Global anti-financial crime watchdog advises enhanced monitoring for Malta
Members of a global anti-money laundering watchdog have voted to add Malta to its grey list, in a decision that could have serious negative repercussions on the country’s economy.
The Financial Action Task Force (FATF) plenary came to the decision shortly after 2.30pm on Wednesday afternoon.
Although no official announcement about the outcome has been made, high-ranking government sources told Times of Malta that Malta had not garnered the required support from FATF members to avoid the greylisting.
The greylisting vote must be formally approved by the FATF’s broader membership before it is confirmed, although that confirmation is generally considered to be a rubber-stamping process.
It is understood that the US did not back Malta during Wednesday’s session.
Sources said Malta was one of two countries that the FATF plenary voted to add to the grey list, with the other being Romania. If those votes are confirmed, they will be the first two EU countries to be added to the list.
Prime Minister Robert Abela and Finance Minister Clyde Caruana are expected to address a press conference later on Wednesday.
Opposition leader Bernard Grech described the decision as a “punishment for the entire nation” and urged the government to set up a unity task force to limit the greylisting damage.
The FATF greylist includes 19 other countries ranging from Albania to Zimbabwe. It includes strife-torn countries such as Syria, Yemen and Myanmar as well as tax havens such as Panama and the Cayman Islands.
Various studies suggest that ending up on the grey list could have far-reaching repercussions on the country’s economy, impacting banking, ease of doing business and the island’s attractiveness to foreign investors.
How was the vote taken?
Wednesday’s vote was held among 37 jurisdictions and two regional organisations – the European Commission and the Gulf Co-operation Council – that are recognised as members of the FATF.
The vote was held on a draft resolution, drawn up by expert evaluators, that was discussed in another secret meeting held on June 15, 2021.
Malta did not have a say during either of the sittings, though it is understood that the country lobbied members to speak on its behalf.
“Consensus among members” was required to overrule any of the experts’ draft conclusions.
The FATF is an extremely secretive body and is not expected to make an official announcement about its plenary session, although a press briefing has been scheduled for this Friday. It is not clear if an official position on Malta will be announced until its final assessment document is published at some point between August and September.
When contacted earlier this week, a spokesman for the FATF would not even confirm that Malta is being reviewed by the global watchdog, saying the process is entirely confidential.
What happens next?
The decision to grey list Malta and Romania will now be presented to the FATF’s various associate members, which will be asked to confirm that decision.
If that happens, Malta will have to sign a commitment to address shortcomings, in a tailor-made action plan drawn up by the FATF’s experts that will be subjected to what the body calls “enhanced monitoring”.
It would then be taken off the FATF list of untrustworthy jurisdictions once all the shortcomings on that list are deemed to have been addressed.
What is the FATF grey list?
Every year, the FATF holds three plenary meetings. The inter-governmental body is tasked with rooting out money laundering by plugging loopholes in the international financial system.
The FATF identifies “jurisdictions with weak measures” through two public documents issued at the end of every week-long plenary.
The worst designation, known as the blacklist, includes countries or jurisdictions with such serious deficiencies that the FATF calls on the international financial system to apply “strict counter-measures”.
In other words, the FATF encourages the global community not to do business with blacklisted countries or to only do so under heightened scrutiny.
Only North Korea and Iran are currently on the blacklist.
The second public document issued by the FATF is called “Improving Global Anti Money Laundering Compliance: On-going process”. This is what is informally known as the greylist.
The list includes countries that have “strategic weaknesses” in their regime to counter money laundering and terror financing, but that have committed to fixing them.
Malta was deemed to have made insufficient progress in bolstering its framework to battle financial crime despite a broadly positive final assessment by the Council of Europe’s Moneyval experts earlier this year.
How long does greylisting last?
Once a country is listed as a “jurisdiction under increased monitoring” by the FATF, it must complete an action plan within a certain time period if they want to be taken off the list.
Only once the FATF and its partners are convinced that this action plan has been thoroughly implemented can a country be removed from the greylist.
That can happen as quickly as within one year, as was the case for Iceland, which was greylisted in 2019 but removed in October last year.
Recent lobbying efforts ‘unsuccessful’
Senior government officials have spent the past week frantically lobbying international partners in a bid to avoid being greylisted.
Sources said that Alfred Camilleri, permanent secretary at the Finance Ministry, had a telephone call with a senior US government official on Monday night.
The US is understood to be among some of the influential FATF members that have not looked favourably at Malta’s efforts to curb major financial crime.
During the Malta-US lobbying the superpower is understood to have gone from being outright against Malta to being “noncommittal”.
Government sources have described a sense of “panic” among political, regulatory and law enforcement top brass ever since the FATF’s evaluators failed to give the island a clean bill of health in a secret meeting last week.
Finance Minister Clyde Caruana said earlier this week that Malta did not deserve to end up on the grey list. He had himself flown out to Germany, which holds the presidency of the FATF for talks over the weekend.
The 39 FATF plenary members
The FATF plenary is made up of 37 member jurisdictions and two 2 regional organisations.
- European Commission
- Gulf Co-operation Council
- Hong Kong, China
- Republic of Korea
- New Zealand
- Russian Federation
- Saudi Arabia
- South Africa
- United Kingdom
- United States
ByIvan Martin|, June 23, 2021, published on Time of Malta