The Arbiter for Financial Services has expressed concern that banks and regulatory watchdogs are burdening their clients with excessive red tape in a bid to enforce anti-money laundering regulations. In view of this he called for a solution “to lessen unnecessary bureaucracy that may make the life of customers difficult and may also hinder investment in financial services thereby negatively affecting the economy”. “The sooner this is done, the better,” he added.

Reno Borg made this appeal in the 2020 annual report of the Office of the Arbiter for Financial Services. Set up in 2016, this institution handles complains related to the financial services industry such as banking, insurances and investment companies and may award damages up to €250,000.

The Maltese financial services sector has been in the spotlight since 2016 with the emergence of the Panama Papers Revelations. Subsequent events like the closure of Pilatus Bank which had been described as a laundromat for shady millionaires and political despots, the brutal murder of journalist Daphne Caruana Galizia and serious allegations on the heads of the financial services sector threw Malta in deep hot water. This race to the bottom culminated in the placing of the country on the grey list of the Financial Action Task Force earlier this year.

While this resulted in immense reputational damage, the implications on the ground were mostly felt by law-abiding citizens, NGOs and businesses on whom banks and regulatory institutions cracked down like a ton of bricks.

The Arbiter noted that a significant number of complaints received last year by his Office were due to new restrictions and obligations emanating from tighter anti-money laundering rules imposed by banks and financial institutions.

Though some of them were not justified, the arbiter called on bankers to embark on an educational campaign to explain new rules and the reason why clients were being expected to conform. The lack of proper communication between bankers and their clients gives rise to unnecessary disputes which can be avoided only through a simple and adequate line of communication, he remarked.

Last year the Office handled over 1,000 enquiries of which 145 cases resulted in a formal complaint mostly from the insurance sector (89), particularly on life policies (39).

As for the banking sector 22 formal complaints were registered including a case in which a bank had refused to allow a client withdraw money from his own account without an explanation. It transpires that some of the funds in this account were being deposited from the client’s mother who had been slapped with a garnishee order. The bank subsequently justified its decision on the grounds that it feared that by allowing the client to withdraw money it would be bypassing the garnishee order. However, the Arbiter disagreed with this bank’s decision saying the latter should have first sought direction from the court, while noting that even in such cases the owner of the account slapped with a freezing order is still allowed to withdraw €698.81 a month to guarantee a decent living. The bank has appealed the decision