The need to balance Malta’s growth agenda with Financial Crime Compliance standards, in the light of FATF decision on Malta

Scene from the AML and Financial Crime Conference 2022

The decision of the FATF to remove Malta from the increased monitoring process, known as the grey list, dominated the agenda of the Third AML & Financial Crime Conference, jointly organised by ARQ Group and the Malta Bankers’ Association, which was held on 21 June 2022.

A full-house of delegates including supervisors, senior bankers, professionals, representatives from the financial services sector and other subject persons as well as policy makers contributed to a highly successful and interactive event, with the theme “Aligning Growth Strategies with the National Financial Crime Compliance Agenda”.

The line-up of speakers and panellists included C-level executives, senior government officials and supervisors, chairpersons of constituted bodies as well as renowned local and international consultants. In his introductory speech, ARQ Group Managing Partner Dr Manfred Galdes said that the conference focussed on the way forward, especially in terms of the ways Malta could emerge stronger from the negative episode of the grey listing.

“In the midst of our enthusiasm to turn over the page and press the restart button, let us not overlook 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. 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’,” said Dr Galdes.

He added 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 our law enforcement and criminal justice processes: “We therefore start this new phase in full knowledge that reform will have to continue, encouraged by the major improvements in our supervisory structures and authorities. Looking forward to seeing a growth strategy for our financial services sector that prioritises the commitment to combat financial crime and to do so without reservations and without sending conflicting messages about the type of business we would like to attract.”

Manfred Galdes speaking at the AML & Financial Crime Conference  2022

Dr Galdes stressed that all stakeholders should also direct their attention towards seizing the growth opportunities brought about by the efforts at strengthening Malta’s compliance infrastructure through innovation and referred to the ambition of Malta potentially becoming a centre of excellence for compliance services and technology.

Following Dr Galdes’s introduction, 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.”

The newly elected Chair of the MBA and CEO of APS Bank plc, Marcel Cassar, addressed the delegates and said that Malta’s compliance agenda needs to unfold around the core philosophy of a risk-based approach. He added that the country’s economic vision, the growth sectors to be prioritised and the policies to promote them need to have the risk-based approach as their barometer.

Mr Cassar referred to the emerging high risks resulting from the COVID-19 pandemic and its related threats and vulnerabilities, cryptocurrency and its increasing usage for money laundering purposes, as well as the growing geopolitical risks and associated disruption of cross-border trade and supply chains. He also focussed on local areas which carry a higher risk 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.

“As banks, we have a key role to play in balancing economic growth with the national compliance agenda. We are in business and our licences carry with them both the privilege as well as the duty to support business activity. But with that comes the obligation to exercise the highest duty of care in safeguarding the integrity of our financial system from the risk of crime – because by doing so we are also safeguarding Malta’s reputation,” he said.

The conference featured three panel discussion sessions as well as a presentation from independent consultant Yehuda Shaffer on the process currently being undertaken to conclude Malta’s second National Risk Assessment. Mr Shaffer focussed on the new and emerging risks for Malta as a financial services jurisdiction as well as the importance of a coordinated approach and effective supervision and sanctioning in terms of FCC.

Highly interactive debates and question and answer sessions characterised all of the panel sessions, as delegates and speakers delved into the next steps following the FATF’s decision as well as ways how to make compliance more effective and streamlined for the benefit of the economic players. One key aspect that was emphasised was the need to maintain the high standards in terms of FCC as well as continue the work to restore Malta’s reputation.

The first panel discussion focussed on the challenges of managing FCC efforts in a constantly changing landscape. This discussion, which was moderated by Alex Konewko, Risk Executive at ARQ Group, included various high-ranking banking officials responsible for risk, compliance and FCC. Amongst the challenges which were mentioned during the discussion were the shortage of expert FCC staff, the rising requests for information by competent authorities as well as the geopolitical tensions with the ensuing sanctions regime against Russia. Ways of improving effectiveness of managing FCC risks as well as the role of technology were debated in detail during this session.

Panel discussion at the AML & Financial Crime Conference 2022

Dr Galdes moderated the second panel discussion which centred on the challenge to balance effective supervision and economic growth and featured senior supervisors and industry representatives. The need to find such balance raised the notion of increasing sustainability when implementing FCC-related processes and procedures. Once again, the key role that technology plays in terms of AML regulation and de-risking strategies were brought up during the panel session. In addition, the panellists discussed the need to continue embedding a compliance culture following FATF’s decision to remove Malta from the grey list, as well as having a single EU rulebook for AML and CFT.

The last panel discussion delved into the steps that need to be taken to shape the national agenda against the backdrop of the recent FATF plenary decision. Moderated by Tonio Zarb, President of the IFSP, the panel featured representatives of various sectoral stakeholders, as well as the Alfred Camilleri, Chairperson of the National Coordinating Committee on Combating Money Laundering and Funding of Terrorism. Mr Camilleri gave a detailed outline of the work that took place in the last years, in particular following Malta’s grey listing and urged everyone not to “lower our guard” given the next round of MONEYVAL evaluation will be taking place in the next two to three years. The need to safeguard various economic sectors as well as rebuild Malta’s reputation resonated throughout the discussion. Moreover, the speakers stressed on the importance of a long-term and sustainable plan that would ensure Malta honours its FCC obligations whilst ensuring businesses continue to prosper.