FATF AML Deficiency List
Corruption Index (Transparency International & W.G.I.)
Malta is on the FATF List of Countries that have been identified as having strategic AML deficiencies
FATF Statement - 25 June 2021
In June 2021, Malta made a high-level political commitment to work with the FATF and MONEYVAL to strengthen the effectiveness of its AML/CFT regime. Since the adoption of its MER in July 2019, Malta has made progress on a number of the MER’s recommended actions to improve its system, such as: strengthening the risk-based approach to FI and DNFBP supervision; improving the analytical process for financial intelligence; resourcing the police and empowering prosecutors to investigate and charge complex money laundering in line with Malta’s risk profile; introducing a national confiscation policy as well as passing a non-conviction based confiscation law; raising sanctions available for the crime of TF and capability to investigate cross-border cash movements for potential TF activity; and increasing outreach and immediate communication to reporting entities on targeted financial sanctions and improving the TF risk understanding of the NPO sector. Malta will work to implement its FATF action plan by (1) continuing to demonstrate that beneficial ownership information is accurate and that, where appropriate, effective, proportionate, and dissuasive sanctions, commensurate with the ML/TF risks, are applied to legal persons if information provided is found to be inaccurate; and ensuring that effective, proportionate, and dissuasive sanctions are applied to gatekeepers when they do not comply with their obligations to obtain accurate and up-to-date beneficial ownership information; (2) enhancing the use of the FIU’s financial intelligence to support authorities pursuing criminal tax and related money laundering cases, including by clarifying the roles and responsibilities of the Commissioner for Revenue and the FIU; and (3) increasing the focus of the FIU’s analysis on these types of offences, to produce intelligence that helps Maltese law enforcement detect and investigate cases in line with Malta’s identified ML risks related to tax evasion.
Compliance with FATF Recommendations
The last Follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Malta was undertaken in 2021. According to that Evaluation, Malta was deemed Compliant for 12 and Largely Compliant for 28 of the FATF 40 Recommendations. No review of the 11 areas of Effectiveness of Malta's AML/CFT Regime was undertaken in the Follow-up MER and, therefore, these remain assessed at being Highly Effective for 0 and Substantially Effective for 2.
US Department of State Money Laundering assessment (INCSR)
Malta was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Malta’s location between North Africa and Italy makes it a transit point for narcotics and human trafficking to Europe. The country’s offshore banking sector is relatively large (eight times GDP), and its ship registry is the largest in Europe. According to the Malta Police Force, the major sources of illegal proceeds are generated through drug trafficking (in particular cocaine, heroin, and cannabis resin) and economic crimes, primarily fraud and misappropriation of public funds. The proceeds generated are not substantial and are primarily based on domestic offenses and eventual self-laundering. Money laundering investigations related to drug trafficking revolve around the suspects living beyond their means and converting the funds by purchasing commodities, such as expensive vehicles, real estate, and other luxury goods.
Foreigners who route illicit gains from illegal activity in foreign jurisdictions to local Maltese bank accounts generate a significant volume of laundered funds. Such offenses usually relate to investment scams and tax/value added tax fraud. Representatives of the financial sector emphasize the risks involved in foreign deposits and investment by politically exposed persons (PEPs) from Eastern Europe and North Africa and the possibility of their linkage to tax evasion or the diversion of funds. These activities are usually detected through requests for assistance by a foreign jurisdiction.
While there is very little evidence of organized criminal groups laundering money in Malta, recent events have indicated that Malta’s online gaming industry may serve as a potential conduit for money laundering activities. Malta’s various financial service and gaming authorities have taken steps to increase oversight to ensure Malta’s gaming industry does not become targeted by crime organizations.
Maltese authorities have detected no terrorism financing activity, and Malta’s financial regulators consider the terrorism financing risk to be low. Contraband smuggling does not appear to be a significant source of illicit proceeds.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 53
World Governance Indicator – Control of Corruption 62
Corruption does not represent a significant challenge for businesses operating in Malta, except for most notably the public procurement sector. This is attributed to the country’s transparent administration and economy, low levels of official impunity, and small room for arbitrary spending of public funds. Inefficient government bureaucracy and the country's shadow economy, which constitutes nearly a quarter of the entire economy, are the largest obstacles to business. Connections between the local elite and political figures also threaten fair competition. The Maltese Criminal Code criminalizes active and passive bribery, abuse of office, extortion and embezzlement, among other corruption-related offenses, and the law is effectively enforced. Businesses report bribery is rare in Malta, and the legal framework criminalizes facilitation payments and giving and receiving gifts. For further information - GAN Integrity Business Anti-Corruption Portal
Malta - the smallest economy in the euro zone - produces only about 20% of its food needs, has limited fresh water supplies, and has few domestic energy sources. Malta's economy is dependent on foreign trade, manufacturing, and tourism. Malta joined the EU in 2004 and adopted the euro on 1 January 2008.
