The local financial services industry has been affected by the COVID disruption, especially since business promotion is so dependent on air travel. But the challenges that this industry faces are not just about the logistics of getting its message across to potential investors.
Even if the coming Moneyval verdict on Malta’s performance in the fight against financial crime may not be as damning as some fear, the industry faces a major challenge to restore Malta’s reputation in international financial circles.
Years of disregard for anti-financial crime regulations cannot be wiped out by merely organising public relations and marketing events by organisations like FinanceMalta.
The chairman of FinanceMalta, Rudolph Psaila, speaking in an interview last week, was eager to get on the first available flight to spread the good news that Malta is open for financial services business as soon as the inconveniences caused by the pandemic are behind us.
The theme of this year’s conference by FinanceMalta is ‘Innovation in financial services: gearing up for the new post-COVID-19 era’. This is a topical theme in these difficult economic times. But there is a risk that the operators in this industry may be oversimplifying the proposed solutions to restore Malta’s reputation.
The FinanceMalta chairman described the long process that potential investors face when opening an account with a Maltese bank as the most urgent problem. He blamed these difficulties on the “shrinking of Maltese banks’ risk appetite”. This is one of the misconceptions that many investment promoters keep peddling.
In a competitive market, banks seek to acquire new customers. Maltese banks are heavily regulated and penalised if they break the rules, including ‘know your customer’ regulations.
The Maltese banks’ regulators are the same ones that oversee the major EU banks. Maltese banks cannot expect to be given special treatment by regulators or, equally important, by correspondent banks simply because Malta has a business model that promotes economic activities perceived to be high risk by international regulators.
When, a few years ago, then prime minister Joseph Muscat criticised local banks for being conservative and blamed them for failing to encourage economic growth, sections of the business community greeted his comments with open approval.
The great majority of financial services operators preferred to engage in deference to the political authorities. They kept their head below the parapet only to be perceived as being complacent about political interference in the management of banks.
The reputation of Malta’s financial services sector can only be regained through hard work and patience. Hopefully, Moneyval’s greylisting will never materialise. Then, Malta will have its work cut out to convince international regulators that we do not only enact good laws to prevent financial crime but also actually implement these laws with a steely determination.
Some good progress has been made on this front. There seems to be a revived political will – albeit smacking of desperation – to make substantial changes to the anti-financial crime process.
It was imperative for this shift to happen, not just to avert the imminent threat of greylisting but to show the international investment community and regulators that Malta is indeed serious in its attempts to regain the excellent reputation it once enjoyed.
The COVID pandemic has undoubtedly made the fence-mending task of FinanceMalta that much more difficult. But the most valid contribution that this agency can make is to persuade all operators in the sector to commit themselves to the full observance of anti-financial crime regulation.