Issue link: https://maltatoday.uberflip.com/i/1378870
maltatoday | SUNDAY • 30 MAY 2021 12 FIAU A SPECIAL REPORT Recommendations and directives: Meeting Malta's EARLIER this week the Coun- cil of Europe's MONEYVAL published a progress report showing significantly improved ratings for Malta in its fight against money laundering and terrorist financing from a tech- nical perspective. Thursday's report clearly acknowledged the progress made since Mal- ta's earlier evaluation, at times doing so quite openly when confirming that, "Malta was among the first MONEYVAL countries to implement the regulatory and institutional framework and conduct as- sessment of money laundering and terrorist financing risks in this area. Malta's rating on the implementation of this recom- mendation has been upgraded from 'partially compliant' to 'largely compliant'." The government has under- taken several key reforms in the wake of MONEYVAL's re- port two years ago, including the bolstering of Malta's regu- latory authorities, introducing new laws and strengthening the police force's arm respon- sible for investigating financial crimes. A lot of the real work on the ground, however, was down to the different authorities in- volved in this area, not least the Financial Intelligence Analysis Unit. Its Legal Affairs Section went through a lengthy pro- cess to bring Malta in line with the onerous requirements of not only the MONEYVAL rec- ommendations but also of the EU's 5th Anti-Money Launder- ing Directive. "There are a lot of deadlines involved, a lot of challenges and the need to con- sult with subject persons be- cause these legislative changes will affect them." "In fact, every time we pro- pose amendments, whether they directly or indirectly af- fect subject persons, we carry out extensive consultation ex- ercises with them. But it is even more than that, the consulta- tion is real, and we invite them to provide us with feedback, including possible alternatives to what we may have proposed that are equally workable" Dr Frendo explains. The purpose behind the ex- ercise, Dr Phyall elaborates, is twofold: "There is the part where you actually want to make them aware that there are changes in the pipeline, and then we also want to see how to actually frame the text of the law to ensure it works." "That is because ultimately, we do need to become com- pliant with the directives and the MONEYVAL recommen- dations, but, at the same time, we also need to make sure that what we propose can actually be implemented on the ground, that it is actually doable." In view of all the changes necessary and arising from an intrinsic awareness that sup- porting subject persons into full compliance was critical, the FIAU saw a pressing need to put together a dedicated team to conduct guidance and outreach with subject persons and to explain the changes to the law. Such outreach has be- come far more frequent these days as the need to communi- cate more with subject persons keeps growing. The number of outreach ac- tivities increased not only with the subject persons themselves, but also with national and in- ternational authorities and counterparts, where the FIAU has contributed by sharing its progress and best practices. Challenges linked to transposi- tion deadlines It is not only the deadline in itself that at times can present particular challenges but even the text of the directive or rec- ommendation that has to be reflected in the legislative pro- posal. Dr Phyall explains, "The wording used can at times be quite generic whereas this can- not be the case when it comes to the laws and guidance that seek to implement these re- quirements. For example, when it comes to the Central- ised Bank Account Register Regulations, Member States have to apply a very strict level of security, but what does that exactly imply and what is be- ing expected of us? We had to come up with an interpretation that can be translated into IT controls, audit trails and so on and so forth." "There are also issues, for ex- ample, when it comes to con- tract drafting. With the Cen- tralised Bank Account Register and the goAML IT system, for example, there were a lot of ne- gotiations with suppliers and with systems users to draw up contracts that cater for the FI- AU's needs in terms of security levels, and to ensure that con- fidentiality and data protection requirements are catered for as well." When it comes to addressing the recommendations made by international bodies such as MONEYVAL, extensive re- search is conducted, we assess what is happening in other ju- risdictions and how they have transposed the recommenda- tions arising from the direc- tives into law. "That," Dr Phyall explains, "gives us some added comfort that what we propose ourselves is something tangible and concrete." The consultative tightrope The research into imple- mentation practices, is then followed by the consultation phase, where the possibility of meeting those requirements within a Maltese context is gauged and consideration is given to certain limitations subject persons face. It can, at times be something of a tight- rope. "It's not so much about bartering or negotiating with the different sectors, but you do have to be a little bit more careful with the terms and the words you use," according to Dr Phyall. "The Covid pandemic did not help because it is one thing to hold meetings at the office face-to-face, but it is quite an- other to hold such meetings online. They are a workable alternative, but surely not the same as meeting with sec- tor representative bodies and subject persons face-to-face. But despite the challenges, we have managed to meet all our deadlines – the CBAR is ac- tive, the goAML system has been launched, we are signing MOUs, we have provided train- ing, we carried on publishing guidance documents, attend- ed international meetings and It has been a long road for the Financial Intelligence Analysis Unit's Legal Affairs Section lately as it coped with numerous updates to national legislation to bring Malta in line with the European Union's 5th Anti-Money Laundering Directive and the Council of Europe's MONEYVAL recommendations. Jonathan Phyall - the FIAU's Head of Legal Affairs - and Manager of Legal and International Relations, Daniel Frendo speak to David Lindsay about the journey Jonathan Phyall (left) and Daniel Frendo (right)