Thursday, 22 July 2021
by Daniel Staicu, Senior Police Officer at Anti-Corruption General Directorate, AML/CFT expert

by Daniel Staicu, Senior Police Officer at Anti-Corruption General Directorate, AML/CFT expert

I was preparing, last week, to write a brief opinion about the news in the European / international landscape in connection with the fight against money laundering and terrorist financing (it was the “FATF week”, right?).


 A fake news came as a warning for Romania


I was considering something about the planned AML supervisory body at European level, the organization of the EBA to face the new challenges in AML/CFT, etc., when, suddenly, on Wednesday a news exploded: Romania will be added to the list of jurisdictions that will “benefit” from an enhanced monitoring by the guardian of the AML / CFT standards, the Financial Action Task Force FATF-GAFI.

In fact, the news that caused the shock wave in the financial world was that Malta, along with another European state, Romania, will be added to the so-called “gray list” of the GAFI-FATF. Malta is recognized for the relatively low costs charged for setting up and running a company, the widespread use of digital technologies and a very beneficial tax regime for both investment funds and service providers. All these factors, and not only, have made the small Mediterranean island (the smallest state in the European Union) to impose itself on international markets as a true financial hub.

Adding to the “gray list” does not imply any other legal action by the international community. At the end of the FATF-GAFI Plenary, the Group’s President, Dr. Marcus Pleyer, noted that the four states added to the list of jurisdictions that will be closely monitored – Haiti, the Philippines, South Sudan and Malta – will not be subject to any other legal sanctions. It is acknowledged that each of the states newly added or existing on the “gray list” has deficiencies, considered strategic by experts, in terms of the system of combating money laundering / terrorist financing, but all these states cooperate closely with the FATF-FATF or one of the regional bodies of the FATF – Moneyval for Europe, and have made a high political commitment to address and resolve these issues.

This is, in fact, the major difference (will for cooperation and political commitment) between the “gray list” and the list of non-cooperating jurisdictions, which in the meantime has become the list of high-risk jurisdictions subject to a call for action, or “blacklist ”, as it appears in the media, and which currently includes only two states: the Democratic People’s Republic of Korea and Iran.

Malta’s risk of being blacklisted is, in my view, non-existent. Malta has implemented a number of measures since the adoption of the 2019 Assessment Report, which allowed all ratings to be raised to a level of at least “largely complaint” and “complaint” in the first Follow-up Report of April 2021. In other words it means that it has taken ”passing grades”, from a technical point of view, at all the Recommendations (the 40 of the GAFI-FATF). It is also worth mentioning that Malta has been one of the pioneers in the implementation of the revised Recommendation 15 on cryptoassets.

Also, on the same day – June 23, according to sources, the news appeared that Malta will be added to the “gray list”, the Prime Minister of Malta, Robert Abela, and the Minister of Finance, Clyde Caruana, held a press conference, reaffirming the firm commitment to continue reforms in the field of AML / CFT, to address financial crime issues directly and to work closely with GAFI-FATF and Moneyval experts to make possible the removal of the country from the list of jurisdictions that require increased monitoring.


The consequences for Romania of posting on the gray list of Malta


Of course, the news was officially confirmed by the President of the FATF-FATF, on Friday, June 25, during the press conference at the end of the Plenary. On this occasion, a premiere is marked: the first state of the European Union added to the “gray list” of the FATF. Also, although it is not a premiere, another case is added to the list of different views of Moneyval versus GAFI-FATF. Asked about the economic impact, Dr. Marcus Pleyer referred to a study by the International Monetary Fund entitled “The Impact of Gray-Listing on Capital Flows: An Analysis Using Machine Learning” by Mizuho Kida and Simon Paetzold, which analyzed, from a statistical point of view, the economic impact on a state under the increased monitoring of the GAFI-FATF. According to the study, in the case of the countries on the gray list, statistically, there was a decrease in Gross Domestic Product by about 7.5% and a decrease in foreign investment by about 3%.

But, in view of Romania’s ties with Malta, what will be the consequences? Malta is not only the financial hub we talked about , it is also the center of iGaming in Europe, being the first European state to regulate online gambling. Today, thanks to its beneficial tax regime, fixed tax rates, clearly established regulations, and well-developed information and security technology, Malta is base to a record number of companies operating in the field of online gambling, its facilities attracting some of the largest operators in the world, and this is fully reflected in the revenue to the national budget. According to the ONJN website, out of the 27 operators with class I license operating in Romania, an impressive 21 (almost 80%) are based in Malta.

