Collective effort needed for Malta to get off grey list ‘as soon as possible’ – IFSP

Dr Wayne Pisani, and Dr Stephen Attard,

Last Updated on Friday, 2 July, 2021 at 1:30 pm by Andre Camilleri

Although the news that Malta has been grey listed by the Financial Advisory Task Force (FATF) is not positive, all stakeholders should come together, share information between them and execute a plan of action so that the country would make it back on the white list “as soon as possible”, representatives from the Institute of Financial Services Practitioners (IFSP) told The Malta Independent on Sunday.

On Wednesday, Malta was greylisted by the FATF. In a press conference on Friday, the FATF explained that even though good progress has been made since a report in 2019 found serious deficiencies in Malta’s jurisdiction, there still remains work which has to be done. This would include areas concerning criminal tax-related issues and money laundering issues, and more support from the Financial Intelligence Analysis Unit to authorities in such cases.

Many uncertainties remained as to what the outcome of the FATF greylisting would entail. The Malta Independent on Sunday spoke to two members of the IFSP to obtain a clearer idea as to what the country should expect; Dr Wayne Pisani, president of the IFSP and Dr Stephen Attard, council member.

“As objective as I can be, being a Maltese, such a decision, I must confess, feels unjust,” Pisani said.

Attard remarked that the largest sentiment they have currently seen within the financial services industry is disappointment “especially because of the Moneyval results which highlighted a clean bill of health on the technical level”. However, he said that we need “to look forward and ensure that we get off this grey list as fast as possible by addressing the FATF’s concerns”.

“I think we’ve seen a lot of dwelling in the media on what if, why and finger pointing. Rather than dwelling too much on past deficiencies, we should  say, ‘look, it is disappointing, for sure, but we need to look forward, learn from the past mistakes and address them, see what this is telling us, roll up our sleeves and have a national approach towards progressing forward’,” Attard said.

Asked about what the reactions from their stakeholders have been, the pair highlighted that they can speak for two main stakeholders in this situation; the members of the IFSP as well as their clients.

“The most obvious stakeholders are our members – the financial services practitioners – but equally, our international client base is an important stakeholder. I think over the past two days, we can say that many of our members shared the sentiment of the IFSP and expressed  disappointment with this outcome; we’ve certainly felt that coming across,” Attard observed.

“There are serious financial services practitioners who invested heavily in compliance resources and processes to diligently run their operations.  So there was and is disappointment.”

However, Attard noted that although a certain degree of anxiety does loom, it is “balanced out by a belief that Malta has advanced a lot already on the technical side”, as well as by the fact that “the industry has equipped itself in recent years to rise up to the upcoming challenge, which the increased monitoring will entail”.

When it comes to international operators, Attard remarked that most of them were caught by surprise by this outcome “especially after the message sent by the Moneyval clean bill of health”.

There is obviously a level of querying on the part of clients to try and understand what it will mean in practice for them. International reputable operators, who have invested in Malta, rightly see the greylisting as an important issue for them and they need to understand exactly what the FATF is telling Malta and what it needs to do, he remarked.

“For such investors, taking a decision about their presence in Malta is important. At the same time, I feel that they would want to ensure that they are taking an informed decision. It’s still too early because there are so many factors that have to come out.”

Pisani agreed with Attard in terms of establishing the identified weaknesses by the FATF first and foremost.

“We have already experienced a lot of work in terms of working to consolidate Malta’s position in terms of compliance. Going forward, yes, we need to continue working as one and more importantly, the industry and all stakeholders need to communicate between themselves,” Pisani said.

We need to look forward to enable Malta and the Maltese community to regain the deserved respect within the shortest time possible. We need to work as one – private/public, across parliament, the different industries – as a nation. We need to plough ahead with the necessary measures, carpe diem the situation to clean up any areas which were left to chance.

The IFSP president remarked that open communication channels should be maintained between constituted bodies, such as the IFSP and other representative bodies, public bodies involved in the process as well as government itself. That intelligence and knowledge would help to manage the process and address any feared delays in the ensuing review process.

“Yes, Malta is under increased monitoring. Yes, there will be pressures from other countries and obviously other authorities. But the most important thing is a reality that a lot has been done over the past two years; we need to translate that work into effective measures, which are seen, perceived and felt,” he said.

In terms of what they are expecting in the future, the IFSP president reiterated that he is hopeful as “the Maltese have a culture and society that has been reinventing itself in various times”.

“Each and every challenge brings with it certain opportunities. I firmly believe that what we have learnt and are still learning in terms of the work carried out in addressing the Moneyval recommendations, as well as what we will experience and then implement in terms of addressing the FATF effectiveness recommendations, will create opportunities, especially in compliance services and other support areas including digital and data management tools,” he said.

Pisani remarked that the call for enhanced compliance is an international reality. Malta has built, and will continue to build, strong resources in this space. As we navigate the present predicament “there will always be an opportunity to turn such challenges into positive outcomes”.

