After week’s political turmoil, flummoxed practitioners mull fighting financial crime

The mood amongst players in Malta’s financial services industry was sombre as they met at a conference yesterday to discuss combatting financial crime


The mood amongst players in Malta’s financial services industry was sombre as they met at a conference yesterday to discuss combatting financial crime.

Participants at the conference, organised by IFS Malta, spoke amongst themselves about the recent, unprecedented developments, which saw the Prime Minister’s chief of staff Keith Schembri resigning and arrested in connection with Daphne Caruana Galizia’s assassination.

Economy Minister Chris Cardona was also questioned by police and subsequently “suspended” himself from his ministerial position, after Tourism Minister Konrad Mizzi had also resigned.

Ironically, the conference was held at the Hilton Hotel, the flagship development of the Tumas Group, the former CEO of which – Yorgen Fenech – last week resigned all directorship positions within his family’s company prior to being arrested by the police in connection with Caruana Galizia’s murder.

A lawyer in the financial services industry who was in attendance told BusinessToday of the uncertainty which had permeated the sector following the political developments of the past days.

To date, the lawyer said, the developments have likely not had a direct impact on the sector, although the general sentiment was one of wishing that the situation would stabilise quickly.

“Clients are not going to up and leave Malta just like that,” he said, “It’s more a matter of how the perception of the industry is being influenced by what it going on.”

When it came to a possible long-term negative impact, he said that he hoped there would be no deep repercussions.

Uphill battle against financial crime

Addressing delegates at the conference, acting head of financial crime compliance at the Malta Financial Services Authority Federica Taccogna said spoke of the complex nature of the fight against crime in the sector, and the challenges faced by regulators and practitioners in making do with limited resources to combat criminals.

Taccogna said the biggest challenges of regulators in the industry had to do with technology and limited resources.

“The complexity comes from the fact that the criminals have tremendous infrastructure – they own IT companies, recruit the best hackers in the world, have top lawyers and unlimited funds at their disposal,” Taccogna said.

“They don’t have to abide by the law and are much freer than the regulators to do what they need to do. Regulators, on the other hand, operate within the boundaries of law, and have limitations, such as those imposed by GDPR rules for instance, when it comes to communicating and getting information from other jurisdictions’ authorities.”

“We are facing a battle in which we are essentially fighting with a sword and they are fighting with all the best technological equipment,” she remarked.

In terms of technology, she said that if regulators and practitioners invested more in technological innovations, this would help solve some of the problems related to resources. It would also improve the efficacy of the technology itself.

Financial Intelligence Analysis Unit director Kenneth Farrugia underlined the importance of providing more guidance to practitioners in the sector to ensure they detected red flags which could indicate financial crime.

“We need to work more upon this area and offer more guidance and practical examples. As an FIAU, we need to provide more guidance on support on red flags,” Farrugia said.

He noted that the FIAU had beefed up its resources in terms of staff and technical capabilities, and now had a dedicated risk and enforcement team and three teams focused on supervision.

The Unit, he highlighted, was working with different authorities, including the MFSA and the Malta Gaming Authority in its fight against financial crime, and was also submitting all of its reports to the FIAU.

It was also addressing Moneyval criticism and implementing its recommendations, while aiming to prosecute more and seize criminals’ assets, he added.

GRTU CEO Abigail Mamo
GRTU CEO Abigail Mamo

Black Friday performance will be litmus test for retailers

Asked on the effect of the developments of Malta’s retailers, GRTU CEO Abigail Mamo said that the situation at the moment remained more or less business as usual, but that sales during Black Friday would show more conclusively whether the political upheaval has had an effect on consumer confidence.

“Retail this year has overall been slower than last year, last year was an exceptional year and in line with foreseen economic developments the slight slowdown was expected,” Mamo said, “[Moreover], the days leading to Black Friday are usually slower because people save and leave their spending for when there are the special offers.”

“Not much out of the ordinary has been reported so far, some retail sectors have mentioned that consumers were focusing more on buying essentials and others have told us that all that has been going on in Valletta has inevitably affected business in the area.”

What would be the most telling would be how sales would do on Black Friday, she emphasised, and that there would be no major political developments on the day.

“The [Black Friday] day has become one of the top most important shopping days and the day that Maltese businesses depend on to make up for slower days and also inject cash flow to buy Christmas stocks,” she underscored.

“We are hopeful that the day will come with no disruptions so that business does not lose out on this one day that they will not be able to recuperate.”

Mamo underlined that it was important that consumers felt confident going to the shops and making the most of the offers, since staying at home would mean that money would be spent online, not in the Maltese economy.

“And that is something that is in nobody’s interest,” she added.

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