One year after being labelled an untrustworthy financial jurisdiction, Malta was taken off the so-called grey list last week. But does it run the risk of being put back on the money-laundering naughty list, and what does being greylisted even mean?

In a momentous decision for Malta, the Financial Action Task Force held a secret vote on Wednesday that took Malta off its list of untrustworthy financial jurisdictions. 

The official announcement was made by the body on Friday, with FATF president Marcus Pleyer congratulating the island on its achievement, while warning there was still work to be done.  

Just shy of one year earlier, the Paris-based body had decided that the island was not doing enough to fight financial crime. 

Malta was told to implement a long list of changes to the way it combats tax evasion, collects information on ultimate beneficial ownership, and shares information with local and international authorities.

Those issues were at the heart of an FATF action plan which Malta had to implement before being given a clean bill of health by the global anti-money laundering body. 

Then, four months ago, the FATF publicly announced that initial indications showed Malta had substantially completed the necessary reforms and appeared to have addressed the shortcomings identified. 

On Friday, Pleyer dismissed local criticism that the decision to grey list the country had been political, saying that it was a purely technical matter. 

Soon after the announcement, Prime Minister Robert Abela gave a press conference saying Malta had implemented the action plan drawn up with the FATF in a “record” 12 months, proving it was a serious and reputable jurisdiction. 

He vowed the government would keep up the fight against high-level criminality and organised crime.

Comparisons with Iceland

Being ‘greylisted’ means a country is placed under increased scrutiny from international bodies. It also serves as a warning to other financial jurisdictions that the country is not fully compliant with anti-money laundering standards. 

It does not, however, result in any financial penalties or sanctions, so it is difficult to quantify the actual cost to the country. 

When asked how and why Malta got here, advisers roped in by the government to handle the fallout from greylisting have drawn comparisons to the situation in Iceland. 

Iceland was put on the FATF grey list in 2019, shaken from the 2016 Panama Papers leak and the political crisis that it caused.

Like Malta, Iceland spent one year on the grey list and officials there say that a lack of collaboration between different agencies and law enforcement was a key shortcoming.  

Since being taken off the grey list, Icelandic officials have carried out a post-mortem, reviewing what had gone wrong for them to get on the grey list in the first place.  

Maltese advisers say this is needed here too.  

Malta still under scrutiny

While Malta let out a sigh of national relief when the vote was held, government sources said the jurisdiction is not out of the woods entirely.  

Over the next two years the country will still go through a hand-holding period with the FATF. It will still have to report back with progress reports.  

This, the sources said, is to ensure that various commitments the island has made are honoured.  

Some of the commitments made in the reform plan last year, such as increasing the number of police inspectors assigned to certain cases and of officials working on tax and corporate filings, are yet to be fully implemented. 

Furthermore, Malta will also have to avoid the temptation of “turning back the clock”.  

“There are a lot of pressures on Malta – the post-COVID recovery, the financial crunch resulting from the war in Ukraine – the temptation will be there for any government to ease back on measures that hamper economic performance,” one senior adviser said.  

Failure to meet the FATF’s expectations could see Malta first served with a formal warning and eventually placed under the same scrutiny process that saw the country greylisted in 2021.  

What they said

“With this news comes the onus of maintaining standards, building further robust control mechanisms and heightening our collective vigilance. We cannot afford to let our guard down.” – Nationalist Party

“A noteworthy example of public-private collaboration, leading to overall progress in the island’s remediation journey.” – Malta Bankers Association

“We should turn this unpleasant experience into a springboard for a proactive renewal of the financial services industry in Malta.” – Chamber of Commerce