Most certainly, the Romanian financial institutions, banks, but also any other entity that falls under the obligations established by Law no. 129/2019 to prevent and combat money laundering and terrorist financing, will apply additional customer due diligence measures, will carry out additional checks on the opening of business relations with partners based in Malta and, last but not least, will look with greater suspicion all transfers of funds to / from Malta.

Read also: President of RENAR, Prof. Dr. Eng. Dr. h.c. Fănel Iacobescu: ”The gambling-specific conformity assessment scheme is being finalized”

Romania is not on the gray list! But still…


Coming back to Romania, the good news was that it was not among the four states added to the list of jurisdictions under heavy monitoring. Where did this news come from, though? “Malta along with Romania, added to the FATF gray list”. Why Romania? Why not any other state in the European Union? After a quick internet search (on Wednesday, immediately after 15.30), I found that the news appeared exclusively in online publications in Malta, citing “official sources” inside the plenary, later being taken over by other profile sites. As the plenary proceedings are conducted in conditions of maximum confidentiality to ensure the independence of opinions and positions, it is very unlikely to find out whether the issue of listing Romania has been raised. Was it just the desire of Maltese journalists not to be alone in this unfortunate situation and premiere, as I have already shown? Hard to say…

I also watched carefully the press conference at the end of the Plenary: no words about Romania. I listened to the journalists’ questions, the vast majority being divided between the Pakistani press and the Maltese press: some being interested in keeping Pakistan on the gray list, others being interested in listing Malta and the possible consequences. Also, about Romania, not a word.


Was Romania, however, in a position to be “greylisted”?


Some clarifications need to be made here: Romania’s latest AML/CFT Evaluation Report, on the 4th Round, following an on-site visit, was adopted at the 44th Moneyval Plenary on April 4, 2014, more than 7 years ago. Since then, our country has implemented a series of measures, some of them timid, others more courageous, allowing to take some “passing grades” (see above) and enter the 5th Round of Evaluation . More recent legislative measures have focused on transposing the last two European directives with the scope to prevent the use of the financial system for money laundering and terrorist financing, into national law, as well as transposing the recommendations of the Moneyval experts through the 2014 Report.

The failure to take the necessary steps to reclassify the ratings where Romania achived a limited progress  within the deadline imposed by the procedures, respectively in maximum four years from the Evaluation Report (2014), conducted to the situation that, during the 56th Plenary of Moneyval, Romania was placed under the Compliance Enhancing Procedure.

From this moment, at each Plenary, Romania missed the opportunity to leave the 4th Round of evaluation because there was no consensus, that high-level commitment, to pass the necessary laws and bylaws to improve the legislative framework for AML / CFT and to implement the reforms required by international standards, in a reasonable time.

The next Moneyval Plenary will most likely take place between December 13-17, 2021. Will Romania exit the 4th Round of Evaluation? Possible. However, in 2022, it is expected that Romania will receive the next on-site evaluation visit on the 5th Round from Moneyval experts and the rules of procedure provide for the possibility of automatic entry in the 5th Evaluation Round even if not all conditions are met. But, everything comes with a cost: there is the possibility that, after the visit, under certain conditions, Romania will enter directly into the analyze of ICRG – International Co-operation Review Group. Is this scenario real? Definitely yes! Can it be avoided? It’s late, it will be hard, but not impossible!

But for this scenario to be avoided, a commitment at the highest political level is needed. The effort of the Romanian experts, the technical part, will not be enough without this commitment. From the experience of the ICRG – Joint Europe / Eurasia Expert Group, the creation of a body, an inter-ministerial working group composed of decision-making officials from the relevant authorities, preferably their leaders, under the coordination of either the Prime Minister or of a deputy prime minister to give a firm message could be helpful. The main objective of this group should be to create synergies between Romanian experts from various fields who have previously participated in evaluation missions, to ensure the availability of Romanian officials to discuss with international experts according to a very precise agenda, establish and prepare the necessary documentation. Last but not least, it is vital to involve all actors working in one way or another in the national framework for preventing and combating money laundering and terrorist financing, whether we are talking about financial institutions or not-for-profit organizations.

I would take this news, which can easily be categorized as a “fake-news“, as an wake-up signal, an invitation to action addressed subliminally to the Romanian authorities.


The question is: will we act in the nick of time?



Author: Editor

Share This Post On

Submit a Comment

Your email address will not be published.