The war against money laundering has intensified in the last decade. Governments and international institutions zoom on the unfairness of criminal abuse in the form of tax evasion, arms dealing, drug dealing, human trafficking and other corrupt activities.

Malta’s anti-money laundering watchdog, the Financial Intelligence Analysis Unit (FIAU), has upgraded its operations in the last few years following the revelation of alleged money-laundering activities, especially at the political level. The pressure put on the FIAU by international anti-money laundering institutions like the Financial Action Task Force is producing the desired results of reducing the risk of money laundering.

In its 2023 annual report presented to parliament by the FIAU, it was revealed that the anti-money laundering watchdog last year received almost two reports a week of people who bought or were trying to buy cars, property, boats, jewellery and other expensive items costing over €10,000 in cash. In 2021, Malta, like most other countries, introduced a €10,000 cap on cash transactions to clamp down on money laundering activities.

FIAU chair Kenneth Farrugia noted that, in several cases, especially those concerning the purchase of cars, bona fide people paid in cash only because they were not aware the practice was illegal and not because they had malicious intent.

Malta is still a long way from having a cashless society. Small-scale tax evasion has a long history, and many today still prefer to deal in cash to avoid attracting the attention of the tax authorities. While this needs to change to ensure that the government’s revenue is optimised to help upgrade public services, the big-ticket money laundering abuses are carried out by criminal experts who do not care much about social justice.

Reducing and preventing financial crime is one of the public commitments that every government must prioritise. While the focus of the FIAU on tackling those who use considerable amounts of cash for commercial activities is commendable, more must be done to ensure that the anti-money laundering controls are indeed adequate.

Banks, for instance, must be more proactive in promoting the use of card-based transactions and away from paying-in-slips, where possible, to reduce the opportunity for third-party deposits being made into accounts and to allow for enhanced monitoring. Card transaction fees can be reduced to enable merchants, service providers and consumers to use cards in commercial transactions.

It is, of course, important that a practical system for cash access continues. With some banks continuing to close branches, there is pressure on remaining cash services to meet the cash needs of communities.

While it is critical to keep the impact of the controls on the amount of cash that can be used for commercial transactions, these controls must be reviewed to ensure that the balance between money laundering controls and the impact on legitimate customers is right.

Existing and new controls that may be introduced must be reviewed regularly to help ensure they are proportionate to the risk and suitable for the business community’s customer base. 

The FIAU must discuss with the business lobbies and banks what steps must be taken to help ensure legitimate customers are not disproportionately impacted by controls that look fine on paper but hinder legitimate business transactions. The business community and the regulator must also focus more on appropriate communication with their customers.

The uncertainty created by the courts on the legitimacy of FIAU’s practice of fining those who break anti-money laundering regulations must also be cleared to ensure that the anti-money laundering process is robust and an effective deterrent for those who abuse.