The European Banking Authority has voiced disquiet over the application of European Union anti-money-laundering law in Malta by the Maltese Financial Services Authority.

In a letter to the European Parliament dated 24 September, Andrea Enria of the EBA has said that her outfit’s ‘preliminary enquiries’ on the subject have raised significant concerns about the MFSA’s authorisation and supervisory practices in relation to Pilatus Bank. She is worried about the regulator’s supervisory practices in the following four areas.

• Communication and co-operation between the MFSA and the Financial Intelligence Analysis Unit during the authorisation process.
• The strength of ‘due diligence’ checks conducted as part of the authorisation process.
• The prudential supervisory response to concerns about the effectiveness of AML systems and controls (there is a vital need for   the prudential authorities to consider money-laundering risks).
• The resources and ‘risk prioritisation’ that the MFSA gives to credit institutions operating on a private banking business model with predominantly non-resident customers.

She has therefore asked the MFSA to update the EBA every quarter about the steps it is taking to supervise firms more firmly and the state of play of its implementation in these areas. EBA staff will also pay a further on-site visit to the MFSA which is scheduled for mid-2019. The good news for the MFSA is that Enria has decided, in her own terminology, to “close the case without opening a breach of union law investigation.”