Malta has demonstrated “significant progress” in fighting money-laundering and terrorism financing, an assessment by Moneyval has found.

The Council of Europe anti-money laundering body said on Thursday that Malta has succeeded to meet general expectations after a raft of deficiencies were first identified by Moneyval in 2019. 

The country has achieved full compliance with twelve of the 40 recommendations on how to improve its anti-money laundering regime, its report said. 

Malta retains minor deficiencies in the implementation of another twenty-eight recommendations where it has been found “largely compliant”.

Moneyval said Malta no longer has “non-compliant” or “partially compliant” ratings. 

However, Moneyval decided that Malta will remain in what is known as the enhanced follow-up procedure, meaning the authorities will have to report back to the expert group on further progress to strengthen its implementation of anti-money laundering measures. 

The report will not come as a surprise - in April, Times of Malta revealed it had formally passed the review. 

What does the report mean?

Whilst the new report means that Malta has been given a pass mark by Moneyval on technical compliance, the possibility of a greylisting by the financial action task force still remains.

Being put on the grey list comes with a strict reform procedure and ‘hand-holding’ by global authorities.

The grey list does not imply any economic sanctions but serves as a signal to the global financial and banking system about heightened risks from transactions with the country in question.

Assessors from the Financial Action Task Force (FATF) will make the final decision on whether Malta will be put on a list of untrustworthy locations. 

Earlier this month, a group of analysts interviewed regulators such as the Malta Financial Services Authority and the police as part of the process to assess the country's ability to tackle major financial crime.  

It is understood the FATF will make a final decision in mid June. 

What areas have improved?

There are four possible ratings of compliance across 40 recommendations: compliant, largely compliant, partially compliant and non-compliant. 

Two Council of Europe teams from Jersey and Italy analysed laws and measures that were in force at least six months before the report - officially dated April 2021 - was due to be discussed.

They found that "overall Malta has made progress" and has improved its ratings in eight areas.

These include:

• The risk of Voluntary Organisations to terrorist financing;
• The application of mandatory measures regarding correspondent banking relationships;
• The speed of filing suspicious transaction reports;
• The accuracy of Beneficial Ownership information;
• The prevention of criminals from owning Financial Institutions TCSP;
• The regulation of real estate agents and lawyers;
• The seizing of assets that could be the proceeds of crime or could constitute laundered property;
• Obligations relating to virtual assets. 

What has the reaction been

Addressing a press conference, Finance Minister Clyde Caruana welcomed the Moneyval decision. 

He said the report's findings confirm governance standards in Malta are equivalent to those in the rest of Europe. 

Caruana acknowledged that Malta still needed to pass the FATF assessment to avoid greylisting. 

“We have done everything asked of us, we have worked hard”, Caruana said.

The Nationalist Party also welcomed the Moneyval announcement, describing it as a positive result for Malta.

“This comes as a relief for Malta, for businesses and for workers, particularly in the financial services sector, who had seen years of work and investment put at risk because of the way the government in the past seven years undermined the institutions and closed an eye to financial crime,” the party said.
 
It observed that the fact that Malta had reached this far – failing the Moneyval test in 2019 and almost getting grey listed - had harmed its reputation, also undermining government efforts to defend Malta’s position against tax harmonisation in Europe.

The PN said it looked forward to the forthcoming report by Financial Action Task Force and hoped the same positive result would be achieved.