TG Says FATF Grey-Listing Is “Unforgivable Blunder” That Must Have Political Consequences

Together Gibraltar has this evening said that Gibraltar’s grey-listing by the Financial Action Task Force is “grave news for Gibraltar’s economy and for our international reputation.”

The party notes that this comes at a time when economic forecasts are “grim, inflation is rampant, Government is running a sizeable budget deficit and our national debt has grown to unprecedented levels.”

A statement continued: “As a response, the Government has characteristically put its spin machine on overdrive to downplay the event and mitigate the damage. Unfortunately, no propaganda can take away from the fact that this decision by the global money laundering watchdog could, and should have been avoided, and that it will cost Gibraltar and its people dearly.

“The identified problems in our financial sector had been highlighted in detail by the Moneyval report issued in December 2019. Together Gibraltar has also highlighted concerns expressed by Moneyval, amidst celebratory fanfare from Government and directionless mumbles from the “official” opposition. The Government knew what needed to be done, but they simply didn’t do enough in the eyes of international experts.

“The Government's congratulatory remarks about having failed to meet “only” 2 out of 78 recommendations would be laughable if they weren’t an insult to the intelligence of our community. Government ought to have been aware of the enormous importance of the 2 remaining items and acted accordingly.

“Responsibility needs to be taken for the Government’s strategic miscalculation that led to Gibraltar’s FATF grey listing. Unfortunately, the people who led Gibraltar to the Grey List have no plans of moving from their privileged seats, especially Minister for Digital and Financial Services, Albert Isola, whose failure to avert this outcome would be grounds for resignation in any respectable democracy.

“Together Gibraltar believes deeply in protecting and championing our industries, the pillars of our economy. With the grey listing, our nation’s good standing and the reputation of our financial services industry have been needlessly dragged through the mud due to the failings of the current administration. Failings that could have been prevented with the proper care, attention and competence. The People of Gibraltar will suffer from this debacle with increased austerity, impoverished public services and lack of opportunities for our children.

“Local companies have diverted enormous effort and resources to address noted deficiencies, and our financial services industry has made much improvement since the Evaluation two years ago. We would have expected Government to do its part too and leave no stone unturned in addressing the issues highlighted to us by the international watchdogs.

“Thankfully, over time our economy has grown passed a critical size in the global arena. With this, our business practices, compliance and sophistication have had to mature too. Gibraltar is now benchmarked against the leading economies of the world. We must rise to the challenge and we must prevail. Gibraltar has made substantial progress to date. However, we also acknowledge that the grey listing is a genuine opportunity to clean up the remaining areas that have otherwise been overlooked by the administration. We can, and will, pull through this together and will ensure that we are better for it.

“To ensure oversight of this target, and to mitigate the risk of failing to address the identified shortcomings, Together Gibraltar calls for a joint parliamentary committee to be established to investigate how these failings were allowed to occur, mitigate the damage, and ensure remedies are in place so these failings never take place again. The party expects this committee to question the Gambling Commissioner and Legal Services Regulatory Authority as to why the online gaming and legal sectors were specifically called out by the FATF report. In addition we call on the Government to publish its assessment of the impact the grey listing will have on our economy and Government budget.

“Some salient facts regarding the grey listing decision and its expected implications:

- From now on, any form of financial transaction linked with Gibraltar will be treated with higher suspicion due to risks associated with money laundering and other financial crimes. This happens at a time in which we are negotiating a treaty with the EU which will have financial and economic components.

- Studies from the International Monetary Fund have concluded that the estimated drop in foreign investment in grey-listed countries is significant. It measured a loss of capital inflows of between 7-10% of GDP, with enormous knock-on effects on general economic output.

- The IMF also states that with grey-listing invariably comes a period of banking “de- risking”, in which international banks terminate relationships with customers in that jurisdiction because they are now considered to be high-risk.

- When Malta was grey-listed by the FATF in 2021, the UK decided to also place Malta in its own high-risk list. With Gibraltar grey-listed, we will likely see our name added to this list, as well as linked to the EU’s high-risk third country list, weakening our position in Brexit negotiations.

- Moody’s, a leading global credit rating agency, downgraded Malta’s economic outlook from stable to negative, with the agency blaming the significant increase in national debt, the sharp deterioration of public finances and the grey-listing by the FATF for its change in outlook. A credit downgrade of this sort will make the Government’s enormous borrowing more expensive to repay.

- In the 4 months following Malta’s grey-listing a number of financial services companies found that it was not possible to operate in the jurisdiction. Many of them surrendered their licenses (to operate companies), creating unemployment and deepening negative perceptions of the jurisdiction.

- IMF studies also state that grey-listed countries experience increased difficulties in cross-border payments, which Gibraltar is greatly reliant on: This problem is more acute when dealing with European countries, which will require greater scrutiny and compliance oversight.”