Financial Action Task Force’s Premature Removal of Malta from the Grey List Criticized

In the summer of 2022, the Financial Action Task Force (FATF) decided that Malta, a major center of online gaming activity, had progressed sufficiently to meet its financial integrity guidelines. Consequently, the watchdog removed the Mediterranean nation from its grey list, lifting limitations and the possibility of severe penalties. However, new investigations suggest that it may have acted too hastily.

An aerial perspective of the Central Bank of Malta. Even after the country was taken off the list, there were still occurrences of money laundering happening. (Image: Alamy)

The FATF, the international financial and anti-money laundering (AML) monitor, explains that countries on the grey list are subjected to intensified monitoring. These countries are “actively working with the FATF to address strategic inadequacies in their regimes to counter money laundering, terrorist financing, and proliferation financing.”

The watchdog resolved, in June 2022, that Malta no longer needed to be subjected to increased vigilance. Nonetheless, the country is still reportedly the favored destination for criminals and embezzlers. This has the potential for billions of dollars of illicit money to keep being funneled through its banks.

No Questions Asked For All Money Welcome

AP News reported last week that Alvaro Ledo Nass, a Venezuelan lawyer, had his hands deep in a major money-laundering operation. He assisted in directing the state-run oil company Petroleos de Venezuela, S.A., at one point laundering around $1.2 billion in misappropriated funds. Approximately $547 million went through Malta.

Nass also received bribes of more than $11 million over a five-year period between 2012 and 2017. That money was part of a massive, $600-million loan deal. The lawyer had to find a place to conceal his illegally-obtained funds, so he allegedly chose places in Spain, the Bahamas, New Jersey, and possibly, Malta.

Malta’s involvement emerged as Nass showed up in a Miami federal court to face charges of money laundering. He became a whistleblower in a bigger case that also implicates Venezuelan President Nicolás Maduro.

Three of Maduro’s stepsons allegedly helped launder the $1.2 billion illegally appropriated from the oil company. Maltese financial institutions accepted 10 wire transfers for the $547 million and never asked follow-up questions.

Venezuela isn’t the only one. In 2020, reports surfaced that Congolese businessman Sindika Dokolo and his wife, Isabel dos Santos, used shell companies to misappropriate billions of dollars. A great deal of that went through Malta.

More than just a businessman’s wife, dos Santos is the daughter of Angola’s former President and dictator, José Eduardo dos Santos. At one point, Forbes listed her as the wealthiest woman in Africa. She may have attained that rank through illegal activity. Dokolo and dos Santos allegedly used their positions to live in luxury off of funds they embezzled from the government.

Then there’s Faruk Fatih Özer, a Turkish entrepreneur who ripped off Thodex, the cryptocurrency exchange he founded. He stashed over $14 million in Malta before police arrested him last year in Albania.

FATF Ignores the Facts

Malta was placed on the FATF grey list in June 2021 and stayed there for one year. Some of the billion-dollar scandals were still running when it was listed. When the watchdog removed Malta from the list last summer, it claimed it was “satisfied that Malta has successfully implemented a series of reforms that it suggested last year.”

That was only two years after Malta determined that the former head of the Malta Financial Services Authority, Joseph Cuschieri, violated local and European Union-level ethics regulations. He traveled to Las Vegas with Yorgen Fenech , the controversial businessman and gambling entrepreneur now standing trial for supposedly murdering journalist Daphne Caruana Galizia.

That scandal is still ongoing, and has reached the highest levels of government. It resulted in the resignation of then-Prime Minister Joseph Muscat in 2019. The case includes suspicions of money laundering, bribery, and other offenses.

In combination with the other recent scandals, it appears the FATF may have taken Malta off its grey list too soon.