The informal feedback provided by the European Banking Authority (EBA) and the EU Commission to the Financial Intelligence Analysis Unit (FIAU) on the latter’s action plan following scrutiny by the institutions was “positive and encouraging”, the FIAU told The Malta Independent on Sunday.

Earlier this year, the EBA had found “general and systematic shortcomings” in the FIAU’s application of anti-money laundering directives with regard to the infamous Pilatus Bank. The findings pointed to general and systematic shortcomings in the FIAU’s application of the third Anti-Money Laundering Directive, the EBA said.  In response to the EBA’s findings, the FIAU said it had serious reservations regarding the process adopted by the EBA in carrying out its preliminary enquiry and the subsequent breach of Union law investigation.

“Notwithstanding this, the FIAU will continue to cooperate with the EBA throughout the implementation of the FIAU’s action plan, which was set in action prior to the EBA’s opening of a preliminary enquiry into the possible breach of Union law in November 2017.”

Asked for an update on the action the FIAU will be taking following the EBA report, the FIAU gave a detailed summary of the series of events.

“The EBA issued its formal recommendations to the FIAU in July 2018. Immediately thereafter the FIAU, noting the recommendations, reviewed its action plan to ensure that it addressed all the EBA’s recommendations. The FIAU also set up an internal project management office and a steering committee to better ensure the successful delivery of its action plan. Additionally, the FIAU also engaged a consultancy firm of international repute to support the Unit with external resources in the implementation of its action plan,” the Unit told this newsroom.

“On 25 July 2018, within the time period stipulated in the EBA’s formal opinion and in line with the EBA regulations, the FIAU submitted a copy of its revised action plan to the EBA as part of its formal reply to inform the EBA of the steps that the FIAU has taken or intends to take to address the recommendations.”

Following this, the FIAU continued to work on the implementation of its action plan, it explained, and in October: “the FIAU learnt that the Commission intended to issue a formal opinion.”

The FIAU met with representatives of the European Commission (who were working on an opinion of their own) on 18 October 2018 and welcomed the opportunity to explain to the Commission the action taken by the FIAU following the EBA’s recommendations. “During the meeting, the FIAU also provided the Commission with a number of documents as evidence of the progress made by the FIAU between July and October 2018.”

The Commission proceeded to issue a formal opinion on 8 November 2018. This opinion required the FIAU to continue taking additional measures to fully comply with its obligations under the fourth Anti-Money Laundering Directive.

The FIAU said that the Commission “recognised the efforts made by the FIAU in addressing the EBA’s recommendation. On the same day, the FIAU issued a press release on its website vis-à-vis the Commission’s opinion.”

Following the Commission’s formal opinion, the FIAU revisited its action plan once again, it said, to ensure that the plan addressed the Commission’s recommendations, “even though these were based on the EBA’s original recommendations. The FIAU also revisited the target deadlines of some of the actions being taken to ensure that such actions are completed earlier than envisaged in the FIAU’s action plan provided to the EBA. The FIAU then met the Commission on 19 November 2018. In this meeting, the FIAU explained to the Commission what it intends to do to address its recommendations. The FIAU also met the EBA (on 20 November) to inform the European Supervisory Authority of such developments. Other than the changes to the target deadlines, the FIAU’s action plan remained largely unchanged after the Commission’s formal opinion.”

The FIAU said that it formally communicated its reply to the European Commission on the actions that the FIAU has taken or intends to take to address the Commission’s recommendations on 21 November 2018. “The FIAU believes that its action plan comprehensively addresses the EU Commission’s concerns and demonstrates its commitment to strengthen its supervisory processes in order enhance and improve its risk-based approach to supervision.”

The FIAU’s action plan consists of nine key actions, eight of which are intended to directly address the EBA’s eight recommendations, the FIAU said.

The action plan is comprised of  various actions for the FIAU to further increase the human resources of its compliance section; issue general, sector specific, and topical guidance to assist obliged entities in complying with domestic law; improve its risk assessment methodology and data collection processes; revise its supervisory procedures and manuals; enhance governance structures supporting and overseeing the risk assessment process; invest in IT systems and further develop the Unit’s sanctioning policy.

The primary aim of the action plan, the FIAU said, is to serve the FIAU in ensuring that it strengthens its supervisory and enforcement functions. “The action plan’s implementation is being monitored closely by the FIAU’s top management, the Unit’s project management office and the steering committee. However, the Unit’s action plan will assist the Unit in providing periodic updates to the EBA and the Commission.”

Asked whether the EBA approved their action plan, the FIAU said: “The EBA has not formally approved our action plan. However, we understand that there is no such procedure under EBA regulations, and therefore it does not appear to be within its legal remit to do so.

“In separate meetings with representatives of the Commission and the EBA, which took place on 19 November and 20 November 2018 respectively, the informal feedback provided by the EBA and the Commission Services to the FIAU with regard to its action plan was positive and encouraging.”

The FIAU said that it is deeply committed to establishing the highest standards. “It is essential for the FIAU to set the standard required to be met also by Subject Persons in Malta. Additionally, the FIAU intends to build a fruitful relationship with the EBA and the Commission based on transparency, dialogue and the sharing of expertise in order to fully achieve our common goal, that is to be effective in our fight against money-laundering and the financing of terrorism.”