EU ‘unconcerned’ by Malta’s greylisting but stricter rules in the pipeline

5th July 2021 • News

The European Commission is not overtly concerned with Malta’s greylisting by the FATF but plans to introduce stricter anti-money laundering rules which all Member States would have to enforce.

While the commission said that the FATF greylisting does not impinge on the EU’s reputation, sources said impending regulations will address anomalies between transposing directives into national law and enforcing laws on the ground.

It is understood that during last month’s FATF plenary, the European Commission (EC) defended Malta’s position and a spokesperson told Newsbook that the commission is confident that Malta will address its shortcomings “quickly” and exit the so-called grey list.

Asked whether the European Commission will take any action against Malta, a commission spokesperson told Newsbook the greylisting “does not call into question anti-money laundering rules in the EU or Malta.”

“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.”

Last month, Malta become the first and only EU country to be greylisted by the global anti-money laundering watchdog. Malta was added to the list of jurisdictions subject to increased monitoring together with Haiti, the Philippines and South Sudan.

he FATF report said that Malta made a high-level political commitment to strengthen the effectiveness of its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regime by being more transparent on the ownership of Malta-registered companies, strengthening financial intelligence and combating tax crimes.

However, the EC spokesperson said, “Malta has already progressed a lot. FATF recognises that out of nine areas, Malta has completed work in seven. Only a few deficiencies remain in respect of the other two areas on beneficial ownership and financial intelligence.”

The commission, the spokesperson said, is confident that Malta can address these remaining areas quickly and exit FATF’s increased monitoring process.


Effectiveness on the ground

Following Malta’s greylisting outspoken Green MEP Sven Giegold described it as embarrassing and called out on the European Commission’s inaction despite several warning about the country’s risks.

“It is embarrassing that it needs a global watchdog to call out a European Member State for severe money laundering and terrorist financing risks. We have known about corruption and organised crime in Malta for years and yet the Commission has been reluctant to act,” Giegold said.

Although the commission would not be drawn on whether it is embarrassed by having a Member State on the FATF grey list, plans are in place to avoid tarnishing the bloc’s reputation in the future.

In 2020, the European Commission outlined its plans for a new single EU anti-money laundering system, which aims to transfer parts of the existing anti-money-laundering Directive to a regulation, thereby directly applicable in the Member States.

While EU regulations have binding legal force throughout every Member State and enter into force on a set date in all countries, directives lay down certain results that must be achieved but each Member State is free to decide how to transpose directives into national laws.

Moreover, the plan envisages an EU-wide anti-money-laundering supervisory system, and a coordination and support mechanism for Member States’ Financial Intelligence Units.

A AML new authority will combine supervisory and financial intelligence coordination under one entity.

Newsbook understands that although the EU already has comprehensive legal frameworks on Anti-Money Laundering and Counter Terrorist Financing (AML/CFT) in place, the EC is concerned about the implementation and enforcement by individual Member States.

In a bid to make it more difficult for criminals to move funds around the EU, the commission plans to overhaul the bloc’s AML system.

The upcoming AML package will allow the EU to better detect suspicious flows, improve the coordination and joint work of authorities across the 27 countries, and enhance cooperation with third-country authorities.

Curiously, Malta avoided infringement procedures by the EC for a number of years, with the last infringement coming in 2017.

Back then, Malta’s failure to implement the anti-money laundering directive had prompted the commission to trigger the first stage of infringement proceedings. Three years later, Malta narrowly escaped new infringement procedures after transposing the EU’s fifth anti-money laundering directive at the eleventh hour.

Yet, Malta failed the FATF test because it failed to enforce AML rules. Although Malta transposed EU AML directives, including beneficial ownership transparency, the rules were not sufficiently enforced to escape the greylisting.

EU sources told this newsroom that there is no connection between Malta’s FATF grey listing and the bloc’s enforcement policy. “What FATF looked at was not how solid AML/CFT rules are in the EU or Malta but rather the effectiveness on the ground in respect of certain areas of the Maltese system,” the sources said.

They added that the upcoming AML package, aims to address these anomalies between transposing directives into national law and enforcing laws on the ground, insisting that “it will allow us to better detect illicit flows, improve the coordination and joint work of authorities across the EU, and cooperate with third-country authorities.”