IMF Recommends Immediate Action on Malta’s AML and CFT Supervision

Published at: March 1, 2019

The International Monetary Fund (IMF) has said that the Malta Financial Services Authority (MFSA) has critical gaps in its supervision for anti-money laundering (AML) and combating the financing of terrorism (CFT), and is recommending “urgent action.” The news was reported by local news outlet the Times of Malta on Feb. 28.

A Financial System Stability Assessment Report was purportedly issued by the IMF on Thursday, Feb. 28, and represents an assessment of Malta’s financial system, the quality of the regulatory and supervisory framework, as well as the country’s ability to cope with financial crises.

Per the report, the IMF stated that “containing financial integrity risks is critical to financial stability. A multi-prong approach is needed to address AML/CFT deficiencies. Enhancing the AML/CFT system is required to protect the financial sector and the broader economy from the ML/TF [money laundering/terrorism financing] threats."

According to the Times of Malta, the report noted the need for enhanced screening processes for beneficiary owner information and monitoring of risk-sensitive accounts, specifically for non-resident clients, including opaque firms, new technologies like digital assets and e-gaming, and IIP-related funds.

In regard to blockchain technology and cryptocurrencies, the report purportedly recommended to employ more resources to supervise service providers. In addition, the report highlighted “the challenges facing the MFSA [Malta Financial Services Authority] from the increased demands of supervising the growing number of licensed financial institutions in an evolving and more complex regulatory environment, as well as the need to upgrade the MFSA's operational capacity to enable it to operate more effectively.”

Malta is renowned for its cryptocurrency and blockchain-friendly regulations and political stance. However in January, the IMF highlighted blockchain — alongside remote gaming sectors and the government’s citizenship-by-investment scheme — as being high on their list of concerns regarding possible AML compliance violations. The agency then said:

“The increasing number of financial entities under supervision, the rapid development of new products, the evolving regulatory environment and the tightening of the labor market have put the Malta Financial Services Authority under considerable strain.”

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