International experts are expected to deliver a poor assessment of Malta’s anti-money laundering regime, The Sunday Times of Malta has learnt. 

Monitoring body Moneyval is likely to give Malta a time window – possibly a year – to address a series of shortcomings in its anti-money laundering efforts or face the threat of eventual blacklisting.

The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism has been reviewing Malta’s financial laws and their enforcement since last year. 

Sources in Malta’s government agencies, who were present for every stage of the evaluation, said they gave their final submissions to the panel of experts last week, after having received the last draft of the country evaluation on July 3.

The evaluation, which the sources described as having given Malta a poor rating, will now be formally approved at a plenary session of the Council of Europe in Strasbourg this week. 

Local stakeholders said the likelihood was that Malta would now be given one year to address a number of shortcomings raised by the experts, a situation known as “grey listing”.

This would list Malta among other countries deemed to have “strategic deficiencies” when it comes to anti-money laundering enforcement.

“In a nutshell, this would mean that we would be presented with a list of areas in which we had ‘strategic deficiencies’ – of which there were quite a few. And we would have to commit to addressing them within a few months, before being reassessed,” a senior source said.

If Malta was seen to have adequately addressed these shortcomings then it would be put back on the ‘white list’. However, if it did not, then it could risk facing blacklisting procedures, which would seriously hinder the island’s ability to operate as a financial services jurisdiction.   

Deemed to have strategic deficiencies

Moneyval, a permanent monitoring body of the Council of Europe, assesses compliance with the principal international standards to counter money laundering, terrorism financing, and the effectiveness of their implementation.

Back in March, Times of Malta had reported that Malta had received a poor grade in a draft Moneyval evaluation, with the government scrambling to push up its final score before the summer deadline. 

High score expected in ‘few’ categories

Sources said the Moneyval experts had not found any major problems with Malta’s laws and the measures the country has ‘on paper’. 

However, they raised concerns about how effectively these laws were implemented by State organs such as the police, the Financial Intelligence Analysis Unit and the Malta Financial Services Authority.

In particular, the police were seen as a “bottleneck”, one source said. 

Certain decisions – such as the licensing of Pilatus Bank, which has since been closed down for alleged money laundering breaches – were also seen as shortcomings by local regulators.  

A source said the country’s anti-money laundering effectiveness could be graded as either ‘high’, ‘substantial’, ‘moderate’, or ‘low’ – “like an A to F grading scale in exams, moderate being considered a fail and low being considered a terrible grade”. 

Out of 11 sections of effectiveness graded – ranging from international cooperation to local supervisory functions and policing – Malta would likely only be considered good enough to score a ‘high’ in a few categories, sources said.

In a number of sections, Malta would probably score a ‘moderate’ or even a ‘low’, the worst grade possible. 

One source in Maltese economic law enforcement said the authorities had known for “quite some time” that Malta would likely fail the overall final evaluation. 

‘Like taking a VRT test’

“You can compare this to taking your car for a VRT [Vehicle Roadworthiness Test]. Let’s assume Malta failed the test, now it is about how many things need to be fixed,” one source said. 

The current evaluation covers the six years between 2013 and 2018 and sources said that since the last visit by the Moneyval experts to Malta in November, local authorities had already been busy drafting plans to start addressing the shortcomings. 

The government had also spent big money on consultancies to start turning things around, with one source saying the bill would reach the “millions of euros”. 

Ultimately, however, most local stakeholders agreed it was time Malta pulled its socks up when it came to how it combatted money laundering. 

“This issue may very well be politicised. However, aside from political interpretations and point scoring, this process can be, and should be, healthy for the jurisdiction. This is a coming of age for Malta’s financial regulators, practitioners, operators and law enforcement, which – let’s face it – haven’t all been quite up to the task,” one stakeholder said.