Malta likely to fail Moneyval test – greylisting beckons: US official

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The likelihood of Malta failing this year’s Moneyval exam on money laundering and financial crime is becoming increasingly likelier according to reports based on comments by American officials based in Malta. Such failure, following the reprimand issued last year, would mean that Malta ends up as the first EU Member State on the so called grey-list, that is a nation which poses a high risk of financial crime.

Last September, Moneyval, the European branch of the Financial Action Task Force, or FATF, had concluded that Malta’s exposure to financial crime was significant and lacked resources, infrastructure and seemingly willingness to investigate and prosecute such crimes.

In recent years, Malta’s financial services reputation has been marred by high-profile scandals, such as the sagas related to Pilatus Bank and more recently, Satabank. Over 300 reports of suspicious transactions at Satabank worth in excess of €130 million have been flagged by EY since it was entrusted to administer the bank’s assets by the MFSA.

In its concluding report, Moneyval had identified almost 60 areas for improvement, which all need to be implemented by October. Otherwise, Malta would ended up with the unwanted label of a high-risk jurisdiction, endangering Malta’s financial services industry and the jobs it provides.

While Government has been largely silent on this issue throughout the past months,  Richard Daynes, a legal advisor with the U.S. Embassy in Malta, told attendees of a webinar hosted by ACAMS’ Malta chapter, and quoted by, that Malta is unlikely to pass this test.

“Unless something happens very quickly, the likelihood is [grey-listing] is going to happen, and it could really be disastrous for Malta’s financial market,” Daynes said. “Even with those additional months, there’s a lot—a lot—that needs to be accomplished here.”

Moneyval warned in September that Maltese prosecutors almost never tackle money laundering as a standalone crime and have yet to secure a single conviction against a shell company or other legal entity involved in illicit finance. It had argued that the Maltese judicial system often delays investigations and prosecutions for years, while regulators do not take any dissuasive sanctions for AML violations.

In particular, Moneyval issued a stark warning that Malta’s regulatory authorities, which include the FIAU and the MFSA, have failed to supervise Malta’s high risk financial services sector.

Following this critical assessment, Finance Minister Edward Scicluna had announced plans to create a Financial Organized Crime Agency to more effectively pursue high-end money laundering cases, but little details had been provided and one year on, there is little public knowledge on progress to this end.

Other reforms were carried out or are underway, such as the allocation of more funds to combat money laudnering,  recovering criminal assets and transferring authority for deciding whether or not to pursue prosecutions for serious crimes from the Malta Police Force to the Attorney General,.

Last month, officials assigned 18 more officers to the Malta Police Force’s financial crimes investigations department, bringing the unit’s headcount to just under 80 officers. The MFSA, whose expenditure skyrocketed in 2019, also said in its Annual Report that it had significantly strengthened its financial crime compliance department. The FIAU has also confirmed that a substantial recruitment process is underway.

Malta has also tightened licensing requirements for financial institutions, began updating its national money-laundering risk assessment, ensured officials from multiple agencies have received training on terrorist financing, and dramatically increased the number of onsite inspections of financial institutions.

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