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EBA pronounces on Malta

Chris Hamblin, Editor, London, 4 June 2019

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In its latest annual report, the European Banking Authority (which moved from London to Paris yesterday because of Brexit) has exonerated the Malta Financial Services Authority, Malta's all-in-one financial regulator, from blame for the scandals of the recent past. It is still, however, waiting for the financial intelligence unit to satisfy its requests.

Some time ago, the EBA used its statutory powers to inquire into and subsequently investigate the possibility that two supervisory authorities in Malta had broken the European Union's anti-money-laundering laws. In July last year, the EBA concluded that the Financial Intelligence Analysis Unit  (FIAU), which supervises financial institutions’ obedience of those laws, had failed to do enough to supervise the 'highly risky' Pilatus Bank, thereby breaking the EU's third Anti Money-Laundering  Directive. The EBA asked the FIAU to do better when assessing money-laundering risks in the financial sector, to evolve a clear supervisory strategy, to  implement robust supervisory procedures, to improve the processes by which it made decisions, and to review its sanctioning procedures. The annual report suggests that it still has not done so, merely noting that "since the publication of these recommendations [the EBA was polite enough not to issue overt orders] the FIAU has provided regular updates to the EBA on the progress made."

Somewhat theatrically, the report refers to the affair as "the Maltese FIAU case." It also states that the EBA paid an on-site visit to the FIAU sometime last year and did not like what it saw.

The EBA is more sanguine with regard to the MFSA: "In spite of serious concerns about the adequacy and effectiveness of the MFSA’s approach to supervision, the EBA arrived at the view that there was not enough evidence to conclude that union law had been breached. Separately, the EBA also launched initial inquiries regarding potential breaches of union law by supervisory authorities in Denmark, Estonia and Latvia."

The report says nothing of the fact that the EBA has now closed its probes in Denmark and Estonia. It does, however, refer to its move between the English and French capitals in a hilariously American-sounding phrase: "One of the key challenges was to officialise our new seat in Paris." HM Government reportedly fought long and hard to keep the EBA in London, although no commentator has explained why it might have wanted to do that.

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