The European Commission has finally met Maltese representatives, including the Financial Intelligence Analysis Unit, to obtain the latest information on the Unit’s efforts to comply with European Banking Authority regulations after its decision to pursue a formal opinion on actions it believes must be implemented in Malta, The Malta Independent on Sunday has been informed.

It is believed that at the meeting Commission services acknowledged that improvements have been made but said they will still pursue a formal opinion.

A European Banking Authority (EBA) spokesperson also told this newsroom that the authority will also conduct an on-site visit to the FIAU in mid-2019 as part of their on-going assessment of information of their recommendation.

The same authority has also finally provided feedback to the action plan the FIAU sent them last July, however, the EBA’s general opinion is that they have concerns that their recommendations have only “partially met at present” by the Unit.

A letter sent to both Commissioner Jourova and FIAU Director Kenneth Farrugia read: “A detailed action plan is, however, provided, setting out a timetable for actions that is intended to be completed progressively between now and June 2019.” A commission spokesperson further explained that the FIAU had to comply with the EBA’s breach of Union law recommendations within one month of the initial report (i.e. 11 August).

“I would also note that our assessment is based only on a review of the documentation provided: a fuller assessment would require an on-site visit and discussions with key staff at the FIAU. We intend to carry out such an on-site visit as part of our programme of supervisory reviews and this is currently scheduled for mid-2019,” the letter continued.

The newsroom had previously reported how the Commission never informed the FIAU, Finance Minister, and European Affairs Minister of its intent, instead revealing the information when giving comments to the Financial Times (FT) at the beginning of October.

Jourova was quoted as saying that the EU would act “because of the EBA’s report since it has concrete proposals for improving the functions of [Malta’s] financial intelligence unit; the situation obliges us to give an opinion”.

The report refers to the European Banking Authority’s critical report on the FIAU’s handling of Pilatus Bank, which also flagged some ‘general shortcomings’ in the unit published last July.

 

‘Legislation does not require the authority to comment on action plan’ – EBA only sent FIAU feedback on 16 October

The FIAU described the comments as ‘extremely inappropriate’, especially given that the unit did not receive any feedback on a detailed action plan which covered a number of areas including its procedures, policies, protocols, supervisory and enforcement processes, and resources, that was submitted to the EBA on 25 July.

The EBA has only now provided the FIAU with feedback to the unit’s action plan on 16 October, one day before the EBA replied to questions sent two weeks ago. Meanwhile, the EBA’s letter to the Commissioner recommending the necessary action to be taken against the FIAU, dated 28 September 2018, was only published on the EBA’s official website on 16 October.

Pressed on the lack of response to the action plan set out by the FIAU, especially given that the decision to pursue a formal opinion was the first of its kind in the EU, the EBA said it is the Commission that decides whether to take such action. “The legislation does not require a further opportunity for the competent authority to comment.”

“Having provided its preliminary assessment to the Commission, the EBA subsequently decided to provide a copy of the assessment to the FIAU so that it could be taken into account when implementing the FIAU’s action plan.”

Issues surrounding the lack of communication were also flagged by Maltese authorities. However, the spokesperson insisted that Jourová informed the Finance Minister in their meeting on 1 October and by letter of 9 October, a day after The Malta Independent on Sunday wrote an article on the issue.

 

EBA has been asked by Commission and MEPs to investigate potential breaches by a number of national supervisors

Asked to elaborate on the possibility of political pressure being placed on European Institutions to act strongly in view of the growing scandals erupting the continent, namely Denmark’s Danske Bank, Dutch bank ING, and Latvia’s ABLV, the EBA’s spokesperson said: “Serious breaches of the legislation on anti-money laundering and combating the financing of terrorism (AML-CFT) call for a comprehensive response at EU level.

“As part of that response, the EBA has been asked by the Commission and MEPs to investigate potential breaches of Union law by a number of national supervisors. In addition, the EBA has recently launched a comprehensive plan to review the effectiveness of AML-CFT supervision in all Member States. This is in line with the EBA’s objective of protecting the public interest by contributing to the stability and effectiveness of the financial system, including ensuring a sound, effective and consistent level of regulation and supervision.”

The Commission’s spokesperson echoed this sentiment, adding that new rules were proposed on 12 September which addressed the identified shortcomings and gaps, including the cooperation and exchange of information between authorities in cross-border situations.

“Following the publication of the Danske bank investigation, the Commission has sent a letter to the EBA asking it to look further into the matter and notably the role of the Danish and Estonian supervisory authorities. The Commission had sent a similar request to the EBA to Latvia following the ABLV case,” the spokesperson said.