An evaluation of CSP regulation as a means of combatting money laundering

Abstract

CSPs and other DNFBPs are seen as the gatekeepers to the financial system. Gatekeepers are positioned at fundamental entry points to the financial system and are therefore able to prevent wrongdoing. Recent AML scandals such as the Panama, the Paradise and the Pandora Papers have illustrated how CSPs in particular, are the epitome of gatekeeping professionals. Their direct involvement in the creation and management of companies, which corporate vehicles are popular choices for money laundering, highlight the CSP sector’s dual possibility to either facilitate money laundering or to stop it. Against this backdrop, in 2019, MONEYVAL pointed out a number of anti-money laundering deficiencies in the Maltese CSP regulatory framework. This triggered the Maltese regulator to overhaul the CSPs’ regulatory framework and to also raise the bar for CSPs. This dissertation evaluates CSP regulation in Malta as a means of combatting money laundering, particularly by assessing whether the recent amendments to the CSP regulatory framework have closed the regulatory gaps identified by MONEYVAL. It also analyses the amendments to assess how standards for the CSP industry have been raised and it evaluates how the Maltese CSP regulatory framework fares in comparison to a number of foreign jurisdictions. In comparison to the analysed foreign jurisdictions, the Maltese CSP regulatory framework fares well, particularly in relation to the regulation of de minimis activities. Contrastingly, there are aspects of CSP regulation in which foreign regulators have adopted a stricter approach, such as the compulsory engagement of a CSP by companies. This dissertation affirmatively concludes that regulatory gaps have been closed and that standards for the CSP industry have indeed been raised. However, a major challenge which this dissertation envisages relates to the need to improve the compliance culture of the CSP industry in order for the industry to be able to comply with the overhauled CSP regulatory framework.