Malta has experienced a troubled history of late regarding money laundering. Whilst the island has been able to prove its credentials in preventing this form of criminality, the significance has not been lost on its gaming and fintech sectors.
With betting, banking and finance playing a crucial role in Malta’s economy, the importance of complying with AML regulations and keeping the country off the Financial Action Task Force (FATF) greylist is a never-ending task.
To gain the operator’s perspective, Payment Expert spoke with Luis Perez, Chief AML Officer at Lottofy, the brand name of Clobet Limited. Perez highlights how the FATF greylisting was a ‘before and after’ scenario for Malta, and how the country’s landscape has developed in the years since.
Payment Expert: Thanks for speaking to us Luis. To begin with, are there any lessons the gaming sector can take on board from payments and financial services when it comes to AML?
Luis Perez: Of course: the long-standing relationship between the payments and financial services and igaming sectors has undoubtedly developed a mutual knowledge base and learning curve on anti-money laundering (AML) practices. To begin with, I think that one crucial lesson is the importance of having robust regulatory frameworks in place.
Additionally, adopting best practices like thorough Know Your Customer (KYC) procedures, continuous transaction monitoring, and prompt reporting of suspicious activities can greatly reduce the risk of money laundering within the gaming sector. As gaming operators, prioritising compliance is essential for us to avoid severe penalties, financial constraints and damage to reputation.
Another key lesson involves implementing a risk-based approach to AML compliance. By focusing resources on high-risk areas such as transactions involving virtual currencies, gaming companies like us can improve their ability to detect and prevent illicit activities. Moreover, maintaining transparency in AML measures not only ensures regulatory compliance but also builds trust among stakeholders and creates a safer gaming environment.
Continuous employee training, internal audits and leveraging technology for enhanced compliance are further lessons that the gaming sector can learn from the payments industry.
By staying updated on evolving regulations and utilising advanced tools like data analytics and artificial intelligence, gaming operators can strengthen their AML frameworks and effectively guard against financial crimes.
In summary, I firmly believe that all this learning has enabled the igaming industry to fortify its regulatory frameworks, bolster enforcement measures and maintain industry confidence, ultimately ensuring a secure and compliant operational landscape.
PE: As a Malta-based gaming company, how closely do you interact with the island’s extensive payments and finance sectors on AML policies?
LP: I can say with confidence that our engagement is not only extensive but also fundamental for upholding compliance and operational excellence. Malta’s regulatory landscape is heavily influenced by the European Union’s Anti-Money Laundering Directive, enforced rigorously by local authorities. This mandates rigorous customer identification, verification procedures and vigilant reporting of any suspicious activities.
The MGA plays a central role in enforcing AML measures, ensuring that gaming licensees actively prevent money laundering and uphold the integrity of the industry. Through collaboration with the Financial Intelligence Analysis Unit (FIAU), the MGA closely monitors and reports all financial transactions within the gaming sector in accordance with the Prevention of Money Laundering Act (PMLA) and associated regulations.
In Malta, gaming companies are held to the same stringent KYC and AML standards as financial institutions. Real-life instances underscore the critical importance of these regulations, with hefty fines imposed on companies for shortcomings in KYC processes that facilitated money laundering through their platforms.
The cooperative efforts between the MGA and the Malta Financial Services Authority (MFSA) ensure that gaming companies operate within a regulatory framework that strikes a balance between facilitating business and imposing strict compliance requirements. The repercussions of failing the Moneyval test by the Council of Europe have emphasised the necessity for robust AML measures, resulting in heightened scrutiny, tighter controls, and regular audits.
Looking ahead, adherence to both EU and local Maltese laws necessitates gaming companies to uphold high standards in AML policies, from initial customer onboarding to continuous transaction monitoring. Surveillance programmes play a pivotal role in enabling real-time detection and reporting of suspicious activities, with the MGA mandating enhanced due diligence measures akin to those seen in traditional banking. This encompasses regular audits and reviews of customer accounts to identify any irregular patterns indicative of money laundering.
So, as a Malta-based gaming company, our collaboration with the payments and finance sectors revolves around strict adherence to AML policies rooted in both EU directives and local legislation. This commitment is enforced through robust cooperation with regulatory bodies such as the MGA and MFSA, ensuring that all our gaming operations are conducted transparently and responsibly. Our dedication to these standards underscores our unwavering commitment to upholding the integrity of our services and combating financial crimes within the industry.
PE: How significant a moment for the European gaming sector was Malta’s removal from the FATF grey list back in 2021?
LP: Personally, I think it marked a before and after on a number of issues. The greylisting highlighted serious deficiencies in Malta’s anti-money laundering measures, leading to increased monitoring, restricted cross-border transactions, difficulties in obtaining credit and reduced foreign investment. This had a profound impact on Malta’s economy, particularly its igaming sector, which constitutes around 12% of the country’s GDP.
The greylisting caused widespread concern within the industry, with a survey by the Maltese Employers’ Association indicating that over 89% of financial services and online gambling firms expected negative repercussions
In response, Maltese authorities implemented extensive reforms to align with FATF’s recommendations, enhancing their regulatory frameworks and increasing enforcement actions. This proactive approach led to Malta’s removal from the grey list within a year, demonstrating its commitment to upholding international financial standards.
This milestone reinstated investor confidence and stabilised the gaming sector. Malta’s reputation for reliable licensing and favourable tax regimes, managed by the Malta Gaming Authority, remained intact, ensuring the retention of gaming operators during the greylisting period. The resilience shown by these companies emphasised Malta’s critical role in the global igaming sector.
Overall, Malta’s successful removal from the grey list reaffirmed its strategic importance in the European and global gaming sectors. It highlighted the delicate balance between stringent financial scrutiny and maintaining an attractive business environment, underscoring the necessity of robust yet flexible regulatory frameworks to ensure industry confidence and sustainable growth.
Keep an eye on Payment Expert next Wednesday for part two of our interview with Luis Perez, further examining the international intricacies of AML.
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