From scrutiny to example setting: hefty investment in the FIAU ushers in a paradigm shift

Financial Intelligence Analysis Unit Deputy Director Alfred Zammit explains to David Lindsay how after a period of excruciating scrutiny in the wake of a number of financial scandals, the FIAU has emerged stronger than ever after much-needed investment and an operational overhaul – so much so, according to Zammit, that it now has in place one of the best anti-money laundering systems in the EU and beyond

Analysis Unit Deputy Director Alfred Zammit (photo: James Bianchi/MaltaToday)
Analysis Unit Deputy Director Alfred Zammit (photo: James Bianchi/MaltaToday)

The FIAU, from the outside at least, appears to have undergone something of a culture change. Has there been an actual metamorphosis within the Unit, is it a matter of having made the FIAU’s operations more visible or is it a combination of the both?

It’s actually a combination of the both. The FIAU has metamorphisised over the past years but, culturally-speaking, it has not really changed – in the sense that it has always been made up of a great team of people who are extremely passionate about their work, hard-working, and who are guided by the FIAU’s core values.

The FIAU has however metamorphosised and there is no resemblance to what it was a few years ago. Not only has the FIAU grown from an HR perspective, but it has also changed, for the better, in other aspects, such as the organisational set up of the FIAU and its governance framework, the number of sections and teams that are now in place ensure better workflows and specialisation, the IT systems that it has invested in such as CASPAR, goAML and other tools, the overhaul of its policies and procedures in the areas of supervision, enforcement and financial intelligence, and the addition of new anti-financial crime responsibilities, such as the Centralised Bank Account Register and the implementation of Malta’s national cash restriction policy.

Also, as you pointed out, our operations have become a lot more visible – and this on various fronts. For example, the setting up a team dedicated to guidance and outreach has enabled the FIAU to up its game in this field – with a clear and visible increase in the number of guidance documents published by the FIAU and the number of outreach activities that we organise or participate in from time to time. The work of the FIAU has become much more visible also because of the administrative measures it has taken when it detected breaches of anti-money laundering regulations. Measures taken by the FIAU are published on its website in accordance with EU law, and this has contributed to a greater level of awareness among subject persons, and to an extent, also among the general public.

Operationally-speaking, there have undoubtedly been a number of significant changes within the FIAU over the last couple years. What catalysed these changes and what have the results been?

The FIAU has indeed seen a huge change over the past couple years, but those changes had actually started before then.  To give you an example, when I joined the FIAU in 2010, there were just 10 employees. In 2018 we already had 43, and in 2015 the FIAU moved to a larger premises. Now we have surpassed the 100-employee threshold, and again, the FIAU shall be moving to another larger premises later this year to accommodate more officers in line with the FIAU’s development plan.

There were a number of different factors catalysing this change. The government has become more sensitive to the need to increase resources and to have strong authorities in place to be able to fight financial crime in Malta, and to ensure that all subject persons in are monitored and compliant wit their obligations.

Operationally-speaking, we have had massive changes over the past years. We have not only increased our resources but we have invested in our people by making sure they get the training they need.  We have invested in tools, in information technology systems, and we have strengthened our policies and procedures across the board. As for the results, all in all, the FIAU has become more effective in carrying out its functions. This has led to an improved level of compliance by subject persons in Malta, and to an increase in the use of financial intelligence by the Police and other authorities in and outside Malta.

For example, the FIAU is receiving and processing many more suspicious reports than ever before. Last year, the Unit received more than 5,000 suspicious reporting from subject persons in Malta, such banks and remote gaming companies, and after having carried out an analysis, it shared more 170 analytical reports with the Police in Malta and over 4,000 intelligence reports with our foreign counterparts. Also, the FIAU has considerably increased its supervisory coverage by carrying out onsite or virtual examinations of subject persons, particularly in higher-risk sectors. In fact, last year more than 200 examinations were conducted using the FIAU’s recently overhauled risk-based approach. This in turn has resulted in more enforcement actions taken by the FIAU, such as the imposition of penalties or requiring subject persons to remediate their shortcomings within a specified period of time.

Malta faces a number of specific money laundering challenges due its size and the structure of its economy – with significant remote gaming and offshore company activity, amongst others. What specific challenges do you see Malta’s FIAU facing in this regard?

Actually, the size of the country presents several inherent advantages. For example, the number of subject persons in Malta (which presently stands just under 2,500), is manageable. We are well-positioned to reach out, communicate and assist subject persons in understanding their obligations and how to implement them in practice. The physical size of the Country and our institutional framework greatly facilitates cooperation and coordination among the competent authorities of Malta both on policy and operational matters.

Nevertheless, Malta’s economy and subject persons are dynamic and quick to respond to business opportunities. One of our main challenges as supervisors and as an intelligence agency is to ensure we keep pace and abreast with the changes taking place in the sectors that we supervise, such as the developments of new niche markets, products or services.

We also need to make sure we maintain the momentum that has developed over these past years and make the most of the investments into the FIAU.

How does Malta now stand, after no small amount of scrutiny and criticism, with international bodies such as Moneyval, the European Banking Authority and the Financial Action Task Force? How has the FIAU reacted to this scrutiny? How has Malta’s standing changed, and why?

Malta’s standing has considerably improved with the authorities you’ve mentioned. If you take the European Banking Authority as an example, the EBA is fully aware of the changes made to the FIAU’s supervisory and enforcement processes as regular liaison was maintained between the FIAU and the EBA as the FIAU was taking action to implement the EBA’s recommendations in 2018. The FIAU has implemented overhauled its supervisory and enforcement policies and procedures to ensure it has addressed all the recommendations. Today, we are proud to say that we have a fantastic working relationship with the EBA and we value their support and contribution in raising AML standards across the EU. We have been invited by them to participate in panel discussions and in training events, and we have also participated in projects and working groups led by the EBA on specific anti-money laundering topics.

Also, following the FIAU’s actions to address the EBA recommendations, we now have in place one of the best risk-based supervisory mechanisms in the European Union and beyond - so much so that we are being asked by the authorities of other countries to walk them through the changes we have implemented so they can learn from our experiences and, in turn, improve their own supervisory mechanisms and systems.

What new powers and tools has the FIAU been given to fight money laundering, one example being the new €10,000 cash limit legislation?  How important is this tool and why was it deemed necessary?

There are several new tools and laws that have come into place lately with respect to the fight against money launder and terrorism financing, and the cash restriction law is just one of them.

There is also, for example, the Centralised Bank Account Register (or CBAR), with the enactment of a specific law, and with the setting up of the system itself which is now up and running.  This means the FIAU can access bank account information in, literally, a matter of minutes.

Speaking of the cash restriction law, there are different reasons why it was implemented.  Not only was it one of Moneyval’s recommendations to consider introducing a mechanism to address the money laundering risks of use of cash in Malta, but Malta’s cash-intensive economy meant that the Country needs to ensure that any associated money laundering risks are adequately mitigated.

As such, having this law in place simultaneously helps in the fight against tax evasion and money laundering in cases where proceeds of crime in the form of cash need to laundered.

This law itself should serve as a deterrent and reduce the excessive use of cash in Malta now that, as a first step, the law is in place. As a second step, the FIAU shall be embarking on an educational and an awareness raising campaign to inform the public of the recently enacted law, what it means to them and what the repercussions could be if one were to break the law. The FIAU is resourcing its newly set up Cash Restriction Section that will be responsible for enforcing this law on the ground.