Between 1972 and 1994 Malta applied a strict exchange control regime limiting capital flows out of the island. In 1994 current account transactions were freed from exchange controls and between 2002 and 2004 capital controls were gradually removed so that all remaining exchange control restrictions were removed until the 1st May 2004, when Malta became a full member of the European Union (EU).
In 2003, the Exchange Control Act (Chap. 233 of the Laws of Malta) was overhauled and re-designated as the External Transactions Act as part of Malta’s legal and economic preparations to become a full member of the EU. Since the accession of Malta to the European Union on the 1st May 2004, there are no Exchange Control regulations in Malta. Furthermore no distinction is made between undertakings owned or controlled by EU citizens and those and those owned or controlled by non-EU citizens for the purposes of exchange controls.
The Minister of Finance is conferred with the power to make regulations to impose restrictions on capital transactions in limited and exceptional circumstances provided by law, intended to preserve the stability of Malta’s financial system. Such powers are intended to address extreme circumstances such as the prevention of a balance of payments crisis, or the implementation of sanctions against specific countries in line with resolutions adopted by any international organisations of which Malta is a member.
The External Transactions Act also includes ministerial power, which can be exercised after consultation with the Central Bank and the National Statistics Office, to require the furnishing of any foreign exchange transactions for statistical purposes. Operators in the financial services sector are required to complete periodic statistical returns (usually annually) for the purpose of compiling Malta’s balance of payments and international investment position and also for submission to EURSTAT.
The Cash Control Regulations (LN 149 and 411 of 2007) which were promulgated on the 15th June 2007 by Ministerial powers exercised in accordance with the External Transactions Act, introduced regulations requiring any person entering or leaving Malta, or travelling through Malta, with an amount of cash (including monetary instruments) amounting to €10,000 to report such cash to the Customs Department on a prescribed form. This measure is intended to help in the battle against the prevention of money laundering.