The Mediterranean island’s inclusion on the Financial Action Task Force’s (FATF) greylist has prompted fears of financial pitfalls and sent shockwaves throughout the wider EU. On June 25, FATF’s president confirmed that Malta had been put onto its greylist, becoming the first EU member ever to be added.
The Maltese government confirmed the Financial Action Task Force (FATF) considers the country in need of “enhanced monitoring” because of its weak measures to tackle money laundering and other financial issues. The move is likely to have major repercussions on the country’s finances, with government sources in Malta describing a sense of “panic” among political, regulatory and law enforcement bosses.
Greylisting puts the country’s reputation at risk, prompting regulators to begin working on measures to ensure Malta comes off the list as quickly as possible. However, this means more regulatory burdens and possible de-risking activities that could hit relationships with certain customers.
Despite the greylisting, sources suggest there is a clear path out of the situation, a spokesperson for the European Commission said that FATF’s ruling does not call into question the current AML rules in the EU, nor Malta itself.
“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,”
Spokesperson, European Commission
This report clarifies the implications of recent moves to grey list Malta and the future ramifications for the island and those who operate within it.
Malta’s inclusion on the FATF greylist has prompted concern, with potentially more regulatory burdens and possible de-risking activities that could hit relationships across the entire ecosystem of organisations based in Malta. From gambling operators to payment firms, any organisation that moves money internationally will be affected. For example, Maltese firms may find problems when financial institutions choose to terminate relationships rather than manage the risk.
Rumours of Malta-based firms having accounts closed internationally by risk-averse banks are beginning to spread around the island. Enhanced due diligence will be a consequence of the listing as local banks rely on other banks for the execution of transactions or provision of services in countries where they do not have a presence. This could also lead to capital flowing out of the country from investors and companies seeking to move their investments to other jurisdictions.
The reputational damage is another key factor Malta faces. In a recent survey, two-thirds of VIXIO GamblingCompliance customers indicated that Malta’s inclusion on the FATF’s greylist is a disaster. Malta has been successful in promoting itself as a destination for companies, particularly within the gaming and financial sectors, both of which rely on their home jurisdictions good reputation.
Industry figures in Malta say that while they do not expect the country’s major gambling firms to move away from the island, there is a fear that potential new investment will instead choose jurisdictions like Cyprus, Gibraltar or the Isle of Man in which to set up business.
One of Malta’s largest gambling employers, Kindred Group, said its key concern around the greylist was the potential for a growing “negative reputation for the sector”. The company’s CEO Henrik Tjärnström said he was putting pressure on the government to act fast to get the country off the greylist.
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