Transposing and implementing the third EU money laundering directive : a Maltese perspective

Abstract

Directive 2005/60/EC of the European Parliament and Council of 26th October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing entered into force on the 15th of December 2005 and had to be implemented by all Member States by not later than the 15th of December 2007. European Directives do not have direct effect. In Malta, such Directives are transposed into national legislation by means of a legal notice that is issued by the Minister and published in the Government Gazette. Legal Notice 180 of 2008, published on the 31 st July 2008 transposed the Third Directive into Maltese law while revoking the previous Regulations so as to make such legislation more comprehensive. Whilst Legal Notice 42 of 2006, which had amended the 2003 Regulations, sought to implement most of the revised FATF 40 Recommendations which constitute the source of the Third Directive, a good number of provisions still had to be transposed to national legislation. Although regulation of anti-money laundering and funding of terrorism is essential for safeguarding the integrity and maintaining the stability of any financial system, legislation alone is not sufficient. Regulatory bodies such as the Financial Intelligence Analysis Unit, together with other supervisory authorities in their role as agents of the FIAU, such as the MFSA and the LGA, constitute a very important role in this regard. It is not enough to set up and empower such bodies with supervisory functions. For these bodies to succeed in their objective of combating such financial crimes, it is imperative that they have and maintain an adequate number of well-trained and skilled workforce, especially in view of the innovative shift from a rule-based approach to a risk-based approach. It is useless requiring subject persons to adopt this new approach unless the regulators also apply this system. Regulators must abide by the law but they must also be efficient and practical. Resources should focus on the most important problems - ones which would have significant impact on investors and customers, the market, as well as the Regulator's and Malta's reputation. Regulation cannot stamp out anti-money laundering and terrorist financing altogether but will go a far way in reducing its incidence and impact. To maximize effectiveness, regulators worldwide need to cooperate in this endeavour and be persistent and unrelenting in their efforts.