An anti-financial crime process is as strong as its weakest link. The Moneyval report identified various weaknesses in Malta’s anti-financial crime framework but assessors saw as particularly serious the inadequate determination of the police to investigate and prosecute suspected criminals.
The report concludes that: “Sanctions for non-compliance with anti-money laundering and countering the financing of terrorism requirements are not considered effective, proportionate and dissuasive.”
It acknowledges that Malta has a sound legal framework to fight various forms of financial crimes. However, Moneyval is concerned that the law enforcement authorities are not in a position to follow up with their investigations and take concrete action in complex money laundering cases related to financial, bribery and corruption offences. While the police have good sources of financial intelligence, only in a limited number of cases is this information used to develop evidence and trace criminal proceeds related to money laundering and other financial crimes.
The report dwells on the inability of the police to properly investigate and prosecute financial crime. The possibility of suspected criminals being allowed to openly live beyond their means without facing money laundering charges is illustrated in circumstances surrounding Daphne Caruana Galizia’s murder.
Broadening their focus to include the role of banks, the financial supervisors and the Financial Intelligence Analysis Unit (FIAU) in combatting financial crime, the report argues that Malta lacks an in-depth analysis of how all types of legal persons and legal arrangements can be misused for money laundering and financing of terrorism purposes.
The licensing of two banks by the MFSA came under sharp criticism as the quality of the fit and proper checks that were conducted indicate that the financial services regulator has an inappropriate risk appetite. This weakness is not conducive to a robust risk management framework for a country with economic activities of a high-risk nature.
While the conclusions of the report are hard-hitting, the reasons for the administrative failures are desensitised. The report argues that limited resources, both human and financial, weigh negatively on Malta’s capability to effectively pursue financial criminal offences.
The supervisory authorities are considered to have inadequate resources to conduct risk-based supervision for the size, complexity and risk profile of the country’s private sector.
The question that remains unanswered is whether the weaknesses in the role of the police, financial regulators and the FIAU can be attributed to lack of resources, inexperience, incompetence or something more sinister.
A question that needs to be asked is whether the right level of political will exists to empower the various protagonists in the fight against financial crime. The answer to this question will determine whether Malta will be able to restore its reputation as a respectable financial services jurisdiction.
The government confirms that it will be beefing up resources to address the concerns of Moneyval. Experience can be bought, people can be trained and law enforcement authorities can be empowered to act independently but what matters is the political will to do what is right rather than close an eye to abuse to promote economic growth at all cost.
It will take more than pious intentions to restore Malta’s reputation.
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