Updated | Moneyval: Malta must step up investigation and prosecution of money laundering

In a report published today, the Council of Europe’s anti-money laundering body MONEYVAL calls on the Maltese authorities to strengthen their practical application of their measures to combat money laundering and financing of terrorism.

The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) is a monitoring body of the Council of Europe entrusted with the task of assessing compliance with the principal international standards to counter money laundering and the financing of terrorism.

The report makes a comprehensive assessment of the effectiveness of Malta’s anti money laundering and countering the financing of terrorism system and its level of compliance with the Recommendations by the Financial Action Task Force (FATF).

“MONEYVAL acknowledges that the authorities have demonstrated a broad understanding of the vulnerabilities within the system, but a number of important factors - notably predicate offences, financing of terrorism, legal persons and arrangements, the development of new technologies and the use of cash - appear to be insufficiently analysed or understood,” the Council of Europe said.

While the Financial Intelligence Analysis Unit is considered to be an important source of financial intelligence for the Maltese police, only in a limited number of cases are the disseminations used to develop evidence and trace criminal proceeds related to money laundering and terrorism financing.

The report considers that money laundering is mainly investigated together with the predicate offence on which the investigation is centred.

But limited resources, both human and financial, weigh negatively on Malta’s capability to effectively pursue this offence. Investigations and prosecutions do not appear to be in line with the country’s risk profile.

The report expresses concerns that the law enforcement authorities are currently not in a position to effectively and in a timely manner pursue high-level and complex money laundering cases related to financial, bribery and corruption offences. Fundamental improvements are also needed with regard to the confiscation of proceeds of crime from money laundering and associated predicate offences.

While Malta has a sound legal framework to fight the financing of terrorism, the report notes that few investigations have been conducted so far which have not resulted in any prosecutions or convictions. While noting recent progress, the report concludes that the actions undertaken by the authorities are not fully in line with the country’s exposure to possible terrorism financing risks.

Malta does ensure the implementation of the United Nations targeted financial sanctions regimes on terrorist financing and the financing of proliferation of weapons of mass destruction without delay. But authorities have been told to demonstrate a competency in co-ordinating their activities with respect to implementation of various targeted financial sanctions’ regimes.

MONEYVAL noted that supervisory authorities do not have adequate resources to conduct risk-based supervision, for the size, complexity and risk profile of the country’s private sector.

“There are weaknesses identified with respect to the appropriate consideration of the wider money laundering and terrorist financing risks at the market entry stage, the adequacy of fit and proper measures for certain types of DNFBPs and the lack of a coherent and comprehensive graduated risk-based supervisory model. Sanctions for non-compliance with anti-money laundering and countering the financing of terrorism requirements are not considered effective, proportionate and dissuasive.”

“Malta is lacking an in-depth analysis of how all types of legal persons and legal arrangements can be misused for money laundering and financing of terrorism purposes. There are shortcomings in a multi-pronged approach to obtaining beneficial ownership information. Considering the nature and scale of business undertaken in Malta, the fines for failing to submit beneficial ownership information on legal persons are not effective, dissuasive and proportionate.”

Based on the results of its evaluation, MONEYVAL decided to apply its enhanced follow-up procedure and invited Malta to report back in December 2021.

Government welcomes report

The Maltese ministers for finance, home affairs, and justice and parliamentary secretary for financial services issued a joint statement welcoming the MONEYVAL evaluation.

“We reiterate our commitment to implementing the recommendations in the Council of Europe report now officially published by MONEYVAL, namely, the Mutual Evaluation Report (MER) which was drawn up following the assessment of Malta’s system as at November 2018 for anti-money laundering and combating the financing of terrorism (AML/CFT),” finance minister Edward Scicluna said.

The ministers said the country had achieved progress on its Strategic Action Plan laid out by Malta’s National Coordinating Committee (NCC). The NCC was established in April 2018 to implement a national strategy against money laundering and the funding of terrorism.  The Committee is composed of the most senior officials from the finance ministry, the Central Bank, the Malta Financial Services Authority, the Commissioner of Revenue, the FIAU, the police, the justice ministry, the Office of the Attorney General, the Asset Recovery Bureau, and the Malta Gaming Authority.

The NCC will now be preparing a one-year action plan to implement the fifty-eight MONEYVAL recommendations. Each MONEYVAL recommendation will be entrusted to a competent institution, with a proposed set of actions in respect of each recommendation, a time frame for implementation, the resource requirements, including support and  expertise, and, where required, an appointed project leader.

The recommendations will complement the measures listed in the Strategic Action Plan, prepared following the National Risk Assessment carried out during 2017. 35 per cent of the measures have been implemented so far, in line with the timeframes mentioned in the three-year action plan.

“Malta is deeply committed to helping combat money laundering and the financing of terrorism, and we welcome recognition of our efforts so far. AML/CFT are serious, transnational issues that require cross-border collaboration. We are determined to commit even more resources towards strengthening our institutions, regulators and law enforcement agencies, to aid in this mission,“ the ministers said.

PN reaction

In a reaction, the Nationalist Party said it had taken note of the report and would be giving a more detailed reaction “in the coming days”

It accused the government of weakening the country’s institution, and as a result, of placing its financial services sector, including the jobs of thousands of “youths and professionals”, at risk.

The PN said that despite knowing about the evaluation well in advance, it had done little to address the “serious problems that Malta had, and still has, with enforcement of anti-money laundering laws”.

Finally, the PN said that the report made it clear that there was no interest in concluding investigations about high-profile cases, corruption and money laundering accusations involving people close to the government.

“The Opposition will continue to insist that the government invest every resource needed for these high-profile cases to be investigate in an effective manner and in the shortest time-frame possible,” the PN said.