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Malta: FATF Grey-listing Highlights The Need For Further Evidence on Effectiveness

This commentary provides an update following today's Financial Action Task Force (FATF) decision to include Malta in its list of countries under enhanced monitoring, often referred as FATF’s "grey list". The FATF, which is the global money laundering and terrorist financing watchdog, is expected to release a full report detailing its assessment most likely by August/September 2021. Prime Minister Abela in a press conference has publicly acknowledged the outcome and pledged to continue to work to remove Malta from the list.

Key highlights include:
• The plenary of the FATF voted to put Malta on its grey list reflecting lingering concerns over the effectiveness of the AML/CFT framework.
• The Maltese authorities have significantly improved the AML/CFT framework in recent years, which led to a favourable Moneyval follow-up assessment in May 2021. Similarly, the supervisory authorities in Malta intensified their supervisory inspections, enforcement, and sanctions in 2020.
• The economic impact of the grey-listing remains unclear and to a great degree will depend on the speed with which the Maltese authorities provide tangible evidence of the effectiveness of their frameworks.
• DBRS Morningstar notes that grey-listing could have long-lasting implications for Malta's attractiveness as a small financial hub and a destination for foreign investment. This would be the case if concerns over the effectiveness of its framework remain unresolved for a prolonged period of time.

“The FATF grey-listing adds another challenge to the current pandemic environment. While the repercussions to the Maltese economy remain uncertain, if the underlying shortfalls identified by the FATF remain unaddressed, this could impact Malta's attractiveness as a small financial hub and a destination for foreign investment. On the other hand, more tangible evidence of the effectiveness of Malta’s AML/CFT framework could mitigate the impact” said Javier Rouillet, Vice President at DBRS Morningstar.