Issue link: https://maltatoday.uberflip.com/i/1439469
20 maltatoday | SUNDAY • 26 DECEMBER 2021 NEWS Christmas specials • FATF troubles ON 23 June 2021, Malta became the first European Union mem- ber state to be grey-listed by the international Financial Action Task Force. 39 members of the FATF de- cided Malta's fate, in a consen- sus that was marked by stiff resistance from the United States, the United Kingdom and Germany. But the decision comes at the tail-end of years in which Malta's Labour administration presided over a weakening of anti-money laundering rules: from the sale of citizeship to high net-worth individuals, criticised by the European Commission; to the harsh light on its Financial Intelligence Analysis Unit and inaction on the Panama Papers when the prime minister's right-hand man was revealed to have set up a secret offshore firm, Malta was never too far off from in- ternational scrutiny. Under the German Presiden- cy of Marcus Pleyer, delegates representing 205 members of the FATF global network and observer organisations includ- ing the International Monetary Fund, the United Nations and the Egmont Group of Financial Intelligence Units took part in the virtual meeting of the FATF Plenary. During five days, they dis- cussed key issues to strengthen global action against the finan- cial flows that fuel crime and terrorism. The organisation, which serves as a watchdog against money laundering and terrorist financing, was then run by the German presidency. Storm brewing The FATF decision came only a couple of months after Malta passed its Moneyval test fol- lowing a series of reforms that beefed up the country's an- ti-money laundering regime. On 29 April, the Council of Europe's anti-money launder- ing committee voted in favour of a final report on Malta's AML and terrorism-financing safeguards during a plenary session held in Strasbourg. The report commended Mal- ta on its efforts to address fi- nancial crime shortcomings. The Maltese government had received the conclusions from the Moneyval group to the draft Enhanced Follow-Up Report, a crucial document for the future of Malta's banking and financial services industry. Malta had initially failed a first assessment from Mon- eyval in 2019, after which the government was given a year to patch up any legislative gaps in terms of money laundering and terrorist-financing. In March this year, Robert Abela warned the financial ser- vices sector that Malta was in a crucial stage relating to the Moneyval assessment. Passing the Moneyval test was considered to be a major step forward in securing a positive FATF outcome. Reforms within the police force had seen the creation of a more robust financial crimes unit that led to high profile prosecutions on money laun- dering and other financial crimes. This was an important devel- opment since one of the major complaints flagged by Mon- eyval had been a lack of pros- ecutions by the police despite red flags noted by regulatory agencies like the Financial In- telligence Analysis Unit and the Malta Financial Services Authority. The FIAU and the MFSA al- so underwent transformation with more resources being di- rected their way. Pressure had been mount- ing on Malta the preceding months with Cabinet ministers speaking in confidence to jour- nalists about pressure from the American government over the country's fights against money laundering, in a bid to extract security concessions from the island-nation. While the US only has ob- server status at the Council of Europe's Moneyval monitoring body on compliance with in- ternational standards on mon- ey laundering, it retains clout inside the international FATF, where the Moneyval assess- ment will be reviewed. According to information gathered by MaltaToday, the US government was interested in getting the green light from Malta for a Status of Forces Agreement, as well as winning closer cooperation on intel- ligence to tackle the problem of arms and drug trafficking at Hurd's Bank, a security chal- lenge that is high on the Amer- ican agenda for Malta. The US considered the SOFA deal crucial towards enhanced interception of the smuggling routes around Hurd's Bank, an offshore bank to Malta's east that is used to bypass US sanc- tions on illegal transhipments. The Americans were said to be insisting on "concurrent jurisdiction", that is a system where both American and Mal- tese courts have jurisdiction. But the Maltese were jittery about the demand, a situation that would lead to both parties quibbling over having any pro- spective criminal case heard in the court they perceived to be most favourable to them. The US had actively encour- aged Maltese requests for Unit- ed Nations Security Council sanctions against fuel smug- glers which also used the na- tional oil storage tanks to store smuggled Libyan fuel; but while sanctions enforcing Libyan embargo rules would grant the US a route to easily board ships it suspected of carrying smug- gled oil and weapons, a SOFA would mean having American naval muscle in its backyard to deal with such situations. Apart from winning great- er US monitoring on Hurd's Bank, the Americans were de- manding that the Chinese em- bassy in Pembroke be, literally, cut down to size. The Chinese embassy wants to rebuild its headquarters here on a 19,000 square metre plot in Pembroke. The Chinese government had purchased the land from the Maltese government for €7.8 million in 2015 after the decision was approved by both sides of par- liament. The Chinese had first approached the Nationalist ad- ministration about the desired land back in 2007, requesting One shade of grey PAUL COCKS With an economy leaping ahead throughout the entire Labour administration, the vulnerabilities of a system prone to few checks and balances exposed Malta to the FATF greylist Companies in financial services, igaming and other services are expecting stronger repercussions than manufacturing, wholesale and retail, and tourism. Businesses were also concerned about rising compliance costs, with some companies having resorted to employing additional personnel to deal with the bureaucracy of added compliance