A critical analysis of the revised FATF recommendations and their impact on the Maltese legislative framework in the area of financial services

Abstract

The revised FATF Recommendations issued in February 2012 have certainly raised the bar for regulatory compliance, highlighting the fact that money laundering, terrorist financing and financing of proliferation of weapons of mass destruction are considered as global major concerns and need to be combated by more specific and comprehensive means. In view of the fact that the revised recommendations are amending the FATF Forty Recommendations and the Nine Special Recommendations, their effects are very far-reaching and it can be stated that all areas of the financial services sector will be affected by their implementation. It is therefore instrumental for a country with an important financial services sector such as Malta to convey its reputability through compliance with these standards. In the light of the above, this study seeks to make a critical analysis of the key changes that were made to the recommendations. These revised standards manifest in particular a shift to a more enhanced risk-based approach and to an assessment methodology which is focused on assessing the effectiveness of the implementation of the recommendations. They also strengthen transparency requirements and address a number of new priority areas such as the financing of proliferation. Furthermore, given that the FATF works to generate the political will of national authorities in order to bring about the legislative and regulatory reforms in the target areas, this study also examines the need and the extent to which our legislation needs to be amended in other to conform with the revised recommendations. This work also aims to examine the impact which these changes will have on the financial services sector itself so that the sector aligns itself with the revised recommendations.