Once the FATF formally announced Malta is no longer on its grey list, the global financial community acknowledged the effort to revise processes, refine rules, increase penalties and impose compliance on industry operators with stricter-than-ever procedures.
We have, in other words, addressed the risk of non-compliance.
Anyone handling the finances of others now has a stark choice. Either to go through the rigmarole of collecting and verifying mountains of information about their customers and keep it up to date while they’re still servicing them or, if the return from the business does not justify the effort to do it, to decline the business altogether.
Many people reacted with relief to the news Malta will be taken off the grey list. Those are not necessarily the people working in the financial services industry. Sure, whitelisting is good news for the prospects of the industry they work in. But they know that the stress induced by the added pressure of checks upon checks that have been introduced is never going to go away. It’s just become much harder to do their job. Forever.
They work out their own risks too. The risk of huge fines and getting their name besmirched for missing some paperwork somewhere and getting slammed for it may be more than at least some professionals are willing to carry all the time. High street banks reject account holders not because they suspect they’re up to no good but because handling their funds (a little or a lot) may not be worth the trouble.
Malta is whitelisted again. But the series of scandals is never addressed- Manuel Delia
Imagine how a village notary might feel about taking risks with overseeing deals that pay them little when an administrative oversight that would have been considered an inconsequential error a year ago could land them into serious trouble now.
I’m not suggesting the changes in procedures were not needed. When the air is clearer, if ever it may be, we may yet be able to look again at the raft of rules that have been adopted and see if all of them are necessary for the purpose they are supposed to serve.
This is the crux of the issue: the purpose. Why do we have all these new rules? Why must industry operators be watched closely to make sure the rules are followed? Why must there be penalties, not merely for closing eyes to wrongdoing but for not keeping a sufficiently watchful eye on the risk there might be any?
All this is supposed to make sure we do not allow ourselves to be used by criminals laundering money or financing terrorism. No doubt, some of the desired effect of restricting money laundering is achieved by scaring it away through the existence of strict oversight. And yet it can’t be all.
Before all this started, the general mantra was that it is statistically impossible that, within all the billions of dollars that flow through Malta, there is no dirty money worthy of prosecutions and convictions in court.
The billions still flow, perhaps slightly reduced. With all the additional rules and procedures, the tighter oversight on the operators, the beefed-up regulatory resources and the effort to look sharper in the eyes of the world, we’re still getting barely any prosecutions worthy of remark and no convictions at all.
Why, after all the changes, after all the blood, sweat and tears, have we seen as many convictions now as we had seen before, that is, none?
This is by no means a uniquely Maltese problem. It is, perhaps, why the FATF think they’ve done their job with Malta and Malta has done its job as far as their expectations go. Globally, there is acceptance that money laundering needs to be resisted, not to mention the financing of terrorism. The gaps and the loopholes in the system that we know criminals have exploited in the past need to be filled. So far so good.
But while criminals move into other loopholes, finding new opportunities to run their mud through our water system, we are busy congratulating ourselves for solving the problems we had yesterday.
There’s a specific significance here in Malta for this entire debate. Some faces familiar to us exploited the old loopholes in front of our very eyes and their exposure attracted the furious attention of the FATF and the pressure on us to change things.
There are many other examples that are equally applicable but none are more explicit than the case of Ali Sadr Hasheminejad, Pilatus Bank, the bags spirited away in the middle of the night, the ruling family of Azerbaijan, Keith Schembri and Brian Tonna, Egrant, Mossack Fonseca (Malta), the Montenegro wind farm, kickbacks on the gas tanker, Konrad Mizzi, SOCAR, 17 Black, Yorgen Fenech, Electrogas, a chain of interconnected events, people and institutions variously described as the biggest scandal in Maltese history and the biggest lie in Maltese history.
The chain of events is odd and uncomfortable. A series of scandals exposes how the compliance weaknesses in Malta’s system were exploited by criminals. Malta is greylisted which forces the country to fix its compliance weaknesses. Malta is whitelisted again. But the series of scandals is never addressed.
Quite apart from the unfairness that it seems that perfectly innocent economic operators ended up paying the same price paid by the operators who permitted and profited from the scandals. Quite apart from the unfairness that the criminals remain unpunished.
The real question we are left with is what is it the world expects from us? Are we to capture criminals and punish them or are we just to make sure we hide the crimes better next time?
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