A study of money laundering risk on the Maltese non-financial business sector

Abstract

Most of the anti-money laundering processes focus on the financial sector as this is considered to be a line of defence to detect and interrupt illicit activity, however literature on the subject has shown that importance should also be given to the non-financial business sector as this is also attractive to criminals and criminal organisations in order for them to be able to diversify their operations into the legitimate economy. The assessment of risk, including the identification of threats and vulnerabilities of this sector, is the foundation for Governments to allocate their anti-money laundering resources in the right places. In this regard, research has shown that the most prominent vulnerabilities of such sectors is the use of cash since this facilitates the money laundering process for illicit funds to be injected in legitimate business through various means. Recent efforts within the European Union have also shown the importance of limiting the use of cash within its Member States. This was done by adopting a threshold-based cash limitation requirement for specific businesses and activities. Due to the nature of the Maltese economy and its inclination towards the use of cash indicates that as a jurisdiction, Malta should give more importance towards this sector in order to limit the infiltration of criminal organisations into legitimate businesses, especially focusing on those sectors which are cash-intensive in their day-to-day operations. Thus, due to these factors and the fact that limited research is available on this matter from a national perspective, this research aims to identify those non-financial business sectors which are considered to have a higher money launder risk than others, understand their vulnerabilities and also to explore certain mitigating measures to address the said risks. The methodology is comprised of a mixed-method approach to triangulate its findings with the literature identified on this topic. Data collection took the form of semi-structured interviews with professionals in the field and subsequently used such findings to conduct a questionnaire to explore the views of restaurants which were highlighted to have the highest money laundering risk during the interviewing process. Throughout the findings of the interviewing process, different themes were identified including the fact that restaurants were considered to pose a higher risk for money laundering misuse due to their cash-intensiveness. On the other hand, the views of restaurants on their perceived risk showed a disagreement on most of the points highlighted by professionals, however, this sector mostly agreed with the possibility that restaurants may be used by criminal organisations as a front for money laundering purposes. The perceived risk and vulnerabilities of certain sectors, most specifically restaurants and their cash-intensiveness corresponds with findings of other research conducted in other Member states. These findings once again highlight the importance of strengthening regulation to address these high-risk business sectors by focusing on their vulnerabilities. Recommendations include the need of more research on this subject, a cash restriction regulation which also includes these high-risk non-financial business sectors, more enforcement and risk-based supervision on this sector.