A critical analysis of anti-money laundering supervision in Malta

Abstract

Anti-money laundering and counter terrorism financing compliance (‘AML/CFT) supervision is a critical component in the global fight against money laundering and terrorist financing (‘ML/TF’), in ensuring that financial intermediaries are appropriately applying AML/CFT controls in line with the ML/TF risks faced by their business and ultimately preventing the misuse of the financial system for ML/TF purposes. In Malta, the AML/CFT supervision is undertaken by the Financial Intelligence Analysis Unit (‘FIAU’) with the help of supervisory authorities which act as agents of the FIAU, assisting it in carrying out AML/CFT supervision. The Maltese supervisory framework has recently been placed under scrutiny, with the FIAU and supervisory authorities working hand in hand to improve the current framework. Despite this, some issues remain with the current supervisory setup, including the fact that supervisory authorities are unable to take action in relation to AML/CFT breaches, this being the central argument behind the study. This dissertation therefore seeks to understand whether an alternate supervisory setup could lead to more benefits in the long run, by answering the primary research question: Can the current architectural set-up of AML/CFT supervision in Malta be improved? The dissertation therefore identifies various factors which can hamper the effectiveness of Malta’s current supervisory setup and concludes that while the current supervisory model appears to work well with regard to the gaming sector, benefits could be gained if the Malta Financial Services Authority, as the single regulator for financial services, were to be assigned AML/CFT supervisory responsibilities for the financial sector. The study also takes into account various limitations and considerations relating to the introduction of an alternative model.