Malta faces police bottleneck in fight against money laundering

Only four cases from the 146 referred to the police by the anti-money laundering agency were prosecuted in five years, an international assessment shows.

Police prosecutions amounted to less than 3% of all suspicious cases flagged by the Financial Intelligence Analysis Unit between 2014 and 2018.

The figures come from the technical assessment carried out by Moneyval, a monitoring body of the Council of Europe, which was published last week.

The report said Malta should step up its efforts to investigate and prosecute money laundering as well as to strengthen its supervisory system.

The FIAU on Friday said that by March this year it had implemented 90% of Moneyval’s recommendations to strengthen its supervisory mechanisms.

FIAU director Kenneth Farrugia said the agency had already been working on an action plan agreed with the European Commission and the European Banking Authority last year.

Moneyval noted that the police also prosecuted another 17 cases of money laundering without having been notified by the FIAU.

However, the majority of these money laundering cases were initiated by the police in the course of investigations on other offences, such as fraud, drug or theft cases.

Moneyval said that the overall number of investigations, prosecutions and convictions for money laundering was low when compared to the number of potential offences.

“Even if only the cases investigated by special branches and the FIAU reports were to be considered, an average of around five money laundering prosecutions per year does cast doubt on Malta’s ability and capacity to pursue money laundering offences,” Moneyval added.

It also painted a dismal picture of police investigations, which seemed to have focussed on domestic crimes and offenders, where the proceeds are located in Malta.

“Investigations appear to be limited to front persons and do not go beyond or through complex corporate structures. No investigations have been initiated prior to 2018 against legal persons,” the report noted.

Industry sources have told MaltaToday that any improvements on the regulatory and supervisory front being undertaken by the FIAU and the Malta Financial Services Authority may be useless unless the police get their act together.

The FIAU and the MFSA have responded to the shortcomings by increasing resources and the quality of their inspections but eventually, any money laundering suspicion they may flag will have to be investigated and prosecuted by the police.

“It does not appear that the police have the human resources and the capability to investigate complex money laundering cases, and unless this is rectified they will remain a bottleneck in Malta’s efforts to combat financial crime,” the sources said.

The government has announced that it will set up an agency to investigate and prosecute financial crimes but so far there has been little information on how this will work.

It remains unclear whether this will be an independent agency with full investigative and prosecutorial powers, or a beefed-up branch of the police force.

The Moneyval report says that the police informed its assessment team that a reform process was envisaged by mid-2020.

According to the report, this reform would convert the current Economic Crimes and anti-money laundering squad into a new financial crimes investigation department with 100 staff members.

Again, it is unclear how this reform ties in with the government’s plans announced last July by Finance Minister Edward Scicluna.

But industry sources were quick to point out that while the FIAU and the MFSA were quick to react to the Moneyval findings, there was no word from the police.