“If, as we envisage and as we keep on advocating and pushing, we put all our thrust to get out of this greylisting, hopefully in the shortest period of time, our expectation is that this clean bill of health from the FATF, will be a trump card attesting the country’s trust, credibility, reputation and integrity; testament to the professionalism and resilience of the Maltese society, including the practitioners and all those involved in the process.

Indeed, possibly there is a silver lining in all this to learn from past mistakes and seize the moment to rebuild Malta’s reputation through such measurable, transparent and internationally-recognised measures which would help to address the negative perceptions of Malta and the Maltese through the implementation of effective measures taken in the execution of the plan.”

Attard added that there will also be an element of recalibration within the sector, but believes that there are many international operators who have chosen and heavily invested in Malta and should be able to adjust to and cope with the increased monitoring of the country.

He said that although this is not an ideal situation, “you have banks, insurance companies, investment funds and investment services providers, who are already very much used to having significant due diligence processes through robust compliance systems. And it’s a question, therefore, of adaptability”.

He did remark, however, that there are a few service providers who have not been able to effectively fight against money laundering and these “cannot continue to operate in this sector”. Having said this, “with or without the FATF greylisting, it was already happening and had to happen”.

Asked about how long the greylisting will last, Pisani remarked that at this point, it would be simply speculation, but he would expect one year at least. However, the country cannot “sit on its laurels”, but must work hard to get out of the grey list as soon as possible, just as it addressed the Moneyval situation.

“We have experienced over the past years what can be deemed as a culture change in terms of the compliance aspect of not just the way we do business, but the way we expect things to happen,” Pisani said. More human resources are needed now to ensure proactive, efficient and proportionate implementation. “This is not just the financial services and international business component, but all areas where there is interplay with finance, including the tax evasion component.”

Attard noted that Malta finds itself in a completely different position to most other countries that are on the grey list as the country “is much more advanced on the technical front”, as proven by the Moneyval report, he said.

“We would expect that if there is a national concerted effort to work at the measures of effectiveness, which the FATF is expecting, then the timeline should be shorter rather than longer,” Attard observed.

He also remarked that the short history of the financial services industry in our country faced two major instances where it had to adapt significantly. One of which was in the early 1990s, “which saw the dismantling of the offshore regime” as well as the “adaptation of our tax regime in 2006-2007” after Malta’s EU accession.

“I would want our members and practitioners to remember those episodes… There was also a mood at the time where practitioners envisaged that there might be so many changes that they would not cope or survive and in a way people started fearing what the future would be,” Attard added.

Although there was a sense of anxiety during those times, Attard recalled that a sense of unity blossomed during such uncertain times. “I’m not comparing what we have on our plate… I would say that this is probably an even bigger challenge. But I think we can draw on those experiences where we saw the resilience of the Maltese people in general, where they were working hand in hand.”

“There is a need for national consensus, the need of working together, even at the level of the political parties, but also the institutions and government recognising that the industry, the financial services industry, and practitioners, can contribute positively because the experience of those two episodes showed how we could overcome the obstacles and come out stronger,” Attard said.

Attard emphasised that the willingness and unity that the Maltese have to show is a crucial point to underscore. “We have reached out and we have made it very clear that the industry wants to support and is willing to even engage with government and institutions,” he said.

“Obviously, there is one area that is not within our competence or remit, in terms of prosecutions; that is definitely something which is the sole prerogative of the police and the institutions. But on other fronts, we believe that there needs to be a dialogue – even with the industry giving the perspective to government and the political parties as to how international investors are looking at all of this and reacting – I think that’s of great value.”

The IFSP president doubled down Attard’s comments, citing that the country needs to be motivated and move forward so that Malta deals with its shortcomings cited by the FATF and clearly communicate this through visible action, he said.

The measures have to be sustainable and based on a number of key pillars including:

  • Effectiveness – not just a matter of churning out legislation but implementing and enforcing them;
  • Efficiency – manageable in terms of effective implementation taking into consideration the resources available and the peculiarity of the economic and social conditions;
  • Proportionality – the measures have to be calibrated to the effective outcome aimed to be achieved and not broad-spectrum measures. There should be targeted measures to address identified weaknesses;
  • Coordination – between public entities and stakeholder involvement including the private sector and public consultation; and
  • Transparency – communicate the plan and progress achieved with the implementation.

“We need to ensure that we do not overburden the consumer disproportionately as a result of these compliance measures that have already been introduced. The FATF call for more effectiveness is, in my view, also indicative of a situation where we didn’t have enough time to show the results of what has been recognised by Moneyval, then a situation where we didn’t do anything; certain processes take their time,” he said.

“Once we devise a plan of action – and this plan should be devised within a matter of weeks and not months – we need to then set an implementation plan. These need to be coupled with a clear and transparent communication strategy in terms of not just the strategy, but being transparent in terms of what we’re doing so that the business community, the consumers, the Maltese society and the international community will know that Malta means business and that it is effectively working towards getting off this grey list.”

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