Four months after Malta was placed on the Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring, known as ‘the grey list’, much has been said about increased delays in banking transactions, increased scrutiny and plummeting foreign investment.

Being on the grey list essentially means that any form of financial transaction linked with the country is treated with higher suspicion due to risks associated with money laundering and other financial crimes. The Shift takes a look at the main events that have happened since Malta was grey-listed on 25 June of this year, as well as the consequences of this demotion.

First reactions

More than 100 companies had, in a survey published by the Malta Employers’ Association in June, blamed the grey-listing on the authorities’ inability to prevent money laundering, enforce rule of law across the board, deal with institutional corruption and provide financial transparency. The government has, both at the time and many times since then, repeatedly pledged its commitment to get Malta off the grey-list, though FATF president Marcus Pleyer recently stated that scant progress on the action plan points has been registered so far.

UK High-Risk list

The blow received by Malta’s economy and in particular, its financial sector, when the country was grey-listed by the FATF was compounded by the UK’s decision to place Malta in its own high-risk list in July, a similar system that highlights untrustworthy jurisdictions. Sources consulted by The Shift had forewarned of the increased distrust cross-border operators would be facing when doing business with counterparts across the world and the UK in particular.

Malta’s outlook goes ‘negative’

Moody’s, a global credit rating agency, downgraded Malta’s economic outlook from stable to negative, with the agency blaming the significant increase in the government’s debt burden, the sharp deterioration of public finances and the grey-listing by the FATF for its change in outlook.

45 financial services companies ditch licences

So far, at least 45 financial services companies have surrendered their licences to operate companies or sub-funds since June, including several high-profile companies like Citco, Customs House Global Fund Services Ltd and HBM Group. These 45 financial services licence holders join the hundreds of others that increasingly walked away from Malta since 2016 amidst the Panama Papers fallout.

Sources in the industry note that while by now many of those who no longer saw merit in remaining in Malta have left or about to leave, many of those who have remained are considering a “Plan B” in case Malta’s grey-listing continues for an extended period (over 12 or 18 months). Should that be the case then a second, much larger wave of exits can be expected, these sources note.

IMF calls for urgent action

Similar to the assessment carried out by Moody’s, the International Monetary Fund (IMF) had urged the government to take immediate action to deal with Malta’s unstable economic outlook in September on the basis of its lack of transparency on beneficial ownership information and its lack of financial intelligence on tax crimes and money laundering.

Just 37% of foreign investors view Malta as ‘attractive’

According to a survey carried out by Ernst & Young, just 37% of 110 companies which filled in the survey believe that Malta is an attractive financial jurisdiction to operate in, almost half of the 62% who thought so in 2020. 46% of those same companies described Malta as ‘unattractive’.