Federica Taccogna, a strategic adviser to the MFSA on financial crime, speaks to Anthony Manduca on improving Malta’s anti-money laundering regime.

The Maltese financial services in­dustry is a relatively young one and has undergone a remarkable and sudden growth, but its regulatory arrangements now need to mature with it, according to Federica Taccogna of FTI Consulting, who is an expert in financial crime.

Federica Taccogna: “The industry needs to embrace the fact that being regulated comes with obligations, and therefore costs”.Federica Taccogna: “The industry needs to embrace the fact that being regulated comes with obligations, and therefore costs”.

FTI Consulting is an independent global business advisory firm that is dedicated to helping organisations manage change, mitigate risk and resolve disputes: financial, legal, operational, political, regulatory, reputational and transactional. Ms Taccogna leads FTI’s regulatory compliance team, and will next month be chairing Fi­nance Malta’s annual conference. She is also a strategic adviser to the MFSA on financial crime.

In view of Moneyval’s poor evaluation of Malta’s actions and preparedness in complying with rigid anti-money laundering legis­lation, what advice would she give on what needs to be done to strengthen Malta’s anti-money laundering regime?   

“It is Moneyval’s purpose to find areas for improvement as part of their assessments – in Malta, and in every other EU Member State. The Maltese financial ser­vices industry is a relatively young one, and has undergone a remarkable and sudden growth. Its regulatory arrangements now need to mature with it,” she says.

Ms Taccogna explains that in relation to financial crime, this means that both the regulators and the industry need to continue to invest into understanding the dynamics of the problems (in other words how criminals use financial services firms to launder money) and how it can be prevented in practice.

“The industry needs to embrace the fact that being regulated comes with obligations, and therefore costs. Regulators need to continue to invest in resources and efforts into educating and guiding the industry and taking action against non-compliance.”

Was she concerned Malta could be blacklisted by Moneyval if not enough progress is made by the country in improving its anti-money laundering framework? 

The challenge for Malta is to remain attractive without allowing wrongdoers to take advantage of its welcoming nature and policies

“In its recent past Malta has been a welcoming jurisdiction. However, opening doors and attracting investment inevitably involves a degree of risk that ‘bad actors’ may also enter the system. Some of the matters with which we have been dealing with recently (most notably, Pilatus and Satabank) indicate that this may be the case for Malta, too. Not exclusively, though. By definition, financial crime was a problem that transcends jurisdictions and the challenge it poses are shared globally.”

She points out that such a problem is more acutely felt in smaller jurisdictions, with a more limited resource and skill pool.

“This is to say that Malta has its share of problematic matters to resolve, but it is by no means alone in it. While there is no need for Malta to stop actively attracting investment and business, only a thorough review of current industry participants will limit the risk of censure from international stakeholders such as Moneyval,” she says.

Moneyval, the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, had said that it had not found any major problems with Malta’s laws and the measures the island has ‘on paper’ but it raised concerns about how effectively these laws were being implemented by State organs such as the police and the Malta Financial Services Authority. What can be done about such a situation?

“Malta implements law and regu­lations that are not exclusively of its own making – for example, European directives and regulation. These laws and regulations have been rapidly and fundamentally changing in recent years and have posed a challenge to all jurisdictions. For example, the fourth recast of the EU’s money laundering directive introduced fundamental changes to the previous regime and was followed shortly after by another recast and a wealth of guidance from multiple bodies and organisations.”

She argues that it is tempting to see financial crime as being a Maltese problem only but evidence suggests this is not the case. “The challenge for smaller jurisdictions such as Malta is to adopt a proportionate approach and striking the right balance between dealing with legacy, laying the foundations for a safe future and continuing to remain attractive. This means sourcing the right skills and expertise to deal with the issue competently.”

 Does she believe there exists a will to tackle money laundering in Malta or are investigations sometimes put on hold either due to external pressure or by a lack of willingness to take the investigations further by the higher echelons of the authorities concerned?

“The fact that I am here and the support FTI is providing the MFSA and FIAU is an indicator that investment is being made to address the financial crime problem in Malta.

“The MFSA recently published an AML/CFT strategy and launch­ed a programme of skill augmentation, acquisition and transfer with the support of global expertise. It is also working on strengthening the quality of its supervisory approach –  both in financial crime and generally – addressing historic qualitative and structural issues and is investing in technology to support all its supervisory pro­cesses including in financial crime.”

That said, Ms Taccogna adds, financial crime is a serious and complex problem that exploits the openness of financial services.

“The challenge, and opportunity, for Malta is to remain attractive without allowing wrongdoers to take advantage of its welcoming nature and policies.”

Finance Malta’s 12th annual conference is being held on June 5 and 6 and is entitled ‘Malta: A Platform for Innovation’. The conference will include sessions on the innovation that is driving the financial sector forward, such as fintech and AI, and will also touch upon important issues that have arisen due to this innovation, such as cybercrime.

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