Malta has weathered the euro-zone crisis better than most EU member states due to a low debt-to-GDP ratio and financially sound banking sector. It has low unemployment relative to other European countries, and growth has recovered since the 2009 recession. In 2014 and 2015, Malta led the euro zone in growth, expanding by nearly 3.5% each year.
Malta’s services sector continued to grow in 2015, with noted increases in the financial services and online gaming sectors. Malta continues to enhance its regulation of the financial services sector, and passed additional legislation in 2014 and 2015 to improve anti-money laundering oversight for financial and gaming activities. Expanding EU discussions of anti-tax avoidance measures, including the “Anti-Tax Avoidance Package” submitted in early 2016, have raised concerns among Malta’s financial services and insurance providers about passage of laws governing EU tax practices, which could have a significant impact on those sectors.
Malta’s 2015 GDP growth was bolstered by energy infrastructure investments, and revenue growth is expected to continue, supported by a strong labour market and proceeds from a citizenship by investment program equal to roughly 0.9% of GDP. Malta's geographic position between Europe and North Africa makes it a route for irregular migration. Historically, Malta's fertility rate has been below the EU average, and population growth in recent years has been largely from immigration, increasing pressure on the pension system. The government has implemented new programs, including free childcare, to encourage increased labour participation. The high cost of borrowing and small labour market remain potential constraints to future economic growth.
Agriculture - products:
potatoes, cauliflower, grapes, wheat, barley, tomatoes, citrus, cut flowers, green peppers; pork, milk, poultry, eggs
tourism, electronics, ship building and repair, construction, food and beverages, pharmaceuticals, footwear, clothing, tobacco, aviation services, financial services, information technology services
Exports - commodities:
machinery and mechanical appliances; mineral fuels, oils and petroleum products; pharmaceutical products; books and newspapers; aircraft/spacecraft and parts; toys, games, and sports equipment
Exports - partners:
Germany 13.3%, France 10.2%, Hong Kong 7.4%, Singapore 7.3%, UK 6.4%, US 5.8%, Italy 5.6%, Japan 4.7% (2015)
Imports - commodities:
mineral fuels, oils and products; electrical machinery; aircraft/spacecraft and parts thereof; machinery and mechanical appliances; plastic and other semi-manufactured goods; vehicles and parts
Imports - partners:
Italy 23%, Netherlands 8.4%, UK 7.5%, Germany 6.8%, Canada 6.1%, China 4.1%, France 4% (2015)
Investment Climate - US State Department
The Republic of Malta is a small, but strategically located island country 60 miles south of Sicily and 180 miles north of Libya, astride some of the world’s busiest shipping lanes. Malta, a politically stable parliamentary republic with a free press, is considered a safe, secure, and welcoming environment for American investors to do business.
Malta joined the European Union (EU) in 2004, the Schengen visa system in 2007, and the Eurozone in 2008. With a population of about 420,000 and a total area of only 122 square miles, it is the smallest country in the EU. The economy is based on services, primarily shipping, banking, professional, scientific and technical activities, online gaming, motion picture industry, and tourism. The country’s banking sector is relatively large (roughly two and a half times GDP), and Malta’s ship registry is the largest ship in Europe. Maltese and English are the official languages.
Malta's economy has weathered the recent global economic crisis relatively well. Real Gross Domestic Product (GDP) growth is estimated to have reached 6.3 percent in 2015, a rate which should moderate to 3.9 percent in 2016 but remain strong relative to the rest of the Euro area. In terms of unemployment, Malta is one of the best performers in the EU, with unemployment projected to average 5.4 percent for the year 2015, and expected to remain broadly unchanged until the end of 2016.
The top three credit rating agencies rank Malta well; all note a stable outlook. The current sovereign credit ratings are:
BBB+ with a stable outlook (S&P)
A3 with a stable outlook (Moody’s)
A with a stable outlook (Fitch)
In 2013, the Government of Malta established the Individual Investor Program (IIP), which assigns citizenship by naturalization to a person and his or her dependents who are contributors to an individual investor program and who pay a fee of €650,000 (additionally, €25,000 for spouses and for dependents under age 18; €50,000 for dependents over age 18). This amendment to the Maltese Citizenship Act, (Chapter 188 of the Laws of Malta) was passed in November 2013 and met with criticism due to the perceived selling of Malta's EU passport and Schengen zone access. In response, the Government modified the law in some ways, such as adding a one-year residency requirement and publicizing the names of new citizens. IIP conditions include a €350,000 threshold for purchasing immovable property, or a €16,000/year threshold for leasing immovable property (which must be retained for at least five years), and a €150,000 threshold for investment in stocks, bonds, or debentures.
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