic effects. The FATF decision is significant given the large banking sector - total banking assets amounted to around 315% of GDP at end-2020. However, Malta’s banks and supervisory authorities have had more time to prepare contingency plans than those in some other countries following an earlier 2019 Moneyval report."