In 2023, Malta conducted its latest National Risk Assessment (NRA) on money laundering (ML), terrorism financing (TF), proliferation financing (PF) and targeted financial sanctions (TFS). This comprehensive review followed the 2018 NRA and subsequent evaluations by international bodies, including Moneyval, the European Banking Authority, the European Commission and the International Monetary Fund.

The 2019 Mutual Evaluation Report (MER) identified critical areas for improvement, leading Malta to overhaul its anti-money laundering and counter-terrorism financing (AML/CFT) framework, achieving significant compliance with Financial Action Task Force (FATF) standards.

The 2023 NRA, aiming to enhance Malta’s AML/CFT measures, introduces first-time assessments of PF and TFS risks. It builds on Malta’s commitment to address previously identified gaps, demonstrating a proactive approach to understanding, delivering and sustaining effective AML/CFT strategies.

This report was shaped by extensive policy deliberation, stakeholder dialogue and a shared commitment to a risk-based approach, emphasising the importance of regular monitoring and updates to maintain the framework’s dynamism and effectiveness.

Malta’s efforts have led to notable progress, including its removal from FATF’s enhanced monitoring list in 2022, reflecting a significant reduction in ML and TF risks across various sectors. This achievement is largely attributed to improved mitigating measures and increased political determination to strengthen the AML/CFT regime. Legal and regulatory enhancements, alongside increased coordination and resource allocation to competent authorities, have been pivotal in enhancing operational effectiveness.

The NRA reveals a detailed sectoral risk analysis, highlighting changes in the landscape since the 2018 assessment. Key sectors such as financial services, designated non-financial businesses and professions (DNFBPs), and virtual financial asset service providers (VFASPs) have seen a decline in residual risk due to enhanced regulatory and governance measures. The assessment underscores the importance of ongoing vigilance and adaptation to emerging risks, particularly in the evolving digital finance space.

Malta has also focused on strengthening anti-corruption measures, enhancing law enforcement capabilities and improving governance practices. Significant investments in technology and personnel have bolstered the capabilities of entities like the Financial Intelligence Analysis Unit, the Malta Financial Services Authority , and the Malta Gaming Authority. Legislative reforms have further solidified the AML/CFT framework, achieving better compliance with international standards.

The report also addresses the role of company service providers (CSPs) and the impact of regulatory changes on their operations, highlighting efforts to ensure these entities meet high standards of governance, risk management and compliance.

The assessment of the virtual financial assets (VFA) sector reflects Malta’s proactive engagement with the challenges and opportunities presented by digital finance, noting significant client engagement and the importance of international cooperation in supervising VFASPs.

In conclusion, Malta’s 2023 NRA articulates the country’s ongoing commitment to combating ML, TF, PF, and ensuring compliance with TFS requirements. While recognising the progress made, the report emphasises the need for continuous improvement in risk understanding, legislative and regulatory frameworks and operational effectiveness.

Malta’s AML/CFT strategy remains focused on a risk-based approach, ensuring that measures are both effective and adaptable to the evolving financial landscape.

Franklin Cachia is director, Tax and Regulated Industries at CSB Group.