Malta has presented the Financial Action Task Force (FATF) with a so-called action plan to get off the grey list of untrustworthy financial jurisdictions.
The government presented the plan to the global watchdog during a virtual meeting on Thursday.
Sources familiar with the government’s efforts said the document presented to the FATF experts monitoring Malta detailed how the country plans to address the shortcomings flagged during a review last year.
“It’s about concretely understanding what the risks are in the respective areas, a sort of risk analysis, having typologies that help in investigations, more coordination between institutions and, finally, delivering results,” one high-level government source said.
The plan gives no timeline of how long Malta expects to take to implement the necessary changes. Government sources told Times of Malta they think the process could stretch into 2023.
In June, the FATF placed Malta on its grey list of countries that are not doing enough to stem the flow of illicit funds.
The island has since signed a commitment with the FATF to bolster its fight against financial crime and it must prove it is taking that commitment seriously before it can be taken off the list.
The action plan was drawn up by Malta National Coordination Committee, chaired by Alfred Camilleri, the permanent secretary at the finance ministry, and includes the heads of the island’s main regulatory and law enforcement entities in the financial sector.
Commitment to effectively fight tax crimes
At the heart of the plan is an improved commitment to effectively fight tax crimes by using intelligence to catch tax cheats and better policing of ultimate beneficial ownership rules.
Times of Malta reported earlier this summer that the timeframes within which the police may investigate and prosecute tax crimes will be widened as part of the government’s plans to get off the FATF grey list.
Another reform revolves around the depth of checks carried out by the local tax authorities on foreign companies in Malta when deciding whether to refund the lion’s share of their tax payments.
At present, the tax authorities process applications for reimbursement in an average of just four to six weeks, with some requests approved in half that time.
The proposed reform, which would need to pass through parliament, would see this window extended to as long as a year, giving the authorities the chance to adequately establish the provenance of the funds before affecting large payments from the public purse.
On paper, the tax rate in Malta stands at 35 per cent, however, the island offers international corporations an effective rate of five per cent through a series of refunds and related schemes.
This attracts foreign companies to set up shop on the island, generating hefty tax revenues for the public coffers.
In recent weeks, the tax authorities have been carrying out fresh due diligence on foreign companies operating through Malta and which have applied and received tax reimbursements.
Action plan’s key points
1. Showing that ownership information for companies based in Malta is accurate and that the authorities crack down decisively when information about company ownership is found to be inaccurate. Gatekeepers, including those in the private sector, that do not comply with their obligations to obtain accurate and up-to-date beneficial ownership must be sanctioned.
2. Enhancing the use of financial intelligence by the government’s Financial Intelligence Analysis Unit to support the authorities pursuing criminal tax and related money laundering cases.
This includes clarifying the roles and responsibilities of the Revenue Commissioner and the FIAU.
3. Focusing FIAU analysis on criminal tax offences to get it to produce intelligence that helps Maltese law enforcement detect and investigate cases in line with Malta’s identified money laundering risks related to tax evasion.