By Elizabeth Hearst for AMLi
It has been confirmed that the EU’s smallest Member State, Malta, has been added to the Financial Action Task Force’s ‘grey list’, something which may cause detrimental effects to the Maltese economy.
Following the FATF’s five-day plenary session, it has been announced that Haiti, Malta, the Philippines, and South Sudan, have been grey listed by the global financial watchdog.
They join countries such as Albania, Myanmar, Nicaragua, Uganda and Syria under increased monitoring by the body, which has called for these jurisdictions to “complete their action plans expeditiously and within the agreed timeframes”, after “strategic deficiencies” were identified in their regimes to “counter money laundering, terrorist financing and proliferation financing”.
The decision to ‘grey list’ Malta was broken on Wednesday evening, sending shockwaves through the small Mediterranean nation. Malta’s Prime Minister, Robert Abela labelled the decision as “unjust”, and believed that the decision was “not deserved”.
Speaking at a press conference, President of the FATF, Dr. Marcus Pleyer said that a “large number of serious issues of significant strategic deficiencies” were identified. However, he conceded that “good progress in a number of areas” had been observed.
Despite the news, officials in Malta had been keen to reduce the clamour caused by the decision. Finance Minister Clyde Caruana said on Wednesday that he did not “forecast this to have a negative impact on the economy”, adding that he did not see “any major shock that will impact the country”.
He stressed that “people’s fear that something drastic will change as of tomorrow is unfounded”.
However, Dr. Pleyer urged Maltese officials to consider this grey-listing seriously, and said that “authorities must not downplay these measures”, but added that the Maltese government had made a “high level political commitment” to address these shortcomings.
When asked by AML Intelligence about the potential devastating economic ramifications to Malta, Dr. Pleyer was adamant that “in the medium to long-term”, that the effects of grey-listing will “help fair competition and improve the international reputation of a fair economic system”.
Despite the perceived negative effects on the country, Dr. Pleyer emphasised that “being on the grey list” has “no legal consequence” in comparison to FATF’s black list.
In a statement, FATF said that Malta had made a “high level political commitment to work with the FATF and MONEYVAL to strengthen the effectiveness of its AML/CFT regime” in June 2021, and had made “progress on a number of the Mutual Evaluation Report (MER) recommendations.
Such recommendations included “strengthening the risk-based approach to Financial Institution (FI) and Designated Non-Financial Business and Professions (DNFBP) supervision”, and “improving the analytical process for financial intelligence”, as well as “resourcing the police and empowering prosecutors to investigate and charge complex money laundering in line with Malta’s risk profile”.
FATF have concluded that Malta will work to “implement its action plan”, by “continuing to demonstrate that beneficial ownership information is accurate”, as well as “ensuring that effective, proportionate and and dissuasive sanctions are applied to gatekeepers when they do not comply with their obligations”.
The body has also recommended that Malta enhances “the use of the FIU’s financial intelligence to support authorities pursuing criminal tax and related money laundering cases”, and have requested that Malta increases the “focus of the FIU’s analysis on these type of offences, to produce intelligence that helps Maltese law enforcement detect and investigate cases in line with Malta’s identified ML risks related to tax evasion”.
The breakdown of the vote is confidential, with Dr. Pleyer emphasising that it was necessary to “protect open discussion from political intervention”.
The decision to keep Pakistan on the grey list, will prove a tumultuous one, with Pakistani officials reportedly unhappy with the move. Foreign Minister Shah Mahmood Qureshi said that there was “no justification” for the financial watchdog to keep Pakistan under enhanced monitoring on Tuesday.
Although Dr. Pleyer revealed that “substantial progress” had been made, with Pakistan now compliant in 26/27 shortcomings identified in the 2018 action plan, the country would still remain on the ‘grey list’. Despite these improvements, the country would need to address AML + Counter Terrorism issues in the country, if it hoped to be removed.
However, when asked if meeting 26/27 recommendations and still not shifting off the grey-list was discouraging to other nations, Dr. Pleyer was adamant that FATF “treats all countries equally” when it comes to official decisions, however there was an “expectation to comply” for those highlighted.
The news however is brighter for Ghana who have been removed from the ‘grey list’, after “significant progress” was made in addressing the previous AML/CFT deficiencies highlighted by FATF.
Dr. Pleyer said he would like to congratulate Ghana for the “hard work and determination of officials”, for the de-listing.
It is believed that Botswana and Mauritius may be next in line to get the nod, after Dr. Pleyer revealed that both countries had “substantially approved” their deficiencies, with on-site visits expected to be completed soon.
The FATF also highlighted the work of South Africa and Japan, with the task-force concluding that the former had implemented a “solid legal framework for combating money laundering and terrorist financing”, but warned that “significant shortcomings remain”.
FATF also concluded that “Japan’s measures to combat money laundering and terrorist financing are delivering results”, but advised that the country “needs to prioritise efforts in certain areas”, including “supervision and preventative measures by financial institutions and designated non-financial businesses and professions”.
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