OPINION

TICKING ALL THE BOXES

Prime Minister Robert Abela has been optimistic about Moneyval's final ruling on Malta. His government had “ticked all the boxes”, he said, ahead of their final report, and as when the right answers are given in a test, one is entitled to expect the desired results. Manuel Delia looks at some of those boxes.

The festering wound that attracted the world’s attention has been Malta’s apparent inability or unwillingness to enforce its laws. The country dragged its feet when implementing anti-money laundering directives. Still, given how older versions of the law were not enforced, there was never much hope updated provisions would make much difference.

Billions of euro are pumped through Malta’s financial system. They go in one end, slosh around the 30 international banks that have an address here, and come out the other, leaving behind small margins that justify the entire operation. With all that money coming through, Malta should have clocked dozens of prosecutions against money laundering by the rules of probability, but there had been none until recently.

That has changed over the past few months. Statistics for anti-money laundering prosecution have shot up. The provisions are a favourite of the police force, and asset freezes are being handed down like there’s too much money in people’s pockets.

But a closer look shows that the statistical shift is not in itself a paradigm shift. There are still zero prosecutions for anti-money laundering through Malta’s financial system. Instead, the police clamp down on village shopkeepers who accept payment in countersigned social security cheques addressed to their impoverished clients. The “proceeds of crime” they are having frozen is the singledigit commission they charge for informally cashing cheques.

Technically, that’s money-laundering. The operative word is “technically”. The local authorities apply laws intended to capture millions of euro laundered from international drug trafficking, industrial-scale tax evasion, bribery, arms dealing, and latter-day slavery to clamp down on people helping old age pensioners and unemployed immigrants dodge punitive banking fees for non-account holders. In the meantime, the people against whom anti-money laundering laws are designed, continue to get away with it. The courts have seen any number of local grocers, village butchers, and small-town bazaarkeepers. But the directors of Pilatus Bank and Satabank have still faced no charges.

This is not just unfair. It perverts the intention of the law, and it refines the impunity of the real financial criminals. It makes a bad situation, worse because it takes the pressure off law enforcement agencies and the prosecution service because they’re looking like they’re doing something about financial crime. When in fact they aren’t.

This is not an unexpected policy failure. It is a conspiracy perpetrated by the powerful. Consider how the government first considered, then discarded adopting the UK model of using unexplained wealth orders to clamp down on people who display money they should not rightly have. Why did they do that? Because unexplained wealth orders are not needed to go after the village groceries. Those small-time businesses have nothing to show but hours of hard-work and slim margins.

But unexplained wealth orders can be awkward for government ministers, members of parliament and other people in power who own properties that seem to have fallen into their laps like rain from an unclouded sky.

The Commissioner for Standards in Public Life has asked MPs to account for wealth in their spouses’ names, information they are not obliged by statute to publish. The majority of MPs—all MPs of the Labour Party—have refused to provide this information. Not all of them have something to hide. Some of them do.

Now local MPs are to organised criminals using Malta’s financial system to launder their money what village groceries are to local MPs. But if the country administrators are unwilling to write and enforce laws that could expose themselves, anyone doing worse than they are will get away with it.

Something very fragile but very crucial at the heart of policy-making in the financial services sector broke in the last weeks of the box-ticking campaign the government has led. The parliamentary Opposition withdrew its support for the confirmation of John Mamo as chairman of the financial services’ regulatory agency. It is traditional for the parliamentary Opposition to disagree with nominations made by the government. But it is customary for the parliamentary Opposition not to do that in matters related to financial services. On the contrary, since the early 1990s, there has been bipartisan consensus on financial services laws and policies.

You can face that like any other divorcee. The Opposition did the breaking, so it must be at fault. The Opposition says the relationship hasn’t been working for a while. John Mamo refused to express regret for his CEO Joseph Cuschieri’s conduct in office. Joseph Cuschieri travelled to Las Vegas with Yorgen Fenech, at Yorgen Fenech’s expense, as his “advisor” or his wingman on a double date. That’s while Yorgen Fenech’s 17 Black saga was giving everyone to understand that he was greasing the palms of Joseph Cuschieri’s pals in government Keith Schembri and Konrad Mizzi. This incident lies at the heart of the collapse of Malta’s global reputation as a financial services destination.

THERE ARE STILL ZERO PROSECUTIONS FOR ANTI-MONEY LAUNDERING THROUGH MALTA'S FINANCIAL SYSTEM

Joseph Cuschieri's appointment—hiring a political crony and a partisan facilitator—to the MFSA, hurt financial services. You’d expect them to learn from that. But consider some other appointments.

Edward Scicluna was the finance minister who in 2013 inherited Malta’s golden name in the industry and who in 2021 retired in disgrace while Malta scrambled to tick boxes to avoid being black-listed as a financial services destination altogether. His has been the most ignoble stewardship of Malta’s USP in this trade since we've ever presented ourselves as bankers for the outside world.

He signed off on the licensing of Pilatus Bank and Satabank, defending his decisions with dogged obtuseness even as European regulators moved to shut them down. He admitted in open court of having been kept outside of a ‘government within a government’ that took major financial decisions he claimed never to have been aware of. In the process, corrupt deals such as Electrogas, the hospitals’ privatisations and others went ahead unchallenged by the finance ministry.

And now, the man who failed to restrain the government when he was serving within it, is supposed to control the government from the seat of the governor of the Central Bank at an arm and a half’s length from it. If it weren’t so tragic, it would be funny.

Almost as amusing as the appointment of a teenager who has just scraped through his ‘A’ levels to sit as governor of Finance Malta, the agency with the job of promoting Malta to the rest of the world as a serious, reliable, competent, safe and clean financial services destination. His only qualification? His membership of the ruling party’s youth wing.

This amounts to box-ticking: updating laws, starting prosecutions, hiring people to head enforcement and regulatory agencies. But if laws are unenforced except to punish the easy targets, and cronies are hired to clip the wings of agencies supposed to fly to catch the real criminals, our financial services industry will remain just that: boxed in.

Manuel is a political blogger who writes for The Sunday Times and manueldelia.com.