The Malta Independent 16 October 2019, Wednesday

Throwing money and resources only will not solve the money laundering issue

Thursday, 19 September 2019, 10:34 Last update: about 27 days ago

We publish in this issue (page 6) the full text of the Moneyval final report plus two statements in reaction. The two statements are, in our opinion, pathetic and confirm the lack of political will to tackle the issue at root level.

The Moneyval report points out that "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."

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In other words, the people the Moneyval committee spoke to showed they do understand that our system is weak and riddled but they have an imperfect appreciation of the consequences of lapses on the Maltese side on the wider context, outside Malta.

The report continues: "The report concluded that obligations are being effectively implemented by financial institutions and designated non-financial businesses and professions to some extent, with major improvements needed. It considers that the appreciation of money laundering and financing of terrorism risks is varied across the sectors. Banks and casinos demonstrated a good understanding of risks and an adequate application of preventive measures, but some non-bank financial institutions and other DNFBPs were unable to clearly articulate how money laundering might occur within their institution or field of activity. Consequently, a low level of reporting of suspicious transactions remains a concern in some sectors."

This is a really terrible indictment. So we, ordinary Maltese law-abiding citizens, have to endure all those questions any time we want eg to open a bank account because of lengthy and also intrusive Know Your Client questions while those, Maltese or foreigners, who bypass the whole system and use non-bank financial institutions and professions get away scot-free.

Then the Moneyval committee gave their Maltese interlocutors a helping hand and a way out - "The report considers that money laundering is mainly investigated together with the predicate offence on which the investigation is centred. 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."

And, true to form, the Maltese authorities grasped at this providential lifeline and whinged their way, as they thought, out.

The four ministers who signed the government reaction (Why only four ministers? Why not the whole Cabinet?) end their statement (see also pg 6): "We are determined to commit even more resources towards strengthening our institutions, regulators and law enforcement agencies, to aid in this mission."

Then they list the Strategic Plan drawn up by the Malta National Coordinating Committee, 35% of whose recommendations have been implemented and add that now the Coordinating Committee already widely representative in itself, will collaborate with 20 competent institutions to draw up a one-year action plan to implement the Moneyval recommendations.

And not to be outdone, the MFSA in its statement in reaction said that "most of the Moneyval recommendations have already been implemented" (thus hinting the whole laborious Moneyval process was a waste of time and effort) and the MFSA CEO could say, with a straight face, that "our commitment is to raise the bar in AML/CFT supervisory standards so that the MFSA can be a role model for financial crime compliance standards in Europe."

To contextualize, the Moneyval report is a humiliating one for our country, coming in the wake of so many international news media reportages about Malta's failures in this section.

This is fast becoming like the small child and the emperor without clothes. To throw money and resources at the problem will not solve anything as long as the grip that politicians have over our regulatory institutions which they pack with chosen party people is broken.

Nor is our regulatory authorities' reaction credible unless the outstanding issues concerning key ministers and advisors, so far defended by the powers that be with multiple excuses and legal quibbles, lost in the Courts' labyrinths and processes, finally reach closure and justice is meted out.

But the people who have so reacted forget that Moneyval is not the average Maltese institution where the government gets to have its way. And that soon, the same Moneyval committee will meet to check if anything sustainable was done in the wake of the report. The time for equivocation is over.
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