Expecting not to be grey listed a bit of a long shot – NOUV Managing Partner

Expecting Malta not to end up on the Financial Action Task Force’s grey list is a bit of a long shot, Mark Aquilina, Managing Partner of consulting firm NOUV, says, stressing he does not want to sound too dramatic.

The level of probability of this happening, he continues, should be viewed when examined against the expected deliverables from the Government in terms of policy and legislation, increase in capacity, capabilities and skills to implement and show the actions taken, which can only be assessed over a number months up to, possibly, two years.

“Given all these elements at play, I would see Malta as continuing to be grey listed only until it can demonstrate that the changes are actually being effective and leading to tangible results including enforcements, prosecutions, etc.,” Mr Aquilina asserts.

To understand why the country has reached this point, he explains that one has to look deep into Maltese culture where, rather than strategic planning, a ‘nonchalant’ and a ‘make hay while the sun shines’ attitude prevailed.

He says that maintaining the rule of law always carries a certain amount of risk and remarks that the country might be independent but it surely is not independent when it comes to governing ourselves.

In his view, throughout the years, the growth in the financial services industry was not matched by the ensuring the country has the necessary resources, political vision, expertise and innovation, which, in turn and over time, led to the prevailing situation.

“Malta has always failed to enforce its own financial regulations ‘robustly’, deferring to informal methods of problem solving and business practices. Issues include poor oversight mechanisms and structures, incompetent senior technocrats with self-serving interests and weak internal control and reporting procedures.

“The country has yet to come to grips with the fact that it must ‘fall in line’ if it wants to operate in the international regulatory framework. It was simply a matter of time before its behaviour caught up with its disregard of international best practice and protocols,” Mr Aquilina asserts.

Speaking of not being grey listed suggests that all is perfect and back to normal, he continues. To him, thinking in such terms would be naive and he believes that neither those drafting the Moneyval report not those tasked with reviewing Malta’s response to it are naive. He is certain they will want to see changes working over a reasonable period, that is, about two years.

Mr Aquilina insists that the impact of grey listing is not a matter of being short or medium term. “As with any business, reputation in the competitive international environment takes time to recover. It is part of a normal business ‘cycle’. Those who have gained from weaknesses laid out in the Moneyval reports have or will move elsewhere to do business or are already looking at ways to circumvent the new ‘changes’,” he notes.

For thing to really change and improve, Mr Aquilina suggests a major ‘cultural change’ within the Government, business and society to act more ethically. In his opinion it will take a generation or two because young people seem discouraged and have little confidence in Malta’s institutions, meaning any changes will not give immediate confidence to external entities.

He points out that ‘selling’ financial services is a delicate matter. He mentions the Malta Gaming Authority as “a good example”, noting that, although it had its downfalls along the years, it was always forward thinking and open for improvement.

If Malta is grey listed, it would need to go back to basics, and the country should admit collective failure, Mr Aquilina comments, adding the commitments made as a direct response to the Moneyval report must be respected.

“There must be an independent local oversight entity with wide powers to monitor all Government policies being implemented, including Government agencies that have responsibilities for enforcement and reporting to Moneyval.,” he says. This, he continues, could be made up of foreign experts, a representation from Parliament and headed by the President.

The consulting firm’s Senior Partner notes that deep changes are required across all levels and underscores the need for full transparency on the work being done, results achieved but also failures available.

Businesses that pushed the ‘envelope’ to operate outside the regulations will suffer from more aggressive enforcement, if Malta is put on the grey list, Mr Aquilina warns. “While trying to blame their losses as resulting from the pandemic and not from corrupt practices, they will need to re-invent themselves and come in line with the rest if they want to continue operating,” he asserts.