The impact of FATF greylisting on banks and asset managers in Malta

Abstract

On the 23rd of June 2021, Malta was greylisted by the world’s money laundering and terrorist financing watchdog, the Financial Action Task Force (FATF). Several stakeholders voiced their opinion on the consequences that may lie ahead for the Maltese economy, including contractions in GDP and capital flows. The purpose of this dissertation has been to identify the impact of FATF greylisting on two major pillars of the Maltese financial services sector and at the very heart of the Maltese economy, banks and asset managers. Towards this aim, the researcher adopted a qualitative approach whereby 5 semi-structured interviews and 1 questionnaire were conducted with representatives from 4 core domestic banks and 2 non-core domestic banks. In addition, 19 survey responses from practitioners in the asset management industry were collected. The main findings of the study indicate that the threat of greylisting itself had already impacted both sectors in particular from a regulatory perspective. Moreover, impacts are related to external effects rather than internal effects. Except for the loss of credibility and the increased scrutiny by correspondent banks, the already set up and advanced systems, policies and procedures coupled with a conservative risk appetite have seen the impact on banks mostly contained. The same cannot be said for asset managers with findings suggesting a heavier impact, in particular issues with service provider relationships and difficulty in attracting new clients. Significantly worse impacts are expected should there be a prolonged greylisting, however, there is substantial optimism for Malta’s delisting in the next FATF plenary in June 2022.