Malta ‘nowhere near’ being greylisted for a second time – BOV chief

Malta is “nowhere near” to being greylisted by a global anti-money laundering watchdog for a second time, according to Bank of Valletta’s chief executive officer.

Speaking to Times of Malta, Kenneth Farrugia pointed to a “significant shift” in the controls put in place since Malta appeared on the Financial Action Task Force (FATF) greylist five years ago.

The list highlights countries found to have “strategic weaknesses” countering money laundering and terror financing but that have committed to fixing them.

Greylisting has been linked to reduced investor confidence and declines in foreign investment, but the impacts on Malta have proved difficult to quantify in the years since. Malta exited the grey list after one year.

Farrugia noted that Malta’s financial regulator, financial intelligence unit and credit institutions have strengthened their controls and increased investments in transaction monitoring in the years since the greylisting, leaving Malta in a “very comfortable position”.

Turning to the bank’s profile, he said global financial institutions Citibank and BNY were now processing BOV payments following an “assiduous review” of the bank’s controls. 

The bank has gone through a process of significant de-risking

Farrugia added that when BOV recently issued a €200 million international bond, “concerns about Malta and financial crime were practically non-existent, which was not the case in 2022”.

Weighing in on the greylisting, BOV chairman Gordon Cordina said it had been “critical” for the country to “come together and exit that episode as soon as possible,” adding that the bank had been a “key operator” in contributing to that effort.

“The bank has gone through a process of significant de-risking,” focusing on clients with a clear connection to Malta and with “no risks or harm or suspicion of threats”. And the bank was now “continuously monitoring” its clients.

BOV has since been given a “clean bill of health, especially through our correspondent banking relationships”, he said.

Farrugia and Cordina were speaking following an interview focusing on the bank’s recent performance.

Super rich clients?

With recent months seeing Delta Air Lines starting direct flights between Malta and New York, and the government signalling to Chinese investors that Malta is “open for business”, is BOV seeing an uptick in business from the super-rich?

“The super-rich are with big global banks; they would have banking arrangements with blue chip institutions,” Farrugia said.

“They would not necessarily have banking arrangements here, because they would already be well serviced by private bankers in different jurisdictions.”

Farrugia noted that around 90% of the bank’s customer base was domestic.

While the bank had seen new customers enter its doors due to the “significant increase” in the number of foreign nationals moving to Malta for work, this trend was not reflected in high-net-worth accounts, the CEO said.

Competition

Farrugia said the bank held a market share of around 50% in respect to deposits and commercial lending, a position that came with “responsibility”.

But with Greek lender CrediaBank set to enter the market by the end of the first quarter of next year, and fintech platforms like Revolut becoming increasingly popular, is BOV worried about the competition?

The bank was “not fearing competition”, Farrugia said.

“It’s really understanding the positioning of competitors in the market, understanding where you want to ensure they compete [and] where you want to ensure you retain leadership,” he said.

Pointing to long-standing competitors APS and Lombard Bank and the relatively recent emergence of ME Direct, he said Revolut was an example of a “new breed of competition”.

CrediaBank, meanwhile, was “really stepping into the shareholding of HSBC, so taking over an existing bank. Will that bring a new drive to the company [BOV]? Yes,” he said.

“If someone is acquiring an institution, they want to push and leverage the standing of that institution. Ultimately, as a bank, we have our own strategic objectives, our own business plan, which we’ll be pursuing.”

‘Safety first’

Cordina noted that while competition in banking often focused on Fintech and the shift to digital banking, investment in regulatory requirements, which he said the bank was “already coping with well,” was the “first important hurdle” for financial institutions.

But the bank was “also investing in the digital aspects, because we are very much aware that a substantial part of our younger customer base is not only hooked by a home loan – we also need to service them equally efficiently in their every day-to-day payment needs”.

However, with the older generation home to “most of the wealth and deposits... we cannot afford to alienate those by going purely digital”. 

Weighing in on the bank’s digital competitiveness, Farrugia noted that BOV had recently upgraded its digital offering, with customers set to be onboarded gradually between now and early next year.

The new service “has a number of slick features and better UX [user experience] ... we want to remain relevant there,” Farrugia said.

Looking ahead, Cordina stressed that “resilience will become a key consideration with the risks of geopolitical [tensions] and cybercrime. ‘Safety first’ will be a very important consideration at the top of most customers’ minds”.