The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism - MONEYVAL is a permanent monitoring body of the Council of Europe entrusted with the task of assessing compliance with the principal international standards to counter money laundering and the financing of terrorism and the effectiveness of their implementation, as well as with the task of making recommendations to national authorities in respect of necessary improvements to their systems. Through a dynamic process of mutual evaluations, peer review and regular follow-up of its reports, MONEYVAL aims to improve the capacities of national authorities to fight money laundering and the financing of terrorism more effectively.
The fifth round mutual evaluation report on Malta was adopted by the MONEYVAL Committee at its 58th Plenary Session and published today the 12th of September 2019.
Key Findings
The report states that Malta has made significant efforts to understand its money laundering (ML) and financing of terrorism (FT) risks, including by conducting a formal national risk assessment (NRA) exercise in 2013/14, with some updating of statistics and findings in 2017. The resulting 2018 report is the primary document demonstrating the country’s understanding of ML/FT threats, vulnerabilities and risks in Malta.
Having said that there are only few FT-related investigations conducted by the Police, of which some were still on-going at the time of the on-site visit. Hence, it is difficult to conclude on the use of financial intelligence by the authorities for the purposes of FT investigations.
Limited resources, both human and financial, allocated to the investigation and prosecution of ML weighs negatively on Malta’s capability to effectively fight ML. While Malta was in principle able to provide examples of convictions for most of the different types of ML, cases of stand-alone ML are very rare and no recent case was presented in relation to professionals of the financial sector. Based on the few convictions the sanctions applied against natural persons appear to be dissuasive. Malta has not yet achieved convictions for ML concerning legal persons.
Law Courts
While the law courts routinely order the confiscation of assets, shortcomings in asset-tracing, in the effective use of provisional measures and in the identification of assets in the judgments cast doubts on the effectiveness of the system and the existence of a coherent policy.
While the actions undertaken by the authorities are not fully in line with Malta’s possible FT risks, the assessment team has however noted recent progress, insofar as the competent authorities have improved their understanding of the threats and vulnerabilities and have undertaken certain actions to mitigate the risks.
Overall, Malta has not demonstrated that AML/CFT obligations are being effectively implemented.
Although fit and proper checks were conducted on these two banks, the risk appetite of the MFSA in licencing a bank with a single beneficial owner, with no track record in banking, raises questions from a wider ML/FT perspective. Market entry measures and on-going fitness and properness measures are inadequate for lawyers, dealers in precious metal stones (DPMS) and real estate agents.
Through a combination of a supranational and national mechanisms Malta ensures implementation of the United Nations (UN) targeted financial sanctions (TFS) regimes on FT and proliferation financing (PF) without delay.
Maltese Legislation
Maltese legislation sets out a comprehensive framework for international cooperation, which enables the authorities to provide assistance concerning ML/FT and associated predicate offences. The FIAU has a broad legal basis for international cooperation and proactively and constructively interacts with its foreign counterparts by exchanging information on ML/FT. The Police are active in the sphere of international cooperation through direct communication (especially via Europol, CARIN and SIENA).
Malta is a relatively large international finance centre specialised in corporate and transaction banking and fund management. Malta’s financial sector is bank-centric. The large and internationally exposed banking sector is highly vulnerable to ML (especially non-retail deposits, correspondent accounts, wire transfers and wealth management, but also in relation to e-gaming and foreign customers). It is estimated that Malta has a significant shadow economy.
Since the last evaluation, Malta has taken steps to improve the AML/CFT framework. Namely, subsidiary legislation was introduced to establish BO registers for companies, trusts (that generate tax consequences), foundations and associations incorporated or administered in Malta. The National Interest (Enabling Powers) Act (which is the main legislative instrument for implementing UN and EU sanctions) has undergone significant changes. The Prevention of Money-Laundering Act (PMLA) has been amended in part to transpose provisions of EU Directive 2015/849 and in part to further clarify and strengthen the national AML/CFT regime. However, some deficiencies remain in Malta’s technical compliance framework.
International Cooperation
A substantial level of effectiveness has been achieved in international cooperation and implementation of PF targeted financial sanctions. A moderate level of effectiveness has been achieved in identifying, understanding and assessing ML/FT risks, using financial intelligence, investigating and prosecuting FT, applying AML/CFT preventive measures by FIs and DNFBPs, implementation of FT targeted financial sanctions and transparency of legal persons and arrangements. A low level of effectiveness has been achieved in all other areas covered by the FATF standards.
Malta has a sound legal framework to fight FT. The Maltese authorities have recently instituted a few FT investigations, but it is difficult to assess whether these are consistent with the country’s FT risk profile as no up-to-date and exhaustive risk assessment was provided by the authorities. There have been no prosecutions or convictions for FT in Malta so far.
Actions to be taken
Malta should, as a matter of priority, take action to improve national understanding of risks, threats and vulnerabilities by:
- a) updating statistical data to inform the analysis of ML/FT risks;
- b) analysing the main predicate offences associated with foreign proceeds of crime;
- c) conducting a detailed analysis of the threat from local organised crime groups (OCGs);
- d) conducting a detailed analysis of the risks arising from the use of legal persons and arrangements;
- e) analysing the ML/FT implications of corruption, tax evasion and the shadow/cash economy;
- f) assessing the vulnerabilities of the FinTech sector, including virtual assets;
- g) conducting a more detailed assessment of FT risks, particularly a detailed analysis of statistics, trends or activities; and consideration of the threats and vulnerabilities of products, services or sectors in Malta.
If you would like further information and assistance with respect to the above please contact Dr. Franklin Cachia, Senior Manager Tax & Regulated Industries on [email protected].
