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The European Commission does not turn a blind eye to the interpretation of anti-money laundering rules and hopes that any more members being greylisted by the Financial Action Task Force can be avoided in the future, the EU’s financial crime chief has said when probed about Malta becoming the first EU country on the grey list.
In June, the Mediterranean island-nation’s inclusion on the FATF grey list sent shockwaves throughout the EU, with experts suggesting that other member states could be next.
At the time, questions were being asked as to whether the trading block is able to sufficiently safeguard against this kind of serious reputational damage from money-laundering scandals — especially considering recent troubles, such as Danske Bank’s failures in Estonia.
Last week, Raluca Pruna, the European Commission’s financial crime chief, tried to downplay the commission’s responsibility for Malta's failings and finding itself on the grey list.
“On Malta, if I may, without entering into the details, it was the case that the commission made use of the breach of law rules for the first time,” she said.
In 2017, the European Commission requested that the European Banking Authority (EBA) investigate a possible breach of EU law regarding the apparent failure of the Maltese Financial Intelligence Unit (FIU) and the Maltese Financial Service Authority (MFSA) to effectively supervise Pilatus Bank in relation to its anti-money laundering (AML) obligations.
In particular, the EBA asked the FIU: to take actions to systematically assess the AML and terrorist financing (CTF) risks associated with the Maltese financial sector; to supervise the effectiveness of the AML/CTF policies and procedures put in place by the obliged entities; and to ensure enough resources are available and robust procedures are in place to supervise obliged entities.
“Malta was not listed due to its FIU, so they’ve made progress, which shows a strong hand on enforcement pays back,” she said.
In the aftermath of the greylisting decision, the commission told VIXIO that FATF’s ruling does not call into question the AML rules in the EU, nor Malta itself, stating: “FATF’s decision is the result of an assessment of the progress made by Malta since 2019 to ensure that its legal framework is solid enough to prevent and combat money laundering and terrorist financing. We are confident that Malta can address these remaining areas quickly and leave FATF’s increased monitoring process.”
Going forward, the Maltese government has presented an AML strategy to FATF, according to reports, and expects it could be on the grey list until 2023.
For Luis Garricano, a member of the European Parliament (MEP) who has been delegated its official rapporteur for the EU’s new AML package, Malta being greylisted was a huge problem — yet not a huge surprise.
It should not have got to a point whereby it has been greylisted, he said, suggesting that there are structural problems with the EU’s member states.
“If you are a small member state, and there is free capital movement mobility, you have a huge gain from becoming the haven for sports gaming or for whichever activity that needs light supervision. Then you can just put up with some inspections and you can veto certain things in the council,” he said, noting that Malta is not the only country to take advantage of this, and concluding that this is an incentive for EU-wide enforcement of AML.
Some spectators at the time of the greylisting echoed Garricano’s criticism of smaller EU member states and even expressed sympathy for Malta’s greylisting, considering the politics that surround it and the fact that decision making is shrouded in secrecy.
In fact, one source joked that choosing who gets extra scrutiny is as political as the Eurovision Song Contest and that the decision could be a case of major financial centres slapping down a newcomer.
