How Malta is cleaning up its act when it comes to money laundering

From: RegTech Analyst

From implementing European legislation to doing more to unearth suspicious transactions, Malta is trying to wash away its reputation of having a problem with money laundering.

That is a reputation that Malta has suffered from for some time. In 2018, the European Banking Authority (EBA) accused Malta of “general and systematic shortcomings” in its application of EU anti-money laundering (AML) rules.

It levied the accusations against the island nation after concluding an enquiry into the way Malta’s AML watchdog the Maltese Financial Intelligence Analysis Unit (FIAU) had investigated alleged wrongdoings at Pilatus Bank where the owner and former chairman had been charged with trying to trying to evade US sanctions against Iran by illegally sending $115m or more to Iranian businesses. He has now been found guilty of some of those crimes.

Despite efforts made by Malta to repair its reputation, it faced another setback in September 2019 when the influential European monitoring organisation Moneyval accused Malta of not doing enough to fight financial crimes. It was particularly sceptical about the risks it saw in Malta’s banking and online gambling sectors, Reuters reported at the time.

Now, the government of Malta has issued a new report trying to show what it has done to strengthen its regulatory defences against money laundering, terrorism financing and other financial crimes.

“Money laundering and the finance of terrorism are serious threats to Europe’s – indeed the entire world’s – financial system and we all have a vital role to play in fighting this twin scourge,” said Edward Scicluna, Malta’s minister for finance. “That is why Malta is committed to implementing in full the recommendations from international institutions such as Moneyval, the Venice Commission and others.

“We have invested and will continue to invest significant resources to ensure our regulators and law enforcement agencies have the resources and training they need to do their jobs. Of course, our institutions also need the right powers to be effective and that is why the government is passing legislation and enacting reforms to strengthen their powers and increase sanctions. And I am pleased to say our institutions are stepping up their collaboration with international partners. We are at the beginning of this journey, but our investment is already showing [results].”

The report highlighted several results of the government’s efforts to clean up Malta’s reputation. For instance, the FIAU reported that it had received 2,778 suspicious transaction reports in 2019, representing a 157% increase on 2017 and 65% increase over 2018. These reports can in turn result in disseminations to the Malta Police, to foreign FIUs and to other domestic competent authorities.

The FIAU also increased pecuniary fines for breaching AML and counter-terrorism financing (CFT) laws in 2019. The regulator imposed €3.9m on subject persons in relation to breaches of their AML and CFT obligations. This represented a 190% increase from 2018 and a 700-fold increase from 2017.

Similarly, the Malta Gaming Authority (MGA) slammed Blackrock Media Limited with a €2.34m fine for “operating gaming services through a Maltese legal entity without being in possession of the necessary authorisation.” The penalty follows a joint investigation by the MGA and Malta’s executive Police force. Blackrock Media Limited has reportedly paid the fine.

The FIAU has also played a part in drafting a series of amendments to both the Prevention of Money Laundering Act (PMLA) and the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR).

A lot of these amendments had to do with ensuring that Malta adhered to the rules laid out in the EU’s Fifth Anti-Money Laundering Directive.

However, Malta’s government noted that the amendments to the PMLA also addressed issues that had been highlighted by Moneyval. These included setting clear timelines within which an appeal against an administrative sanction imposed by the FIAU is to be heard and decided, rendering supervision efforts more efficient and hence more effective.

Another change made in PMLA in accordance with Moneyval’s recommendations was to switch up the way the publication of penalties takes place, making the publications regime more effective and simultaneously respecting the principle of proportionality.

The MFSA has introduced new regulatory obligations for trusts, bringing greater scrutiny and accountability. The amended legislation significantly increased the number of trusts that must register with the Trust Beneficial Ownership Register, from 300 to over 3,000. The change mandates that all trusts, irrespective of whether they generate tax consequences, must submit ultimate beneficial ownership information to the MFSA.

Another highlight in the report was from the Malta Business Registry (MBR), which is tasked with ensuring that stakeholders have adequate, accurate and easy access to registers of companies established under Maltese law. It revealed that it had initiated defunct procedures against about 2,000 entities in 2020, with a total of 1,654 companies struck off for being non-compliant as of February 2020.

The government’s report also stated that Malta’s customs department has had a record-breaking year in 2019, with €1.55m in undeclared cash being seized in 66 cases. This represented a 560% increase from the €203,335 seized in ten cases 2018.

The custom’s department is confident that it will be able to keep this up thanks to its strong collaboration with Malta’s police’s AML and CTF units.

Copyright © 2020 FinTech Global

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