Issue link: https://maltatoday.uberflip.com/i/1399957
16 maltatoday | SUNDAY • 8 AUGUST 2021 NEWS www.VirtuFerries.com 05:00 Malta Sicily 08:00 Malta Sicily + Terms & Conditions Apply. Double Departures On Saturdays September Offer! €49 €95 €69 Greylist stops Malta business on global investment platform MATTHEW VELLA ONE of the financial world's widely-used digital investment platforms, Praemium, has an- nounced it will terminate all form of business for Malta-based relationships and transactions, due to the island's FATF grey- listing. Praemium said it will accept no new money onto the platform for existing businesses with links to Malta, and that all relation- ships where a client is resident in one of these jurisdictions would be moved to high risk, and en- hanced due diligence will be re- quired. Any accounts holding funds will be frozen, Praemium said, saying these requirements al- ways apply when Praemium be- comes aware of a new country being added to the Financial Ac- tion Task Force's greylist of ju- risdictions subject to increased monitoring. Praemium's platform is used by over 500,000 investors as a fully-integrated account man- agement platform for clients to view investment assets in one place and for custodial solutions. The platform boasts of a 'rebal- ancing engine' so that all indi- vidual investment accounts are kept automatically in line with an investment strategy. Wealth advisors who flagged the Praemium action to Mal- taToday said they are worried the extreme position not to take new business from Malta, could spread to other global custodian agents. Praemium's letter to clients said that it would decline any new clients – whether they be underlying investors, advisor or third parties such as product providers – if they have strong links to, or are resident in Malta, or have operations based on the island. "For Praemium Interna- tional Limited, Malta and other countries subject to the same action, would be included with- in the prohibited countries table within the CDD guidelines doc- ument," the company said, refer- ring to its due diligence guide. Such actions by custodians of investments held by foreign portfolio investors (FPI) puts a big question mark on the in- vestments made by Malta-based FPIs, and other FPI applications underway. Both the greylist and actions by custodians like Praemium cre- ate a massive perception issue that could prohibit investment through the Maltese jurisdiction from large investors, such as pension, endowment, and sover- eign wealth funds. Malta was added to the FATF greylist on 25 June 2021. The FATF is the global money laundering and terrorist financ- ing watchdog, that sets inter- national standards on prevent- ing such illegal activities. FATF monitors countries to ensure they implement its standards fully and holds countries that do not comply to account. These are high-risk jurisdictions sub- ject to a call for action, and ju- risdictions like Malta that are placed under increased moni- toring. On 30 June, the credit rating agency Fitch said there would be no immediate impact on Malta's ratings from the FATF greylist, but warned that reputational damage could reduce Malta's attractiveness for investors and corporates. The more negative effects could be o capital outflows and weaker-than-projected eco- nomic performance. "Empirical research studies provide mixed evidence on how greylisting can affect capital flows and growth. Repeated greylisting of Pana- ma and greylisting of Iceland in 2019 and 2020 had limited eco- nomic effects," Fitch said. Perceived shortcomings in Malta's anti-money laundering framework may have contribut- ed to the number of active Cor- respondent Banking Relation- ships (CBRs) falling by around 20% between 2011 and 2019. While Bank of Valletta, Malta's largest bank, was able to estab- lish new arrangements for US dollar clearing after ING Bank and Raiffeisen Austria terminat- ed their CBRs, greylisting could still raise transaction costs or reduce cross-border transaction flows for the whole banking sec- tor. Malta's has an exceptionally large flow of foreign direct in- vestment and investment port- folio transactions, mainly due to tax-planning activities. mvella@mediatoday.com.mt