Prime Minister Robert Abela’s bold claim that Malta will pass its Moneyval test with flying colours is “unrealistic” and has got the financial institutions concerned, financial service sources have told The Malta Independent on Sunday.

Abela made the statement on Wednesday, while speaking during a Labour Party conference in Cospicua.

“The same way we passed the test of the Venice Commission and the COVID-19 pandemic, we will pass the Moneyval test. And not only will we pass it, but we will pass it with great success because we know what we’re doing and we’re focused,” Abela said.

In October, Malta will once again be tested by Moneyval, also known as the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, which is a Council of Europe body.

Last September, Moneyval ruled that Malta remains highly exposed to illicit finance but lacks the resources and infrastructure required to prosecute and seize assets from money launderers and the criminals they serve. Malta has until October to implement Moneyval's 58 recommendations for bolstering its campaign against financial crime to avoid inclusion on the group's "grey list" of high-risk jurisdictions. Being placed on the grey list would be a death knell for Malta's financial services industry especially.

Moneyval gave Malta a fail grade last year, and gave the country one year to get its act together.

The regulatory authorities, namely the Financial Intelligence Analysis Unit (FIAU) and the Malta Financial Services Authority (MFSA) have made great strides forward and have improved regulations and increased their onsite visits. Both authorities are expected to be fully in line with Moneyval recommendations by the end of summer. But the police, despite making efforts in the field of financial crime, are still lagging behind when it comes to money laundering prosecutions.

Apart from the low number of cases that ended up in court, Malta’s reputation suffered due to the fact that the police did not take action against high-profile politicians who might have been, according to leaked FIAU reports, taking part in money laundering activities.

Just this week, a public inquiry board heard how the Economic Crimes Unit, then led by Inspector Ian Abdilla, had not sent for former minister Konrad Mizzi and former OPM chief of staff Keith Schembri when the Panama Papers revelations broke. Abdilla has since been kicked off the ECU and has been transferred to another unit.

The police have recently started beefing up their Financial Crimes Unit, engaging civilian analysts and moving to a new building, and the new Police Commissioner, Angelo Gafa, said last week that he was appointing a new head at the ECU – Superintendent Alexandra Mamo – because “we need to send a clear signal that things are going to change.”

But sources from the financial industry say the move is “too little, too late.”

“Malta’s reputation has suffered greatly as a result of police inaction over the past years and, despite the efforts, we will be lucky if we even pass the Moneval test,” one source said. “In the best-case scenario, we will just scrape through.”

Another well-placed source said the Prime Minister’s statement was “irresponsible” at a time when much more work needs to be done. “He gave the impression that we are there, and that we will pass the test comfortably, when the truth is very different. There is a lot more that needs to be done and we will be lucky if we pass.”

Sources explained that a grey listing could spell disaster for the financial services sector, which has been growing substantially year on year and employs over 12,000 people.

The Financial Action Task Force grey list is a warning that a country might be blacklisted – in which case it would face serious sanctions. These could include sanctions from international institutions like the World Bank and the International Monetary Fund, difficulty obtaining loans from the said institutions, an overall reduction in international trade, and international boycotts and embargoes. 

Such a move would make Malta less attractive for new investment and more difficult for existing companies to operate, with the risk that some companies in the sector could relocate to other jurisdictions.

Malta Employers Association President Doris Sammut Bonnici warned last week that having the country grey listed by Moneyval could be as devastating as the coronavirus pandemic.