Editorial | Tech growth requires smarter enforcement

The European Commission has not minced its words on the need for stronger anti-money laundering enforcement in the country recommendations released yesterday.

This is all the more necessary in the light of the services economy’s rate of growth, Brussels underscored.

The size of Malta’s financial and gaming sector, and the efforts to attract crypto-currency operators require effective anti-money laundering enforcement, the commission said.

With Malta aiming to become a top-tier jurisdiction, it follows that the country will have to beef up its regulatory resources.

Malta is pretty much like a teenager who has rapidly outgrown her clothes. While the private sector has found the space to flourish in a country with a government that calls itself business-friendly, public services and infrastructure have lagged behind.

The financial services sector has not only grown bigger but become more complex and is challenging traditional models with technological innovation.

Government’s strategy to attract crypto currency operators, provide a regulatory framework for artificial intelligence and use of blockchain technology in a multitude of fields is the hallmark of a nimble, forward-looking administration.

But with this must come a solid investment in enforcement. Malta’s regulators have to also up their game and be at the forefront of innovation if they are to keep pace with the private sector.

These developments require more, better and smarter enforcement to ensure that Malta becomes a top-tier jurisdiction.

In an interview with sister newspaper MaltaToday last February, Joseph Cuschieri, CEO at the Malta Financial Services Authority, acknowledged the need to beef up the regulator’s monitoring and enforcement capabilities.

The MFSA has rolled out a three-year transformation plan that foresees bigger investments in information technology and a more professional workforce. The government must back the change with a strong financial commitment but industry must also contribute more in terms of licence fees.

A more efficient watchdog benefits the sector as a whole because it helps to give certainty.

The commission commented positively in its report on the recent increase in the human and budgetary resources of the Financial Intelligence Analysis Unit and the enhancement of its procedures and processes.

But there is a major lacuna in the police force, which is ultimately responsible for criminal prosecution.

The police’s Economic Crimes Unit is understaffed and unable to carry out complex investigations in an expedient manner. And the commission did highlight this.

The complexity of money-laundering schemes, made worse with technological advancement, requires specialised personnel, who not only can read and interpret accounts but understand the IT underpinning these transactions. Policing needs to become smarter.

The commission noted that “governance shortcomings, particularly in the fight against corruption” could adversely affect the business environment and weigh negatively on investment.

This is a warning Malta must heed if it wants to continue its path of growth and prosperity.

Strengthening the regulatory and enforcement authorities is not a choice but a must to ensure private enterprise operates on a level playing field without having to carry the burden of bad reputation caused by rogue elements.