Gibraltar officials have vowed to reverse the “disappointing surprise” of being relegated to the Financial Action Task Force's (FATF) greylist within 12 months.
Gambling and financial services minister Albert Isola said it was galling to be named to the list despite three years of work tightening anti-money laundering (AML) rules and policies.
“Are we going to have to work harder to stay still?” he said. “Unfortunately I believe we will.”
Isola was among speakers at the KPMG Gibraltar eSummit on Thursday (June 23).
In an announcement last week that came as a shock to the British Overseas Territory, Gibraltar joined Nicaragua, Pakistan, the United Arab Emirates and others on the list of countries with “strategic deficiencies” in AML and counter-terrorist policies, according to FATF.
The move came as a rival European online gambling and financial services hub, Malta, was removed from the list.
The relegation is not only embarrassing, but can carry an economic sting.
An International Monetary Fund report said an FATF greylisting typically hurts a country’s “capital flows”, with the impact averaging a -7.6 percent impact on gross domestic product.
Still, although some Malta-based firms complained that the relegation had made accessing funding harder, Fitch Ratings last month said the rating “had not yet materially affected the Maltese economy”.
Unlike Malta’s previous listing, which included concerns about financial services, the global watchdog’s Gibraltar concerns focused on allegedly lax enforcement and lenient oversight of gambling companies.
Gibraltar gambling commissioner Andrew Lyman challenged that assessment, saying in the evaluation period, between 2020 and 2022, regulators reached six financial settlements totalling £3.7m in fines, or a record of punishing a third of all the jurisdiction’s customer-facing licensees.
Only one of the companies hit by those settlements, however, was named: Mansion Group, which agreed to pay £850,000 in March for AML deficiencies.
Gibraltar is “in many respects a flagship jurisdiction for the way it has massively improved its anti-money laundering and terrorist financing systems in a difficult period for all jurisdictions”, he told the audience.
“I’m sure we will be off that list in a year at the re-evaluation stage,” he said.
FATF acknowledged progress, but said it wanted to see authorities demonstrate they are “actively and successfully” levying sanctions and seizures following investigations.
Lyman said the regulator had conducted onsite visits to all of its consumer-facing licensees and only one was deemed “below the line” and its management is addressing issues identified.
But Lyman said he did not expect the regulator to “artificially adapt” standards to meet expectations, with higher or more numerous fines, as it is bound by regulation, which limits fines to two times the financial benefit, or up to £1m.
Lyman said the international body’s concerns were focused on learnings from infractions, rather than the range and frequency of punishment for misdeeds.
“I won’t go around fining people on an arbitrary basis, it would be a breach of the law,” he said during a break in the sessions.
“We have to prove that our regime is robust,” Lyman told the audience. “Something we must accept we did not manage to achieve in the current round. We must assault the summit again.”