The Malta Independent 19 September 2019, Thursday

Brussels to warn Malta over dirty money scandal - Financial Times

Wednesday, 3 October 2018, 10:50 Last update: about 13 months ago

The European Commission is preparing to use little-known powers in EU law to issue binding demands on Malta’s financial regulator after an EU watchdog found “systematic” weaknesses in its enforcement of anti-money laundering rules, the Financial Times reports.

It will be the first time that Brussels orders a member state to strengthen enforcement of its anti-money laundering rules after a string of scandals across Europe’s banking system.

Brussels’ intervention follows a series of scandals in Europe in the past year including high-profile cases at Denmark’s Danske Bank, Dutch bank ING and Latvia’s ABLV. The revelations have exposed a dangerous lack of co-operation among national banking authorities in the EU and Brussels, raising security concerns about illicit foreign money entering the continent. In response, the commission has prepared new regulations to boost the resources and powers of the European Banking Authority to fight dirty money flows, giving the authority extra staff and a clearer legal powers. It is also moving to make greater use of existing powers in EU law.

Vera Jourova, the EU’s justice commissioner, told the Financial Times that Brussels would publish a “formal opinion” on action that must be taken by Malta after its financial conduct regulator failed to address concerns raised by the EBA, a pan-EU banking watchdog, in July. “We will react because the EBA’s report has concrete proposals for improving the functions of [Malta’s] financial intelligence unit. The situation obliges us to come with an opinion,” said Ms Jourova.

The EBA’s report warned of “general and systematic shortcomings” in the work of Malta’s Financial Intelligence Analysis Unit, or FIAU, an independent government agency tasked with combating money laundering and terrorist financing. The commission’s opinion will be formally binding on Malta’s FIAU. Should it fail to act, the EBA would then be able to give direct orders to Maltese banks to bring them into line with EU rules, such as requirements for customer background checks and other due diligence measures. The commission has until mid-November to formally issue the opinion, after which Malta’s FIAU has 10 days to reply and set out what changes it intends to make.

Edward Scicluna, Malta’s finance minister, told the FT that his government was already working on enforcing new laws to address shortcomings in the fight against illicit financing. He said the country had set up a co-ordinated committee of national bodies, including the central bank and the FIAU, to better counter money laundering. “We cannot drag our feet,” said Scicluna.

The EBA probe centred on the supervision of Pilatus Bank, a private lender, which was accused by US authorities of being set up with criminal proceeds. Pilatus lost its banking licence this year after its chairman was arrested in the US over allegations of evading sanctions against Iran. But the EBA said the investigation also revealed problems with the “general practice” of the regulator that went beyond “this particular case”.

“We have to be quicker than the criminals. Money laundering has the potential to destroy the coherence and working of the EU’s financial sector,” Jourova said. She briefed EU finance ministers on Tuesday on the commission’s plans to boost enforcement powers across Europe. Any reforms to the EBA will need to be supported by a weighted majority of the EU’s national governments and the European Parliament. At the meeting in Luxembourg, France and Spain were vocal supporters of the move to bolster the powers of the EBA. But others member states, such as the Netherlands and Finland, were more hesitant to endorse plans that would interfere with the work of national authorities. Ms Jourova said the proposals were “proportionate” and was confident they would be backed by a majority of EU governments.


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