The grey list is getting greyer

Malta is a world leader in setting standards for others to follow.

Okay, yes, the effect is indirect. New standards are being set in order to close the loopholes Malta keeps trying to exploit. But the country is still a proud catalyst for change. No one’s better at finding a way to evade a rule while claiming to follow it in good faith.

The Ministers of the Financial Action Task Force held their biennial meeting last week, where they took stock of the results of the 4th round of mutual evaluations. You know, the round Malta failed despite frantic last minute lobbying by the government in the hopes of avoiding the grey list.

We know how well that went. But don’t wurr-ry, sources inside the government expressed their optimism earlier this month that Malta will be off the list of shame and back in good standing as early as June.

They were trying to put a positive spin on the latest visit of FATF assessors, but the results of the organisation’s biennial meeting just dumped a big bucket of ice cold water on the smouldering embers of Clyde Caruana’s pipe dream.

The Methodology and Procedures for the 5th round of evaluations seem like they were written with Malta in mind.

“The next round of mutual evaluations will place an even greater focus on effectiveness,” the report said, “to ensure that countries are implementing and making use of the laws, regulations and policies that are being passed.”

Passing a pile of laws on paper while doing absolutely nothing in practice helped Malta scrape by the GRECO evaluation, but it didn’t pull the wool over the FATF’s eyes — and those eyes just got beadier.

“No problem,” you might be thinking. “We’ll just throw a few small fry under the bus and the top dogs can continue to enjoy the utter impunity that made Joseph Muscat the OCCRP’s Person of the Year in Organized Crime and Corruption.”

Unfortunately, the evaluators thought of that, too. As former US President George W. Bush famously said, “Fool me once, shame on…shame on you. Fool me… you can’t get fooled again.”

The 5th round assessors are being explicitly told to “focus on the areas where the risks are highest, not just lower-risk areas where it is comparatively easier to launch investigations and secure convictions.”

In case it wasn’t clear enough for Malta, the Methodology stressed that the 5th round will be “results-oriented, focusing on specific actions”.

That’s bad news for Prime Minister Robert Abela, who will be forced to choose between the financial future of his spiralling economy and protecting the beneficiaries of a laundry list of scandals from criminal prosecution.

His options for finding another, more legitimate, source of national revenue are getting slimmer by the day.

I wouldn’t bet the farm on financial services. The EU has its eyes on tax havens, and tax harmonization will remove Malta’s only competitive advantage. Add that to the intense oversight being applied to Maltese banks and to normal law abiding Maltese customers and it’s difficult to see why any business would want to base here.

Passport peddling is on the way out too, regardless of how desperately the government tries to cling to it. Infringement proceedings will take time, so there’s still money on the table. But a Maltese passport is now a red flag for increased scrutiny.

Even cheap tourism, long a dependable source of revenue, isn’t bouncing back from the two year pandemic. Tourists are eager to travel again, but they aren’t keen to spend time packed in dense crowds. And thanks to a looming global recession, they’re also increasingly pinched financially. It’s a buyer’s market where pristine destinations are competing for business with less crowded beaches and less construction cranes per square metre than poor beleaguered Malta.

Other destinations will likely have better flight options too, now that Air Malta is on its last wing and another round of State aid is unlikely to be approved.

There’s a lot of money going out, and a lot less money coming in.

The national debt is growing faster than a pimple on the bum of a fat man in summer, and the deficit is now ‘Best in Europe’. Wait, sorry, that’s Highest in Europe, and dangerously close to setting off EU alarm bells and triggering forced austerity.

The picture is worse than it looks on paper because bloated public sector employment leads to a slight inflation of GDP. While hiring hundreds of unqualified people for make-belief non-jobs does lower unemployment figures, it undercuts actual growth by robbing the public sector of potential employees and haemorrhaging taxpayer funds.

The Central Bank’s latest 2022 projections forecast 6% growth in Malta’s GDP, but a 6.2% deficit. This can be stable long term, assuming two things: the government acts aggressively to reduce deficit levels, and the economy recovers and grows as expected.

What if those two things don’t happen? According to the Central Bank, “the possibility of ‘explosive’ debt growth would present itself.”

Given the shocking level of pre-election public sector hiring and Abela’s bloated €100 million Cabinet, the odds of this government reining in spending are slim.

