The financial centre of Malta, which has been hit by money laundering and corruption scandals, cannot shake off its reputation as a gateway to dirty money. Deutsche Bank will therefore cease all activities as a correspondent bank in Malta at the end of the year. Before the announcement of Deutsche Bank, the Dutch ING had withdrawn from correspondent banking relations in Malta following scandals.
Correspondent banks maintain business relations with banks from other countries in order to allow for cross-border payment transactions. Correspondent banking has recently fallen into disrepute because of weak controls and the possibility of abuse by criminals. Since correspondent banks often do not know payer and receiver themselves, they have to monitor the partner banks’ compliance with due diligence requirements for customer identification. A study by the Committee on Payment Transactions and Market Infrastructures of the Bank for International Settlements (BIS) in May of this year showed that the number of correspondent bank relationships has shrunk globally by 20 per cent over the past seven years due to the huge implementation effort and difficulties in cross-border data exchange. In addition to Malta, Deutsche Bank is currently withdrawing from this business with banks in Estonia, Latvia, Lithuania and Cyprus. A few months ago, Deutsche Bank already withdrew from its correspondent banking business with the Maltese Bank of Valletta.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“Finally, good news from Deutsche Bank on financial crime. However, Deutsche Bank’s withdrawal from five eurozone countries reveals government failure. It is an embarrassment for the European Banking Union when credit institutions withdraw from euro countries because of allegations of money laundering. A large-scale withdrawal of correspondent banks from Malta and other risky countries would be dangerous, as payments could then increasingly shift to channels that are more difficult to control.
Deutsche Bank’s withdrawal from business with Malta and other euro countries shows that the Banking Union must finally take the fight against money laundering seriously. The European Commission must no longer watch the Member States doing nothing, but must initiate infringement proceedings for implementation failures. Comparing the text of the Anti-money Laundering Directive with national legislation only masks the actual shortcomings in the lack of implementation of money laundering controls.
The new EU Commission should replace all or at least part of the European Anti-money Laundering Directive by a directly applicable Regulation. In the forthcoming negotiations on the EU budget, the European Member States must increase the funds for the European Banking Authority so that it can fulfil its new role in the fight against money laundering. In the medium term, we need a European Anti-money Laundering Authority for cross-border supervision of financial crime. Effective anti-money laundering is in the interest of all EU Member States”.