Are all Greys Comparable?
On June 25th, 2021, the FATF (Financial Action Task Force) placed Malta on its grey-list, the countries under increased monitoring. The predictions as to what might happen to the Maltese economy are still uncertain. Therefore, to have a better understanding of possible impacts on the country’s economy, we analyzed some of the negative effects grey-listing brought to Iceland, Bosnia and Herzegovina, Albania, and Pakistan.
Iceland remained on the grey-list for a short period of time, early 2019 to late 2020. Whereas the Icelandic economy did not feel any serious economic consequences, its reputation suffered. For instance, an Icelandic student in Sweden experienced difficulties while opening a bank account. We can clearly see that the grey-listing can bring inconveniences not only to the economy as a whole, but also to individuals. The country, therefore, lost some of its credibility. In fact, the Prime Minister of Iceland expressed concerns on the country’s reputational risk, as well as a potential long-term loss in investors and companies investing in Iceland.
Another grey-listed country was Bosnia and Herzegovina, from April 2015 until February 2018. The economy of the country relies on export. Thus, the grey-listing brought to the issues while carrying out cross-border payments. According to the IMF (International Monetary Fund) the number of cross-border SWIFT payments, to and from grey-listed countries, decreased by 7 to 10%. However, the situation in Malta is different, as Malta has direct access to the Single European Payment Area (SEPA). Nonetheless, for transactions outside of SEPA, which are performed via SWIFT, the possibility of the impact remains increased.
Furthermore, Albania is one of the countries that suffered the most while grey-listed, staying on the grey-list from 2011 to 2015, and again from 2018 onwards. To tackle organized crime, Albania banned in-person and online sports betting and most slot halls which are not operated near major tourist resorts. Consequently, the country lost 4 billion leks (circa. € 33 million) in taxes only by banning gambling businesses. As a contrast, in 2019 the Maltese gambling industry contributed to the Maltese economy € 1,56 billion in value added. Therefore, a similar measure in the Maltese islands would have a drastic impact on its economy. However, the FATF report on Malta’s grey-listing, did not flag financial crime risk related to online gaming.
Our last country examined is Pakistan, which was grey-listed in 2008, from 2012 to 2015, and again from 2018 onwards. The most affected sector was the banking industry. This was due to global “correspondent” banks and other intermediary financial institutions demanding a higher level of due diligence in cases of grey-listed countries. With regard to the economy, according to “The Economic Times”, Pakistan lost $ 38 billion due to its grey-listing since 2008.
The above overview of grey-listed countries and the consequences they faced clearly show us that the shades of grey can vary from country to country due to various factors. At this point, the predictions of Malta’s faith are still uncertain. To reduce and mitigate the final impact, it will all depend on the willingness of the country to make appropriate and necessary changes.
