Action and monitoring on money laundering critical to avoid greylisting by Moneyval – experts

Financial expert Godfrey Leone Ganado believes that in order for Malta not to fall into the Financial Action Task Force (FATF) grey list, the authorities need to show that action is being taken to redress the situation by implementing more rigid regulations on money laundering and on due diligence procedures, with tight achievable timelines.

He also stressed that the authorities must bring closure to the investigation into the assassination of journalist Daphne Caruana Galizia. Leone Ganado told The Shift he firmly believes that Malta needs to open its doors to foreign participation in investigations and prosecutions of Politically Exposed Persons in criminal activities, particularly money laundering.

He echoed calls by Matthew Caruana Galizia for an umbrella investigation into corruption and murder, through the establishment of a Europol Joint Investigation Team.

A recent report claimed that Malta is increasingly likely to become the first EU country to end up in the FATF grey list. Falling into this list means that a country is not considered as a safe jurisdiction for preventing terror funding and money laundering.

The country is presented with recommendations and given a specific period to report back to the European branch of FATF called Moneyval. The implications for Malta are very serious, and Leone Ganado’s comments were in line with assessments by a number of other experts consulted by The Shift.

Malta must be prepared to submit itself to very regular monitoring by international agencies and to show absolute transparency in validating its actions, he added.

“It has to show the will, with proof, that independent action has been taken on money laundering activities carried out in Malta and through Malta, over the years since the present political party was elected to government.”

On the need to allow foreign investigative teams to aid the investigation into the journalist’s assassination, Leone Ganado added: “The lead foreign participation of investigators in bringing to a closure the heinous assassination of Daphne Caruana Galizia and the process of justice for all those directly or indirectly involved, not least the impunity of persons like the Attorney General and the Commissioner of Police is needed”.

Leone Ganado said that this assassination was one of the multiple reasons why Malta risks falling into this list.

“The reluctance of the government to take concrete action to independently investigate and prosecute the masterminds behind the assassination and the apparent involvement of the government itself through State captured institutions” are all contributors to this possible downgrade in Malta’s reputation.

Effect on local businesses

Besides the huge reputational blow, having Malta under the lens of Moneyval and FATF has a terrible trickle down effect on major segments of our economy or, as Leone Ganado simply put it, a negative ripple effect.

The financial expert said that just as Malta managed, through a process which took years, to provide a banking background for major companies to move their operations to Malta, greylisting will have exactly the opposite effect.

“With the shutdown of these financial services companies, and the difficulty in attracting new ones to replace them, the positive ripple effect will now lead to a negative ripple effect, and the first ones to suffer the impact, are the middle to lower class members of our society.”

This situation is already present and increasing on a daily basis, the expert claimed, as poverty is rearing its head at a high rate and food banks are starting to find it difficult to cope with the present demand.

Other experts who spoke to The Shift agreed that falling into this tier will have immense adverse effects on the country’s reputation.

“Going by the experience of other countries faced with a similar situation, there is no doubt that the economic impact would be significant and that is why every effort needs to be undertaken to avoid this eventuality. Malta’s attractiveness for investment would surely be weakened and this would have an effect on various segments of our economy,” one expert who preferred to remain anonymous said.

Right now the Moneyval grey list includes countries like Albania, Cambodia, Ghana, Zimbabwe, Syria and Yemen, among others. Should the greylisting go forward, Malta will be the only Member State in the European Union to be included.

“This means that any foreign company shortlisting countries where to set up business, will most likely exclude any country classified as Grey. Also companies that are already set up in Malta, will reassess their situation and probably start downsizing or closing down to relocate to White List countries.”

One other major implication, he explained, is that the key to business operations is access to international banks of very high repute.

Moneyval’s fifth round report on Malta contained 58 recommended actions. The main weaknesses identified were related to the adequacy of supervision, investigation and prosecution of the money laundering offence and asset freezing and confiscation, the expert explained.

“Simply put, the FATF requires a high-level political commitment that the jurisdiction will implement the legal, regulatory, and operational reforms required. Whether or not a recommendation is made to the plenary of the FATF for a country to be included in the list will depend on the level of political commitment, the urgency attributed to reform and the effectiveness and timeliness of the actions actually taken.”

As devastating as a pandemic

As crunch time looms further and the authorities in Malta have to try and salvage the situation, the Malta Employers Association (MEA) has said that the consequences of being greylisted by Moneyval could be “as devastating as the COVID-19 crisis.”

When addressing the MEA’s annual general meeting, President Doris Sammut Bonnici said Malta should never have come to this state with “Moneyval breathing down our necks.”

She said that Malta’s reputation was rocked by a series of major scandals which have drawn the wrong attention on an international level.

Finance Minister Edward Scicluna has denied claims made by local newspapers suggesting Malta is asking for a 6-month extension to its deadline and dubbed it as spin to make it seem the government feared it would not meet the deadline.

Ever confident, ever positive Prime Minister Robert Abela has downplayed the seriousness of the issue saying that Malta will skirt Moneyval grey list just like it managed to “win over the pandemic”.

Malta has until October to rectify the list of recommendations put forward by the FATF.