The recent FATF decision might have a substantial impact on Malta’s economy

Recently, FATF (Financial Action Task Force) added Malta to the list of Jurisdictions Under Increased Monitoring for violating AML policies, making it the first European country in recent history to be greylisted. Since Malta passed MONEYVAL’s assessment earlier this year, FATF’s decision caught everyone by surprise.

Gambling and online gaming services are significant contributors to the economy

Malta is home to services deemed higher-risk, such as gambling and online gaming, which have been a great contribution to the country’s economy. In 2019 gaming alone made up €1.56bn, making it the third largest private sector contributor to Malta’s budget.

Knowing this, the country has been meticulous in adhering to AML compliance, in fact, it was the first European country to create a legislative framework for its gaming sector, resulting in the Malta Gaming Authority, which has been active for almost two decades. To this day, it is known as one of the most active regulators in the world.

Keeping this in mind, Maltese authorities were taken aback by the FTAF decision, with Prime Minister Robert Abela calling it “unjust and undeserved”. The reaction seems warranted considering Malta’s future economic outlook is at stake — as fears about the long-term impact for the country’s reputation and negative effect on foreign direct investments have surfaced.

Two possible future scenarios for Malta’s economy

One of the possible future scenarios would include the possibility of businesses turning to inexperienced service providers. If the financial service providers refuse to work with ‘higher-risk’ businesses, they will have no other option than to look for alternative service providers, some of which may be lacking the needed experience or knowledge about the legal framework and risk-assessment working in these sectors.

Another possible outcome is that the businesses might be forced to leave the country and venture abroad in search of more favourable conditions and financial service providers. This would result in a direct impact on the country’s economy and, depending on the scale of this migration, can be quite substantial.

A case-by-case approach might be more suitable

While gambling and gaming services are categorised as riskier businesses, it’s important not to paint the whole industry, or country for that matter, with the same brush, but instead try to use a case-by-case review approach. Businesses in Malta have long established practices that take AML very seriously, along with the supporting services that help monitor their activity to meet compliance and other regulations. Overall, the responsible businesses should not have to suffer reputational damage just because of the industry or country they operate in.

Looking ahead, it’s important that financial services in the country do not abandon businesses, which have diligently complied with Malta’s regulator requirements. Solid partnerships are essential in this precarious time and financial solution providers should take responsibility in choosing and observing their clientele, making sure they are operating inside of the legal framework. Considering this, we will continue to allocate top-rated AML specialists to Malta-based companies during this time of turmoil and hope that other fintechs and financial institutions will follow suit.

Marius Galdikas is the CEO at ConnectPay, an online banking service provider for internet-based companies, offering a wide range of payment solutions, including SEPA and SWIFT payments, IBAN multi-currency accounts, Mastercard online card payments, and merchant accounts. A business and technology executive, Galdikas has more than 15 years of experience developing digital products as well as working in the global finance industry, and is well knowledgeable about the ins and outs of the financial world.