I hope they aren’t counting on economic growth to sort it out. The latest FATF evaluation criteria made it clear that Malta’s period in the global financial wilderness is only beginning.

                           
                               
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KLAUS
KLAUS
13 days ago

As a person who has to decide about the “Grey-Listing”, I would only look for the initiated and finished proceedings like for example with Joseph Muscat, Keith Schembri or Konrad Mizzi and ask Robert Abela personally why he himself and the so-called police commissioner Angelo Gafá are not charged yet.

Winston Smith
Winston Smith
13 days ago

Excellent reporting as usual. The national debt is growing faster than a pimple on the bum of a fat man in summer…. classic.

Francis Said
Francis Said
13 days ago

An excellent opinion post that relies on facts and knowledge. Well done.

saviour mamo
saviour mamo
13 days ago

We are pinning our hopes in FATF to bring to justice those persons who abused from illicit funds and by corruption.

James
James
13 days ago
Reply to  saviour mamo

I am not sure the FATF is able to bring prosecutions against those involved and identified in all the corrupt scandals which presumably led the FATF to place Malta on its grey list in the first place.

However, the Shift, as ever, has shared with us the hope that the noose is tightening as their article demonstrated https://theshiftnews.com/2022/04/22/its-not-me-its-them/

The “untouchables “ are no longer able to fool all of the people all of the time and the chickens are coming home to roost.

The efforts of everyone at the Shift to keep the spotlight on the miscreants is to be lauded!

saviour mamo
saviour mamo
12 days ago
Reply to  James

It is the onus of the government to prosecute against those involved. We have a situation where there is enough evidence to prosecute persons but the government is protecting them. FATF should make pressure so that those suspected of money laundering are investigated and prosecuted. It is evident that the police aren’t working independently from the government.

carlo
carlo
11 days ago
Reply to  saviour mamo

‘It is the onus of the government to prosecute against those involved’ –
How can the corrupt government of the day prosecute if HE IS PART OF IT.

Gianfranco Selvaggi
Gianfranco Selvaggi
13 days ago

This is excellent financial journalism

Ant Vassallo
Ant Vassallo
13 days ago

excellent as usual! but, of course, robbing the private sector of employees – the public sector has more than enough numbers

Bruno
Bruno
13 days ago

It is very clear that the FIAU was in panic mode. They were caught red-handed. This article reveals it all.

https://fintelegram.com/__trashed/

Janet Wojtkow
Janet Wojtkow
13 days ago

An excellent summary of the reality of the situation, if only the gahans could see that! Poor Malta!

G Mizzi
G Mizzi
12 days ago

My thoughts exactly. Malta will soon come face to face with the biblical four horsemen: evaporation of passport sales, tax harmonisation, lower tourism receipts and greylisting.

Paul Bonello
Paul Bonello
12 days ago

The writer brings out the fact that objectively, and substantively, there are no effective results to show for Malta’s Police, FIAU and Tax Authorities since June of last year.. FATF are not influenced by Government statements of wishful thinking intended to instill a good feel factor domestically, especially during election times.

Francis Said
Francis Said
9 days ago

A excellent written opinion that deserves a National debate.
We either succeed together or flounder together
Unfortunately, the rape on our economy seems to be unstoppable. This is a planned and divisive attitude of the PL.
What a shame to Malta’s International reputation.

Joe Genovese
Joe Genovese
7 days ago

Ryan, why do you use “oversight” the way it’s used in US English?

In British English, that had a totally different meaning. The Yanks came, and turned that into a British English Janus Word.

British English had the perfectly respectable, centuries-old “supervision” which still serves its purpose today.

And tomorrow.

Don’t you think?

Joe Genovese
Joe Genovese
7 days ago

A couple of not-so-squeaky clean EU Members must be fuming over Malta.

Like Portugal, Cyprus.

For it was thanks to the way Malta flogged “its” passports to all-comers that non-synthetic fertilizer rained down on Brussels, kicking up a stench that roused the Commission from its stupor.

Who would have even given it a passing thought that the Kink Of Stink’s brain child would have commendable, albeit unintended, consequences?

As you say, Ryan, Malta is a world leader in setting standards for others to follow.

OK, “European”.

Last edited 7 days ago by Joe Genovese

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