Malta greylisting means week’s delay for BOV-to-HSBC transfer

Major players in the Maltese financial services industry have had to file declarations with their banks that they are not servicing any clients based in blacklisted jurisdictions: one of the direct effects of Malta’s greylisting by the Financial Action Task Force.

Now a major theme of the Nationalist Party’s criticism of the Abela administration, Malta’s greylisting by the FATF is affecting the normal conduct of business on large transactions of cash.

In one clear example shown to MaltaToday, a correspondent bank handling a SWIFT transaction from Bank of Valletta to HSBC Malta held up individual transactions worth hundreds of thousands of euros, for at least seven days.

The money was a refund from an oversubscribed bond issue, which required a remittance from BOV to HSBC Malta.

Neither bank was aware of why the hold-up had taken place, with the payment having been cleared by the SWIFT centre and the bank’s payment screening and payment investigations unit.

It was only after further inquiries were made by the initiating bank a week after, that it had resulted that the correspondent bank had sent a list of questions in connection with the transaction. The client was asked to confirm that none of its clients, for whom the refund was expected to be sent to, had any relation to blacklisted jurisdictions Iran, Syria, Crimea, North Korea, or Cuba.

One of the financial players with knowledge of the delayed transactions said the development was worrying: “This is a tangible sign of the FATF greylisting effect. What was supposed to be a same-day remittance from one Maltese bank to the other, took seven days. It generated a lot of to-and-fro from one bank to the other, with the client having to enquire whether the amount had been blocked or not.

Unlike the FATF greylisting, which signalled to companies and countries that they should exercise increased caution when trading in Malta, the country’s re-categorisation by the UK government as a high-risk jurisdiction now forces practitioners to adhere by a number of legally binding procedures.

This sets into motion an enhanced due diligence which includes additional information on the customer, the business relationship, the source of funds, reasons for the transaction, and the enhanced monitoring of the business relationship by increasing the number and timings of controls applied.

Undoubtedly, this could lead to an increased cost in cross-border transactions with the UK, as Maltese banks would need to ensure a higher level of scrutiny on outgoing payments.

Increased requests for information on the nature of payments from Maltese banks, as well as restrictions by UK correspondent banks on downstream banking relationships with Maltese banks, are some of the effects of the FATF greylisting for Malta.

FATF update

FATF President Marcus Pleyer said Malta has made “good progress” to get off the greylist.

“Malta has made good progress across its action plan including by imposing an increasing number of penalties, with dissuasive average fines for the filing of incorrect beneficial ownership information,” he said.

Addressing a press conference, Pleyer said since being greylisted, the country has done well to disseminate information to the Police Force related to tax crimes.

“It [Malta] has also disseminated additional financial intelligence to the Malta Police concerning money laundering linked to tax crimes leading to a greater number of tax based money laundering investigations than in the years past,” the FATF president said.

Government has received criticism from the Opposition for failing to address Malta’s greylisting in a meaningful way in the budget presented last week.

Opposition finance spokesperson Mario de Marco accused the government of picking on the small fish to try and impress international assessors.

Pleyer also said more work remains to be done by Malta.

“However, there is more work that remains - as none of Malta’s action plans have been largely addressed in the short time since the listing in June. So the FATF has seen good initial steps for Malta and encourages it to continue its improvements and address all the items in the action plan,” he said.

Malta was placed on the greylist in June, after it failed to garner the necessary support from FATF members, despite its adherence to a Moneyval assessment in which it achieved a high compliance rate on various recommendations.