“The fact that the country has had to overhaul its compliance infrastructure and strengthen its preventative mechanisms can be turned into an opportunity. With some more effort, Malta can start to be perceived as a leading country where compliance standards are concerned. We should be exporting our high standards overseas, not just in FinTech and RegTech that has been developed, but even in the areas of advisory and support services,” says Manfred Galdes, Managing Partner at ARQ Group.

It can really be the case of finding a bright silver lining at the close of a cloudy day, as early reports indicate that Malta should be receiving the good news that it has been removed from the FATF grey-list of countries on Friday afternoon, one year after having been included in the short list of countries under increased monitoring by the global watchdog.

Having led Malta’s Financial Intelligence Analysis Unit (FIAU) between 2008 and 2016, Manfred Galdes requires no introduction in the field of anti-money laundering compliance. Asked to provide his view on whether the country has taken the matter sufficiently seriously, Dr Galdes looks forward optimistically.

“This decision, once confirmed on Friday, will mean that hopefully from now on we can look back at this period as an unfortunate dark episode that we have learnt a lot from,” the AML expert says.

“Compared to two years ago, subject persons have much more guidance, there is a much more robust supervisory regime, there surely is more awareness of what needs to be done, compliance officers have a stronger voice, operators are more rigorous in deciding who to onboard and they’re asking the right questions. 

“We have had to evolve in a very short period of time, and that has also meant that technologies needed to be developed to sustain our compliance ambitions. The exportability of that knowledge and the innovative approaches are certainly an opportunity.”

Asked about his views on the developments at the FIAU as an institution in the past months, Dr Galdes expresses his satisfaction that the governmental agency’s budget has been increased practically ten-fold. “The FIAU today, as a supervisory authority, has been greatly strengthened and its capabilities to act upon intelligence and analyse financial information has evolved substantially. Seeing that the organisation has been given the resources that it has always needed is something that is fundamentally important both for the institution itself as well as the environment in which it operates,” Dr Galdes remarks.

“Unfortunately, we had to go through the grey-listing to get to this point,” he laments. “I would have been much more satisfied had the country strengthened its capability and resources to punish the perpetrators of financial crime and supervise the financial and non-financial sectors without having to go through a process which potentially tarnished the country’s reputation.”

Asked whether grey-listing had the predicted effect on Malta when it was first announced in June 2021, with a full year’s hindsight, Dr Galdes said it was hard to quantify, especially in terms of missed opportunities and investment that went elsewhere.

“Certain things don’t happen from one day to the next,” he notes. “Thankfully, the difficulties with opening bank accounts or counterparties becoming uncomfortable doing business with Maltese companies or finding it harder to do so because of enhanced due diligence requirements take a number of months to start having a material impact on businesses.

"Add to that, the grey-listing period was characterised by the COVID-19 pandemic which took a lot of wind out of the country’s sails in its own way. We now have a war in Europe following the invasion of Ukraine, which has also affected financial markets this year and brought about new challenges in implementing a complex sanctions regime, meaning that it has been hard to differentiate reliably between these multiple factors,” Dr Galdes notes.

Dr Galdes proceeds to explain further how the operators, together with service providers such as ARQ Group which are dedicated to assisting financial services and gaming businesses in this area, were active in the past year.

“First of all, operators stood to attention, and started taking serious corrective action immediately, including accelerating improvements that were already in flight prior to the grey-listing. Though the episode would have ideally been avoided, there were a series of things that were commendable on Malta’s part. This meant that a stark signal was sent to the international community, that the country was taking this very seriously.”

Reflecting on the financial services industry in the wider sense, Dr Galdes has words of praise for the achievements of a sector which has punched above its weight from its inception way back in the 1990s.

“Malta has serious professionals who have built a strong financial services industry over more than 20 years. We managed to attract some big players, which meant that the core of the industry was doing very well for itself,” Dr Galdes remarks.  

“We certainly do not need to explain why a sound compliance infrastructure is important, however unfortunately, some local market players may have initially seen this requirement only as an administrative burden. Without the right level of supervision in place and the lack of resources at a supervisory level, it was possible for operators to continue to provide services without an adequate compliance programme and the right infrastructure to back it up. Now that there is a renewed focus on AML compliance and financial crime prevention, our services are even more in demand than before. Particularly to help remediate those gaps and maintain such standards in the future,” Dr Galdes explains.

“We can help businesses get in line without them needing to bring on board a small army of people, who to be fair might not even be available given the current human resources market. We can also help them deal with specific projects that require expertise that is not necessarily available in-house, and not only in the AML sphere."

Dr Galdes makes it a point to remark that ARQ is building a reputation for thought leadership in other areas of compliance and risk management. “We may well be best known for our AML advisory services but over the years we have grown to offer a complete mix of services to assist in related fields. ARQ Group boasts a team of experts having various specialisations, with a combined wealth of experience, who can assist our clients in risk management, regulatory compliance, internal audit, ESG as well as other related advisory services.

“We cannot be everything for everyone, but our formidable team gives us the confidence that we are leaders in determinate fields, as we can truly add value to our clients and be an essential partner to them in their plans for safe and sustainable growth.”

Dr Galdes is also keen to share his enthusiasm about the new addition to the fold, ARQ Educate, which was set up to help companies and financial institutions stay ahead of the curve, through professional education, practical training, case-based courses aimed at employees, training workshops for boards of directors and e-learning courses.

ARQ Group, in collaboration with the Malta Banking Association will be organising “Aligning Growth Strategies with the National Financial Crime Compliance Agenda”, on 21st June. The conference will host a high-level discussion on how the country needs to look ahead, after the FATF's announcement. Bookings for the conference are being accepted through here