Fight with Financial Crime in Malta

Blog / Fight with Financial Crime in Malta

The Mediterranean island of Malta has garnered considerable global attention due to its increasing influence within the international financial sector. Its advantageous geographical location, accommodating tax policies, and a developing financial services industry that is crypto-friendly have made Malta an attractive prospect for businesses. Nevertheless, this rapid ascent to popularity has also brought an elevated risk of financial crime, necessitating a proactive response from Malta.

Financial crime encompasses a broad spectrum of illicit activities, which include organized crimes like money laundering, fraud, corruption, the financing of terrorism, and illicit trafficking. These activities not only injure Malta's reputation but also pose a significant threat to its financial stability and global reputation. To uphold its significance as a reputable and dependable financial hub, Malta must take decisive steps to counteract financial crimes effectively.

Common Financial Crimes

Malta's flourishing economic landscape draws financial misconduct like a magnet. To ensure Malta’s overall stability and security, it is vital to learn more about these problems and find solutions for them proactively.

Money Laundering and Corruption

Money laundering and corruption cause great damage to Malta's financial landscape. The public trust has been shaken due to the allegations of high-level politicians and officials being involved in organized crime activities. Prominent among these is the notorious Pilatus Bank scandal, which revealed alleged money laundering schemes involving offshore entities and influential individuals.

The interconnectedness of corruption and financial crime has also raised concerns. The country's party financing system has been criticized for its potential to facilitate political bribery and undue influence by private interests.

Tax Evasion and Passport Scandals

Malta's reputation as a tax haven has attracted individuals seeking to evade taxes through intricate schemes. The controversial "citizenship by investment program" allowed high-net-worth individuals to obtain Maltese citizenship in exchange for substantial investments. While the program was suspended for applicants from Russia and Belarus following recent international events, it exposed vulnerabilities in Malta's financial ecosystem.

This web of tax evasion and questionable passport practices has not only sparked debates about tax fairness but also highlighted the need for enhanced oversight and transparency in the nation's financial sector.

Online Financial Scams and Ponzi Schemes

In the digital age, Malta has witnessed a surge in financial scams, with a proliferation of online scams and Ponzi schemes. The aftermath of the tragic murder of journalist Daphne Caruana Galizia uncovered the inner workings of financial crimes. This included fraudulent financial activities that preyed on unsuspecting victims, which undermined both individual financial security and overall trust in the financial sector.

These online scams have underscored the urgency of bolstering cybersecurity measures and enforcing stringent regulations to protect customers and investors.

Countries with high rates of illicit financial activity and laundering schemes

Regulatory Efforts Against Financial Crime

Malta's efforts to combat financial crime revolve around the Prevention of Money Laundering Act (PMLA), which serves as the cornerstone of its legal authority for prosecuting money laundering. The PMLA and its subsidiary regulations primarily concern the responsibilities of entities subject to anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations. 

To establish a money laundering offense in Malta, the prosecution must prove two crucial elements: the mental aspect (mens rea) and the factual aspect (actus reus). This entails demonstrating knowledge or suspicion regarding the property in question and involvement in money laundering processes. It is essential to note that Malta adheres to an "all crimes regime," meaning any criminal offense can potentially serve as a predicate offense for money laundering.

To substantiate a money laundering offense, it is imperative to establish that the proceeds being laundered originated from a criminal activity. If the activity generating these proceeds is deemed criminal either in Malta or any other jurisdiction, then those proceeds are regarded as illicit. Notably, corporate entities can also be held accountable for money laundering offenses, provided that the offense benefits the entity and is committed by one of its officers. Furthermore, Maltese courts have jurisdiction even when a part of the offense occurs within Malta.

Role of Law Enforcement

The responsibility for investigating and prosecuting money laundering offenses in Malta is distributed among various authorities. The Financial Intelligence Analysis Unit (FIAU) plays a pivotal role in receiving and analyzing reports of suspicious transactions. Subsequently, the FIAU forwards these reports to the Commissioner of Police for further investigation. The Malta Police Force's Anti-Money Laundering Department conducts these investigations, while the Office of the Attorney General handles the prosecution. 

Defensive Strategies for Businesses

In Malta, financial institutions are facing growing pressures to strengthen their safeguards against financial misconduct, specifically money laundering. It is paramount for these institutions to establish strong AML strategies to minimize risks. However, there are certain points to ensure compliance smoother.

Embracing Digital Transformation and Innovativeness

Opting for digitalization provides a great help for Maltese financial institutions. By adopting cutting-edge AML solutions powered by advanced technologies such as artificial intelligence and machine learning (AI/ML), the capacity to evaluate risks and monitor transactions can be rapidly enhanced. These technologies possess the ability to scrutinize extensive data sets in real time, which makes them more effective in flagging potentially suspicious activities compared to traditional methods.

Automation of Customer Due Diligence (CDD)

Streamlining compliance efforts can be achieved by automating processes related to CDD. For instance, utilizing Robotic Process Automation (RPA) aids in verifying customer identities, cross-referencing them against sanction lists, and efficiently assessing their risk profiles. This automation relieves the compliance teams of excessive burdens and guarantees that high-risk clients receive the necessary scrutiny.

Enhanced Utilization of AML Screening Software

Financial institutions in Malta should prioritize the utilization of AML screening software. This software offers real-time transaction surveillance, customer screening against worldwide sanction lists, and risk evaluation capabilities. It enhances efficiency and accuracy in identifying potential money laundering activities. Furthermore, it allows businesses to stay updated with evolving regulatory requirements.

Introducing Sanction Scanner to Bolster Compliance

Within a swiftly changing regulatory environment, Maltese financial institutions must adopt defensive strategies that encompass digital innovation and AML solutions. Embracing these technologies not only ensures compliance but also safeguards the credibility of their operations. 

Financial institutions can rely on Sanction Scanner for effective AML compliance in Malta. As a prominent developer of AML compliance software, Sanction Scanner offers state-of-the-art solutions aligned with Malta's regulatory framework. By leveraging Sanction Scanner's AML solutions, Maltese businesses can boost their compliance endeavors, reduce false alarms, and maintain an advantage in combating financial misconduct. To ensure your success, contact us or request a demo today.

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