Malta creating new unit to tackle complex, international financial crimes, seize, freeze assets: Finance Ministry
Malta is creating a new unit to more aggressively uncover and prosecute large-scale, complex financial crime cases, and increase the power authorities have to freeze the assets of illicit entities, according to the country’s Ministry of Finance.
Taken together, the “sweeping reforms” will reinforce the country’s “commitment to fighting the scourge of financial crime and money laundering,” according to written and public statements by Finance Minister Edward Scicluna, adding that the new measures are designed to “boost the resources available to regulators and law enforcement,” and finally, their effectiveness to produce prosecutions and convictions.
The changes cover three main areas:
Complex money laundering cases: Creation of new Financial Organized Crime Agency to investigate and prosecute the most serious cases of money laundering and financial crime
- Speed up case closures: New Police Prosecution Unit to accelerate the prosecution of serious cases
- More seized, frozen assets: Enhanced powers for the Asset Recovery Bureau
- Separation of duties: State Advocate Bill to separate Attorney General’s civil and prosecution functions
The moves are in response to growing internal and external pressure on Malta from U.S. and European authorities over extensive gaps in the country’s anti-money laundering (AML) compliance defenses, lax oversight and enforcement by regulators and prosecutors and few investigations of large money laundering cases currently plaguing the region.
In November, the European Commission took rare and drastic steps to increase legal pressure on Luxembourg and Malta for not adequately implementing bloc-wide financial crime compliance regulations, while pulling back similar actions against Spain after a range of recent improvements.
The move comes as several EU member states – including Denmark, Estonia, Latvia, the Netherlands and others – have become mired in money laundering scandals to the tune of hundreds of billions of dollars and individual banks in some countries have paid in some cases record penalties in the hundreds of millions of dollars for extensive and longstanding AML failures.
Across the board, the commission levied a range of censures against the three countries.
Authorities chastised Malta’s financial intelligence unit for having lax supervision of the banking sector with ostensibly the worst punishment handed down to Luxembourg, which at the time faced a lump sum penalty and daily fines until examiners deem it in line with Europe’s Fourth AML Directive.
At issue with Malta and the Financial Intelligence Analysis Unit (FIAU) has been what European authorities believe is a disconnect between what examiners concluded on the ground and what was actually going on behind the scenes at financial institutions in the region.
The disconnect was exemplified by what happened at Pilatus bank, which the European Central Bank (ECB) shuttered in November due to widespread fraud and money laundering allegations, culminating in the indictment of the institution’s chairman on related charges.
Prior to this, the Maltese FIAU has given Pilatus overall positive reviews for AML program functions.
That all changed in March when U.S. prosecutors arrested Pilatus Chairman Ali Sadr Hashemi Nejad.
The Iranian allegedly orchestrated a scheme to evade U.S. economic sanctions and secret more than $115 million paid under a Venezuelan construction deal through the U.S. financial system – a dynamic layering risks on top of risks, something a regulator should have realized required significantly more scrutiny.
Pilatus also faced allegations of processing graft-gilt payments for senior Azeri and Maltese figures by investigative journalist Daphne Caruana Galizia, later killed by a car bomb attack, according to media reports.
The European Banking Authority (EBA) investigated and concluded that Malta’s FIAU “was breaching Union law” and issued recommendations to improve the situation in July, which have not been implemented to the watchdog’s satisfaction. “It considered that Malta failed to correctly supervise financial institutions and ensure their compliance with anti-money laundering rules.”
Part of the challenge is that Malta has a “comparatively small public administration, with its limited available resources,” a dynamic that has “forced public institutions to take on multiple roles. This has been most evident in the roles of prosecution and investigation where both the police force and Attorney General have occupied dual functions.”
De-coupling these groups will allow more specialized, intensive financial crime investigations, though details are still spare on how the country will organize, structure, staff and better analyze, share and shape data, intelligence and tips into concrete cases, prosecutions and convictions.
“Organized financial crime is an international scourge that knows no borders and can only be eradicated through a joined-up approach between countries,” Scicluna said in a statement.
The country is “determined to play our part in making this happen,” he said. “That is why we are throwing ever more resources at the problem and enacting legal and regulatory reforms to transform the fighting capabilities of our institutions and regulators,” (via the Malta Ministry of Finance).