Susan MeierWhen the Financial Action Task Force (FATF) placed Malta on its list of jurisdictions under increased monitoring—commonly known as the "grey list"—in June 2021, it caused quite a stir within the local financial services sector. Malta had the unfortunate distinction of being the first EU member state to be listed, despite the fact that operators on the island were already subject to strict AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) frameworks derived from both local and EU law.
Fast forward twelve months, and following significant progress in addressing the deficiencies identified by the FATF, Malta has been officially removed from the grey list.
This article outlines the key measures Malta implemented to secure its removal from the list and restore its standing in the international financial community.
1. Accuracy of Beneficial Ownership Information
According to the FATF, a primary area requiring immediate attention was the accuracy of beneficial ownership (BO) information, alongside the enforcement of appropriate penalties for administrators who failed to keep this data up to date.
Previously, there were instances where information regarding the ultimate beneficial owners of companies was not being recorded correctly by gatekeepers (such as corporate service providers) and, consequently, was not accurately filed with the Malta Business Registry (MBR). This was a major concern, as concealing BO information—or difficulties in establishing ownership structures—are classic red flags for money laundering and terrorism financing.
Today, companies are legally required to submit accurate beneficial ownership details to the Malta Business Registry (MBR) under the Companies Act (Register of Beneficial Owners) Regulations. Non-compliance is met with strict fines and penalties. To increase transparency, the MBR has also launched a "Beneficial Owners" section on its portal, allowing users to access current ownership data for all active companies for a nominal fee.
Throughout 2021, both the MBR and the Financial Intelligence Analysis Unit (FIAU) conducted a series of intensive on-site inspections of gatekeepers. These inspections focused heavily on the accuracy and validity of the BO data submitted to the registry.
The FIAU published the findings in a report titled "Compliance with Beneficial Ownership Obligations by Company Service Providers – Thematic Review 2021". The results were largely positive. The document noted that "most CSPs are compliant with their BO obligations." Where issues were found, they were limited to exceptional cases. Crucially, the review stated that "no systemic breaches were identified throughout the thematic review, neither at the level of the individual CSPs nor within the CSP sector as a whole."
These efforts to clean up the registry and verify ownership data played a pivotal role in satisfying the FATF's requirements.
2. Enforcement of Money Laundering Offences
A second critical issue raised by the FATF was the need for better utilisation of financial intelligence by the FIAU to support authorities in prosecuting tax and money laundering crimes.
The FATF's view was that money laundering cases were not being treated with enough urgency in Malta. They called for stronger enforcement to increase conviction rates and to resolve long-standing money laundering cases that had been pending without prosecution.
Malta implemented a series of sweeping changes to tackle this. Senior leadership changes were made within both the Malta Police Force and the Malta Gaming Authority (MGA), signalling a clear intent to break from the status quo and prioritize these issues.
The FIAU significantly ramped up the number of inspections and compliance reviews across the board, targeting banks, financial institutions, gaming companies, corporate service providers, notaries, and real estate agents. In 2021 alone, the FIAU issued administrative fines totalling over €11 million to entities that failed to meet their AML/CFT obligations.
This figure stands in stark contrast to previous years. The total value of fines more than tripled between 2020 and 2021 (2020: approx. €3.8m; 2019: approx. €3.9m; 2018: €996,180; 2017: €61,145). This aggressive enforcement demonstrated the FIAU's determination to crack down on non-compliance, a shift that was instrumental in Malta's removal from the grey list.
3. Tackling Tax Evasion
The FATF also felt that Malta was not doing enough to combat tax evasion at a national level. They emphasized that the FIAU needed to place greater importance on analysing tax-related crimes to enable Maltese law enforcement to detect and investigate such cases promptly.
Throughout 2021 and 2022, the relevant authorities worked to improve their methodology for combating tax evasion. This involved developing a clear national policy shared by the Malta Police Force, the FIAU, and the Office of the Commissioner for Revenue. The goal was to establish a framework for prioritizing and fighting tax evasion in a coherent, effective, and proportionate manner across all sectors.
This strategy included increasing resources and expertise within the authorities to handle tax evasion cases more effectively. Simultaneously, the private sector received targeted training to improve its ability to detect and report serious tax matters.
The role of the FIAU in addressing this deficiency cannot be overstated. The unit made it a priority to focus more heavily on tax cases, establishing a dedicated team to follow up on reports of serious tax evasion. In November 2021, the FIAU published a guidance paper titled "Typologies & Red Flags: Indicators of Tax-Related ML". This document was designed to help subject persons (and the public) identify suspicious activities linked to tax evasion and report them to the FIAU without delay.
Final Thoughts
In June 2022, the FATF concluded that Malta had made significant progress in resolving the issues identified 12 months prior and moved quickly to remove the jurisdiction from the grey list.
However, Malta cannot afford to be complacent. The country must maintain the momentum it has built in strengthening its AML/CFT frameworks. Failing to do so could invite further disciplinary action from the FATF or other international bodies, which would have severe consequences for Malta's economy, reputation, and ability to attract foreign investment.
Disclaimer: The above article is based on independent research by Dr. Werner & Partners and does not constitute legal advice. If you would like to meet with one of our representatives for further information, please contact us to arrange an appointment.
