Comment: Europe's fight against money laundering goes on, even in a pandemic

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Comment: Europe's fight against money laundering goes on, even in a pandemic

Writing for II, Kenneth Farrugia explains how Malta is rising to the challenge of tackling money laundering.

The fight against money laundering and the financing of terrorism are crucial issues for the integrity and stability of the global financial ecosystem. Nowhere is this more pronounced than Europe, where numerous cases of high-level money laundering cases through credit institutions have been reported on.

To be clear, money laundering is an international scourge that does not respect borders. It requires a joined up, collaborative approach to defeat it. And we cannot use the covid-19 pandemic as an excuse to relax in this battle.

Malta and its financial regulators have swung into action."

Malta is determined to play its part. In 2018, the European Banking Authority (EBA) highlighted areas where we needed to strengthen our safeguards, supervision and sanctions against money laundering. Moneyval, a body tasked with assessing compliance with international AML standards for its members, which includes Malta, made similar recommendations.

Malta and its financial regulators have swung into action.

The Financial Intelligence Analysis Unit (FIAU) has been on the front line here. Our AML mission means we are responsible for analysing financial intelligence and reports on suspicions of money laundering and financing of terrorism, which we can then share with the police. We also supervise a large number of financial and non-financial services firms and professionals, with powers to punish misdemeanours with fines and other measures.

While the FIAU began life in 2002 with just three officials, today we boast a 75-strong workforce thanks to considerable investment. And we continue to hire new and train existing staff to bolster resources further, with approved plans to reach 153 by 2022. We are also investing in specialised software, including specifically designed tools to carry out risk assessment processes, analytical tools to automate intelligence analysis processes, as well as cryptocurrency investigation software.

We have also tightened up our sanctions to give them more teeth. We introduced the possibility of imposing measures such as remediation actions in conjunction with or instead of pecuniary fines to drive compliance, while we have enhanced the publication of sanctions procedures enabling us to publish a wider pool of sanctions we impose, including those under appeal.

All this investment will come to nought however if we cannot show results. They are beginning to come through.

Suspicious Transaction Reports or STRs are a key metric in the fight against money laundering. Banks and other parties are required to notify regulators about suspicious transactions, demonstrating that they have effective internal controls and monitoring tools, and that these controls in turn are properly evaluated by the regulator. The FIAU received 2,778 STRs last year which is an increase of 157% over 2018.

At the same time the FIAU has strengthened its AML coordination with other regulators including the Malta Financial Services Authority and the Malta Gaming Authority.

International collaboration in the fight against financial crime is also crucial. The FIAU proactively shares information with its international counterparts and these so-called spontaneous intelligence reports which more than doubled in 2019 (1,548) in comparison with the previous year (749).

We are increasing financial penalties. Last year we levied almost €4 million in fines for AML/CFT breaches, an almost 700-fold increase on 2017.  In 2017 fines amounted to €61,145 and 2018 to €996,180.

The challenge now for the FIAU and for other regulators is to sustain our work and achievements in the so-called COVID-era. Malta, like many other countries, is in a quasi-lockdown. Our Courts are shut, much of our workforce is self-isolating. At this moment, our Government is focused on saving lives and on bolstering business and the economy.

Nevertheless, we are working hard to proceed with our duties and to implement as many changes and improvements as possible.  For example, the FIAU has piloted conducting supervisory examinations with financial services firms by video call. Our teams are participating in online training and panel discussions, including a recent online video conference with industry body the Association of Certified Anti-Money Laundering Specialists (ACAMS).

Our recruitment drive has moved online. We continue to receive STRs and are managing to process the incoming intelligence and disseminate where necessary. We are even issuing draft regulation for consultation and finalising guidance documents, most recently on proposals to reflect Moneyval's AML recommendations in Malta's own legislation.

For now, the focus must remain on the battle to defeat the pandemic. Once we have achieved victory, we can double down on our day job - renewing the fight against money laundering.

Kenneth Farrugia is director of the Financial Intelligence Analysis Unit (FIAU).