Adopting post-grey list ‘business as usual’ mentality a mistake ‘of epic proportions’, says ex-FIAU boss

Malta’s removal from the grey list of financial jurisdictions must not be seen as a finish line, but as the “beginning of a long journey” where complacency would be a mistake of “epic proportions”, according to two leading financial services stakeholders.

The comments were made during the Third AML & Financial Crime Conference jointly organised by corporate advisory firm ARQ Group and the Malta Bankers’ Association (MBA), held on 21st June with the theme: Aligning Growth Strategies with the National Financial Crime Compliance Agenda.

ARQ Group managing partner Manfred Galdes said the enthusiasm “to turn over a page and press the restart button” should not overshadow the “ever-present need for reform in the country’s investigative, prosecutorial and judicial processes aimed at bringing the perpetrators of financial crime to justice and to seizing their ill-gotten assets”.

Dr Galdes previously served as director of the Financial Intelligence Analysis Unit (FIAU), which was the target of two of the three explicit reasons provided for Malta’s inclusion in the Financial Action Task Force’s list of jurisdictions subject to enhanced monitoring, as the grey list is officially known.

He resigned in 2016 after the police failed to take action on a dossier the FIAU had prepared indicating the possibility of criminal action taken by Keith Schembri, the right hand man of Joseph Muscat.

Testifying before the public inquiry into the assassination of journalist Daphne Caruana Galizia, Dr Galdes said of the dossier: “The bank statements were clear, the documents were self-explanatory – there was enough information to start an investigation with urgency.”

Instead, increases to the FIAU’s resources were stopped without warning or explanation, with a Government official telling Dr Galdes that an order had come through to “stop everything”.

At the conference, Dr Galdes said it would be “a mistake of epic proportions if we simply were to move on with the belief that all the reforms that needed to be completed are done and dusted, and we are therefore now back to ‘business as usual’”.

He pointed out that the sixth round of MONEYVAL mutual evaluations is not too far off, and attention will eventually be directed once again to the effectiveness of Malta’s law enforcement and criminal justice processes.

Dr Galdes added that he looks forward seeing a growth strategy for the financial services sector that prioritises the commitment to combat financial crime “without reservations and without sending conflicting messages about the type of business we would like to attract”, and spoke of the growth opportunities brought about by the efforts at strengthening Malta’s compliance infrastructure through innovation, referring to the ambition of potentially becoming a centre of excellence for compliance services and technology.

Speaking after Dr Galdes, the MBA’s secretary general Karol Gabarretta said that the FATF’s decision does not signify in any way that Malta is now “home and dry”: “The fact that we have been removed from the grey list is the beginning of a long journey which will need to demonstrate that the progress achieved during these past three years, since the publication of the 2019 MONEYVAL report on Malta.

“Only through the adoption of the right mindset and through tangible demonstration that our jurisdiction has well and truly turned the page and is now fully committed to do things the way they should always have been done in the first place, will we manage to reinstate the integrity we may have lost during these last few years.”

APS Bank CEO Marcel Cassar, who was recently elected chairperson of the MBA, also addressed delegates focusing his intervention on local areas which carry a higher risk of financial crime, such as real estate, environmental crime, as well as reputational laundering.

He emphasised the need to urgently return to promoting Malta’s financial services in terms of high entry standards, serious regulation and sound prudential supervision.