The implication of the EU 5th anti-money laundering directive, now as imposed national law : a banking experience

Abstract

The aim of this research project was to assess if and how local domestic banks have changed their mindset in implementing Anti-Money Laundering Directives since 2019, when the first study was conducted, particularly in relation the EU 5th Anti-Money Laundering Directive. Back in 2019, the research included four banks, two large and two small and these were thoroughly analysed on various aspects that were to be affected by the changes from the 4th Directive to the 5th Directive, prior to the 5th Directive being imposed as a National Law. The research found several discrepancies between the different sized banks, particularly in their mindset, where the larger banks were viewed to be proactive and open to change, whilst the smaller banks were considered to be reactive and resisting change. This was mainly attributed to the lack of resources available at hand at the different sized banks. The research below focuses on how this mindset could have changed since 2019, where the crucial point is that the 5th Directive has since become imposed a National Law. The researcher re-interviewed banks of a similar size to 2019 on the various aspects which were considered to be of large discrepancy and allowed the researcher to identify how strategies deployed by the banks have changed in the past years. The outcome of this was that the smaller banks have taken the initiative to be in-line once and for all to the 5th Directive, which could be attributed to the fact that this was imposed as a National Law. However, the research identified areas where the smaller banks were now acting in a more proactive manner to that manner identified in 2019. Particularly, this was in areas such as consultancy, where they are engaging with external consultants more regularly in order to help mitigate the gap with larger banks. Moreover, the research targeted an area which was quite worrisome in 2019, that relating to Malta’s economic orientation. Back in 2019, it was evidently shown, that whilst Malta was trying to position itself as a niche’ service provider for crypto currencies, blockchain technology and the gaming industry, the risk appetite from banks was close to none, however, this was subject to change should more knowledge be obtained by such banks. Interviewed again four years on, banks have explained that whilst more knowledge has been gained, the risk appetite remains as it was, particularly due to the controversial areas that such businesses are related to, something which was also mentioned in the literature review provided. Finally, knowing that this area is one which is considered to be highly dynamic and constantly being updated, the research closed off by analysing the interviewees perceptions on the newly proposed changes to the AML/CFT regulations, particularly those relating to a 6th Directive, the introduction of the Anti-Money Laundering Authority and the EU Single Rulebook. The researcher could identify if the mindset to a more proactive approach for the smaller banks was being used here as well. However, this created a discrepancy, where whilst three of the banks looked at these changes with optimism and encouragement, another bank was not considering such changes and was rather focusing on other areas not relating to money laundering at the time.