Malta first EU state placed on international money laundering watch-list

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Parliament House in Valletta, Malta's capital. Source: Continentaleurope/Wikimedia Commons.

Malta was recently included on a global money laundering watch-list over concerns the island nation is a haven for money laundering and other potentially criminal activities, which may interface with the country's significant online gambling sector. Malta-issued gaming licenses are utilized by several betting firms with a presence in Estonia.

The inclusion of an EU member state on a list, compiled by the Paris-based Financial Action Task Force (FATF), which includes nations such as Zimbabwe, Syria and South Sudan, represents something of a blow to the island nation's prestige as a quality gambling license-issuing authority, at a time when the sector has been under some media and political scrutiny.

Many online sports betting and gambling firms based in Tallinn and Estonia either make use of a Malta-issued license, or have offices in Malta, or both. Online gaming affiliates, which promote online casinos and other sites for audiences such as the Scandinavian market, have also been based in Estonia in recent years.

The FATF made its announcement Friday, ERR's online news in Estonian reports, and means the country will be under increased surveillance in its activities, amid fears that the island is a hotbed for money laundering, tax evasion, terror financing and other criminal doings.

The FATF says Malta has made progress in some areas, but that more action is needed, while the Maltese government rejects the country's addition to the list, noting reforms have been in progress over the past couple of years and adding that authorities will cooperate with the FATF and other relevant bodies.

The gaming industry itself estimates it contributed over €1.5 billion to Malta's economy in 2019, around 10 percent of the country's overall GDP.

Malta is one of several jurisdictions whose gambling licenses are popular among online casinos and betting sites, others include the Isle of Man, the Channel Islands, Gibraltar and Curaçao. The latter's reputation is less than stellar, though the island nation, part of the Kingdom of the Netherlands, is not included on the FATF list.

Only two countries are on the FATF's full "black" list at present, namely Iran and North Korea, while Malta has joined 17 other states on the borderline "gray" list. No other EU states are on this list, with Albania the only other European country to have appeared.

In October 2017 a Maltese journalist investigating corruption in the country – including links between the online gaming industry's and organized crime – Daphne Caruana Galizia, was murdered in a car bomb attack, one of several such incidents to have occurred on the island in the past five years.

A recent Sunday Times report looking at the (perfectly legal) practice of white-labeling, whereby a gambling firm gains access to a country's market, in this case the U.K., via a third-party license holder, referenced a Tallinn-based bitcoin gaming firm, which also has offices on Malta.

Estonia itself was the center of a major money laundering scandal focused on the now-defunct Tallinn branch of Danske Bank. Well in excess of €200 billion in potentially illicit funds are thought to have passed through the branches' portals between 2007 and 2015.

A gaming tax is levied on Estonia-registered casinos and betting firms, with proceeds often put towards social programs. However, only a small number of gambling firms have licenses to operate in Estonia itself. The government's recently-unveiled state budget strategy, which included proposed spending cuts, reignited discussions about the taxation system and overall tax take in Estonia.

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Editor: Andrew Whyte

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