Eighteen months.

These two words were a common thread which linked the speeches that were delivered by the Prime Minister and the Finance Minister last Wednesday.

They were addressing a hastily called up press conference after it was announced that Malta had been placed on the grey list by the Financial Action Task Force.

Both Robert Abela and Clyde Caruana emphasised the phrase “18 months”, speaking about how during this period of time the government worked on reforms aimed to bring about more checks and balances and, as a result of this, also restore a reputation that had been sullied.

They were hoping to avoid the shame and embarrassment of the FATF decision. But their lobbying efforts were futile, as the vote taken was one against Malta.

Malta is now in the same basket as other countries with a poor standing on matters pertaining to the way money laundering and financing of terrorism are tackled.

It is not a nice place to be.

Abela and Caruana spoke about the last 18 months with a purpose.

They wanted to put distance between this government and the one that was led by Joseph Muscat. It was as if they were saying that it’s not really their fault and that they did their best to repair the damage which had been caused earlier, but they were unable to be convincing enough.

They did not say it directly, but they were blaming Joseph Muscat for what happened.

Because 18 months is the length of time that Robert Abela has been PM. Before him, as we all know, we had another head of government.

 

Muscat’s administration

It will never be admitted by Labour, but deep down they all know that Malta is today suffering the consequences of the Joseph Muscat administration.

Under Muscat’s watch, the culture of impunity, the lack of action taken to combat corruption and institutions that did not carry out their duties properly are, in a nutshell, what led to the decision taken by the FATF.

And it is, now, Robert Abela who has to face the music. Muscat is high and dry, while Abela must now find the strength and energy to attempt to lift Malta out of the black hole that was dug for it by an endless series of shortcomings under Muscat’s leadership.

Muscat had been warned several times that he was taking Malta down the wrong path. He was repeatedly told that, sooner or later, there would be serious repercussions for Malta.

The Opposition, the independent media, social partners, and privately even people from within the Labour fold were constantly expressing their concern that there was too much laissez-faire.

But Muscat did not listen, and ploughed on.

He is politically responsible for the hard blow Malta received from the FATF. But he no longer holds a political position. And so the costs of his faults will now be paid for by others.

Muscat had said he wanted Malta to be the best in the world. What happened was that Malta is now among the worst. That Malta became the first country in the European Union to be placed on the grey list by FATF is not something that we can be proud of.

Its effects are far-reaching and could possibly take long to overcome.

 

Years of transgressions

During the press conference, Abela said that the decision to grey list Malta was unjust and unfair. Maybe it is so considering the efforts that have been made in the last 18 months to rectify the situation.

But when you look at the overall picture, the FATF decision was not a surprise. Malta is paying the price of years of Muscat’s stubbornness in believing that what he was doing was right. The kind of “u iva, mhux xorta mentality” that is brushed aside, not to say welcomed, by a huge chunk of Maltese society, but which is frowned upon elsewhere. Years of institutional neglect, protection of people who were in the wrong and the ignoring of signs which were all pointing towards a disaster have caught up with us.

Abela’s government tried to counter the snowballing effect of the decisions taken and/or lack of action in the previous six years with a string of reforms that were aimed to put Malta back on track. But changing the way members of the judiciary and the police commissioner were appointed, as well as giving better tools to our financial institutions in their fight against money laundering, among other things, was apparently not enough to convince the FATF that Malta means business and that it had turned a corner.

It was too late.

Malta had scraped through other tests in the past.

Not this time.

Abela put forward the argument that Malta should have been given another chance because of what his government did to make up for past deficiencies. He said that the reforms that came to be under his premiership should have been taken into account as signs that the government had learnt from the mistakes committed (by others).

But it is clear that the previous years of transgressions were kept in mind when the decision was taken last Wednesday.

 

Self-inflicted, humiliating

The Malta Employers Association explained the situation perfectly in its statement in reaction to the news. “This crisis is entirely self-inflicted,” it charged. It spoke of a country which “has been shaken by too many scandals involving senior politicians and politically exposed persons as well as the major institutions”.

Labelling the grey listing as “unprecedented and humiliating for Malta”, the MEA said the first step of the “uphill process” it to “rebuild our national brand”. The repercussions, it added, will be carried by honest businesses and their employees.

And that’s the unfortunate part of it.

It is not only Abela, as a successor to Muscat, who will politically bear the brunt of the decision from a political point of view. There will be ripple effects on different segments of the country’s economy, not to mention the way Malta’s reputation has been badly hit.

The grey listing will “spare no sector”, as the Malta Developers Association put it, and “will be borne by the whole economy for as long as we retain this status”, as the Chamber of Commerce explained.

 

Political aftermath

The FATF decision will not affect the way the average voter thinks. Many do not understand or realise the implications of such an outcome for Malta. So long as they get their vouchers and annual tax rebate, they will believe that everything is fine.

Hard-line Labour supporters still think that Muscat never put a foot wrong. They will be eternally grateful to him for turning the party into a victory machine. In Muscat’s defence, they also argue that the former premier did not know what those around him were doing. For them, after all, what matters is that Labour is in power.

Labour won the last two general elections handsomely and looks set to achieve a consecutive third. An event such as the FATF’s decision is too abstract for it to have an effect on how people think.

But this does not mean that it should be taken lightly. There could be repercussions that are more tangible in the not so distant future.

 

The way forward

Now that Malta has been officially branded as having “strategic weaknesses” in its institutional set-up to counter money laundering and the financing of terrorism, it will not be easy to do business in Malta. Companies which have intentions to invest will probably look elsewhere, and those already here will consider their options.

Grey-listing may last a year, as it did in the case of Iceland, but it may last longer than that. For Malta to be re-instated to the white list, there needs to be a concerted and speedy effort to persuade the FATF members that Malta is taking matters seriously. The reforms that were implemented in the last 18 months must be complemented with others aimed to strengthen our financial regime further.

The institutions – the police, in particular – must also increase the tempo of their investigations into all allegations of corruption and money laundering. We have seen progress in this regard in the past months. It is understandable that these kinds of cases are complicated and hard to prove, and in this respect the corps should be provided with better tools and resources with which to carry out its duties.

In Wednesday’s press conference, Abela said that Malta will continue to build on the reforms that it has already implemented “out of conviction” to ensure the best possible regulatory framework and rights.

“We will continue to dialogue to convince (the FATF) that Malta is improving in this field. We will continue bringing about positive change where it is needed,” he said.

There is no other option but to do so.

The problem is that in spite of what was done in these past 18 months, Malta failed.

In the best interests of the country, it is hoped that, next time round, Malta will face its test with a cleaner bill of health.

And, most of all, be better equipped to pass.