The Financial Action Task Force (“FATF“) has released its 2025 Comprehensive Update on Terrorist Financing Risks, shedding light on emerging threats and regulatory expectations for financial service providers. For companies operating in Malta this report is a crucial guide to staying compliant and mitigating risks.
Key Takeaways from the FATF 2025 Report
Crowdfunding Platforms Under Scrutiny
The FATF highlights the increasing misuse of crowdfunding platforms for terrorist financing. While crowdfunding is a legitimate way to raise funds, bad actors exploit these channels to move illicit money under the guise of charitable donations or business ventures.
Therefore, Malta-Based Crowdfunding Providers Should strengthen KYC (“Know Your Customer”) and CDD (“Customer Due Diligence”) procedures. Monitor transactions for unusual patterns, such as rapid fund transfers or inconsistent donation sources and implement automated risk detection tools to flag suspicious activities.
EMIs Must Enhance Transaction Monitoring
Electronic Money Institutions (“EMIs”) remain vulnerable due to their fast, cross-border payment capabilities. The report notes that terrorist financiers may exploit EMI wallets and prepaid cards to obscure funds. In this regard, Malta is advised to apply Enhanced Due Diligence (“EDD”) for high-risk customers and ensure real-time transaction monitoring to detect anomalies.
Financial Institutions: Strengthening Compliance Frameworks
Traditional banks and financial institutions must remain vigilant against layering techniques (where illicit funds are moved through multiple accounts to disguise their origin). The FATF emphasises the need for ongoing staff training and AI-driven compliance solutions.
The Best Practices suggested for Malta’s Financial Institutions are to conduct regular risk assessments to identify weak points. Invest in advanced AML/CFT (“Anti-Money Laundering/Counter-Terrorist Financing”) software and foster a culture of compliance with continuous employee awareness programmes.
Investment Services: Preventing Abuse of Complex Structures
Terrorist financiers may use investment funds, trusts, or shell companies to move and conceal funds. The FATF warns that lack of transparency in beneficial ownership increases risks.
Investment Firms in Malta are advised to verify ultimate beneficial ownership (“UBO”) for all clients, scrutinise unusual investment patterns, such as rapid portfolio changes or unexplained wealth and maintain strong record-keeping to ensure audit readiness.
How Malta’s Financial Service Providers Can Stay Ahead
The FATF’s 2025 report reinforces the need for proactive risk management. Companies in Malta’s financial sector should:
- Leverage RegTech solutions for smarter compliance;
- Conduct independent audits to assess AML/CFT effectiveness; and
- Engage with professionals in the financial services industry and the Malta Financial Services Authority (“MFSA”) for guidance on evolving regulations.
By staying informed and adopting robust compliance measures, Malta’s financial service providers can protect their operations, maintain trust, and uphold global standards.
Contact us today to ensure your business meets FATF and MFSA requirements effectively.
