Lack of transparency on company ownership, tax crimes led to Malta’s greylisting

FATF president Marcus Pleyer said today that lack of transparency on ultimate beneficial owners of companies and weak financial intelligence on tax crimes were the main “serious strategic deficiencies” that led Malta to the grey list.

The financial action task force, or FATF, is seen as the global gold standard on anti money-laundering and terrorism financing practices. Pleyer officially announced that Malta, Haiti, the Philippines and South Sudan are now officially on the grey-list earlier this afternoon.

All four countries have agreed to the FATF’s imposed action plans and “are actively working to address the strategic deficiencies in their systems”, Pleyer said.

The FATFs grey-list serves as a warning label to companies and countries across the globe, meaning that any countries on the list are seen as jurisdictions that fall short of international standards of financial compliance and therefore carry a higher risk in terms of doing business.

Malta is the first EU country to ever be grey-listed. Meanwhile, Ghana, after spending three years bolstering its supervision of bank-related activity and its capacity to provide accurate, timely information about company ownership, has been taken off the list.

As for Malta, Pleyer repeatedly stressed that the final report based on Malta’s MONEYVAL mutual evaluation in 2019, “outlined a large number of serious issues regarding risks in the country”.

“This includes issues concerning criminal tax and related money-laundering cases. Malta’s financial intelligence unit needs to support law enforcement authorities to pursue these kinds of cases and focus on them,” Pleyer said, declining to give further details due to the confidential nature of the discussions held during the plenary.

“It is crucial for Malta to make sure that systems are in place which are strong enough to address money-laundering and terrorist financing and serious organised crime,” he added.

The president of the FATF also unequivocally stated that Malta, in spite of its compliance on paper as assessed by MONEYVAL, had “failed nine of eleven of its objectives in terms of effectiveness”.

In other words, the country failed to effectively implement changes in a way that led to tangible results such as prosecutions of high-level money laundering cases.

“The Maltese authorities need to ensure that beneficial owner information is accurate and up to date,” Pleyer said, specifically referring to information which “often relates to anonymous shell companies”.

“If information regarding the true owners of companies is found to be inaccurate, authorities need to apply decisive sanctions,” Pleyer stated.

The president made it clear that Malta has an undisclosed time-line set for it and that the country’s administration “knows exactly when to comply and when to address which deficiency”.

He also insisted that local authorities “must not downplay the importance of these measures”, later referring to media reports that indicated the government was not happy with the FATF’s decision and had labelled the decision “unjust and unfair”.

“In the end, the government of Malta gave its clear political commitment to work together with the FATF to address all the deficiencies, and this is a signal of cooperation I am grateful for,” Pleyer said.

Pleyer argued that the government’s cooperation would help the country improve its systems and therefore have “a strong rule of law, sustainable and fair economic growth and social cohesion”.

While Ghana exited the grey-list after receiving the FATF’s official stamp of approval, Mauritius and Botswana are awaiting the FATF’s team for a visit which will determine whether the two countries also get taken off the grey-list by October.

Pakistan is set to remain on the grey-list because it has failed to effectively implement its new anti money-laundering legislation. The FATF urged Pakistan to “increase the number of investigations and prosecution efforts to ensure that law enforcement agencies cooperate internationally to trace, freeze and confiscate assets”.

The task force has also completed mutual evaluations of Japan and South Africa. Both countries can expect to receive a report in August following an internal quality control review over the summer.

The FATF is also set to release a few major reports in the upcoming weeks, all of which were discussed in the five-day plenary session held in June of this year.

The reports discuss environmental crime, right-wing terrorism funding, the use of technology in the fight against money laundering and a review of the FATF’s newest set of rules meant to enforce compliance when handling virtual assets such as cryptocurrencies.