Finance Minister claims unfair treatment after draft Moneyval report was leaked

Finance Minister Edward Scicluna has claimed Malta was treated unfairly when a draft report on a Moneyval evaluation on the money laundering situation in the country was leaked.

According to the leaked findings of an ongoing evaluation by Moneyval - which is currently in its eight stage, with seven more to go - Malta has failed the initial test on its anti-money laundering system, Times of Malta had reported.

The Council of Europe's mission has been carrying out the biennial evaluations on Malta for the last 20 years.

Sources told the newspaper that, in the last evaluation, out of 11 sections of effectiveness graded – ranging from international cooperation to local supervisory functions and policing – none were considered good enough to score a "high".

Scicluna, however, said that it was unfair that, due to the leak, the evaluation process had to be stopped in the middle, while, in other countries, it is allowed to take its due course.

“Somebody leaked a draft Moneyval report in the middle of the evaluation's phases. This prejudiced the process. The rule of law demands that the process takes its due course. Since the process was stopped in the middle, we will now have to face consequences,” he said, without elaborating.

Scicluna was giving a rundown on Malta’s economy at a Malta Council for Economic and Social Development (MCESD) conference on the country’s National Reform Programme, for which the press were present for the first part.

He said that the government had been working hard to dispel the myth that Malta wasn’t serious when it came to anti-money laundering efforts. It was not factual that the government hadn’t transposed the 4th anti-money laundering directive, as is sometimes claimed, he underscored.

“Due to the 2017 election, the transposition of the 4th anti-money laundering directive had to be halted, but by December of that year we finalised the process, and it went to the Commission for review. In turn, the Commission gave use their feedback on what it felt where shortcomings which needed to be amended. We raised our objections to the issues the pointed out, and from around 30 points which they made, we then ended up with less than a handful, which were subsequently implemented in Parliament,” he said.

He also noted that a national assessment on money laundering had started in 2013, “before any bank-related controversies emerged”. “We launched the assessment in the context of what happen in Cyprus with the banks. In 2018, we updated the assessment, which led to the drawing up of a National Strategyc Action Plan, where we identified 47 weaknesses in the system, 17 of which have now been addressed.”

Regarding Malta’s economy, Scicluna said that nominal GDP grew by 8.9% in 2018, signifying an addition of over €1 billion in economic activity over the previous year, Edward Scicluna said.

The Finance Minister said that, despite the popular perception, most of the economy’s growth was happening in the private sector, not the public one. The private sector held 76% and 77% of the share of total employment in 2017 and 2018 respectively, denoting an increase. However, the public sector’s share decreased from 27% in 2017 to 24% last year.

He said that, through the National Reform Programme - which aims to implement the European Commission’s country-specific recommendations - Malta had demonstrated a good record in putting into effect suggested reforms.

Although he acknowledged that the European Commission had pointed out in its February Country Report that Malta’s progress in addressing the 2018 country-specific recommendations had been “limited”, he said that the island was in fact amongst the best performing member states when it comes to implementation of the suggestions.

“It is true that the Commission said we made limited progress. But our record is good. Of the 28 member states, we came fourth in terms of putting into effect the country-specific recommendations since 2013,” Scicluna highlighted.

“Since our country is growing at such a rapid speed, it is to be expected that things will be pointed out which can be improved,” he said.

Government’s willingness to engage with social partners

Addressing the conference, EU funds parliamentary secretary Aaron Farrugia said the meeting, for which MEUSAC were also present, showed the government’s willingness to engage with social partners on its strategies to support macroeconomic stability, create the conditions for further economic growth, and strengthen social cohesion while sustaining the environment.

“Indeed, this consultation on the National Reform Programme provides a space for reflection on Malta’s progress in addressing the Europe 2020 targets, whilst presenting the government’s reaction to the challenges identified in the Country Report published by the European Commission earlier in February,” Farrugia said.

In the same vein as Scicluna, Farrugia said that while the recent Country Report said Malta had made only limited progress in addressing the country-specific recommendations, research by the Bruegel Institute showed that Malta was amongst the top performers in the EU. “Over the period 2013-17, Malta ranked 4th in the EU in terms of implementation of CSRs. This shows that Government takes this process by seriously and that the efforts are appreciated by peers,” he underlined.

“Structural reforms are important determinants of economic growth. At the same time, such reforms spanning fields such as pensions, health, education, judiciary and competition tend to be particularly tough to implement, especially in view of the political costs involved,” he went on to note.

“In recognition of this, the European Commission proposed a regulation on the establishment of the Reform Support Programme with a view to strengthen instruments based on EU funding that are intended to support governments in implementing country-specific recommendations or other challenges identified in the European Semester,” Farrugia added, “This shows that the European Semester and EU funding are becoming increasingly intertwined, with a view to create the necessary conditions for the implementation of reforms.”