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Keeping up appearances

The Nationalist Party is asking for my head, my resignation. The indictment? The FIAU got itself in breach of the third anti-money-laundering (AML) directive by not following the correct procedures during my watch as Minister for Finance. The PN team of two called a press conference. Straight faces. A very serious affair.

Let us be straight on this. Anti-money-laundering is indeed a serious affair. The fight against tax evasion, drugs, arms trading, smuggling, corruption and terrorism can be effectively fought by discouraging the conduit of the financial proceeds of crime through financial institutions.

A global intergovernmental organisation, the FATF, was set up by the G7 in 1989 for this purpose. Malta’s own legal setup in this area was evaluated by FATF’s regional (European) MONEYVAL in 1998, resulting in our own FIAU being set up in 2002.

As one can detect from the various MONEYVAL and FSAP evaluation reports, Malta has made good progress over time in its legislative, regulatory and institutional reforms. One of our senior officials was even appointed to be chairman of MONEYVAL for two years. We cooperated with other jurisdictions, attended all related European and international meetings and exchanged information with EU and non-EU authorities according to our signed and ratified mutual agreements.

My baptism by fire came during the Cyprus crisis on my first day after taking office in March 2013, when the European media started spreading rumours that Malta would be the next Cyprus. A war room was set up in my ministry, consultants were brought over, and local media were briefed on the seriousness of the situation. We were advised that risk assessments being imposed on the Cypriot authorities by the troika regarding AML issues would best be done voluntarily in-house by our own authorities beforehand.

Because it was in our self-interest, in the interest of Malta’s financial stability. An AML national risk assessment was in fact started soon and completed a year and a half later.

During the last legislature I passed through Parliament several amendments to strengthen our legislative and regulatory framework, in part to transpose the AML directives and others to strengthen our local regulation and supervision. We were also negotiating with the IMF and MONEYVAL about a suitable date for mission visits which would not interfere with major events such as local elections.

In the meantime a task force was set up to co-ordinate the work required to deal with these thorough evaluative exercises which affect every financial institution and every professional group associated with the industry or its clients. Over the last five years FIAU staff saw a fourfold increase, and its budget a tenfold one, now standing at nearly €4 million. An AML strategy and a corresponding 50-point tasked plan was also launched.

Once you start investigating, you find yourself tracing the steps of all these reports to one source. And that source is here. In Malta

And then came Pilatus Bank and its chairman, Seyed Ali Sadr Hasheminejad. While I never met this guy he must have met my predecessor and the highest officials of the MFSA appointed by the PN government, who were all kept in place until the termination of their appointments in December 2014, well after Pilatus and other banks including NEMEA got their licences.

But back to the PN’s dog-eared plan to bring down the government as they did in 1998, with tactics dating further back to the early 1980s, familiar to those still alive to remember. Like a deft-handed, three-card trickster they try to impress on the Maltese electorate how fast Malta’s reputation is deteriorating under a Labour government by pointing to 100 or so international newspapers and TV stations and now various EU institutions’ declarations.

However, watch carefully. Once you start investigating, you find yourself tracing the steps of all these reports to one source. And that source is here. In Malta.

The pressure on the EBA to rush and act in the AML field for the first time at the EU level, and make of the Maltese institution an example to show that the European financial regulator has the muscle to cope with AML issues as well, came from the Commission. In turn the political pressure on the Commission came specifically from three MEPs, pushed by Malta’s David Casa.

While bigger EU member states and their financial institutions continue being associated with thousands of real and proven AML transgressions, valued at several billion, tiny Malta is singled out for systemic procedural failures related to one bank. And the PN, behind their strained, long and shocked faces, are elated.

In fact they intend to extend this tactic further by pressuring MONEYVAL prior to their coming down to Malta in November. These MEPs’ rule of law book does not seem to prohibit them from pressuring Malta’s judiciary and other independent local and European regulatory institutions into imposing sanctions on anything connected to Pilatus Bank, whom they decided to lynch many moons ago.

As self-appointed upright judge, jury and executioner, they are convinced they hold the copyright to the rule of law book.

To top it all off, the press conference was addressed by the PN shadow finance minister, Mario de Marco, a top criminal lawyer who during a given morning in summer 2015, while representing the Opposition in the delicate task of amending with me the country’s anti-money-laundering legislation, rushed out in the middle of the meeting to go to Mrieħel to threaten those same national regulatory authorities whom we were supposed to strengthen with a court case in the defence of his professional clients, the Italian igaming operators Fenplay, who had alleged ‘Ndrangheta connections, sought by a European arrest warrant, and whose licence was withdrawn by our authorities, for… you guessed it… money laundering.

Very impressive indeed.

In the meantime, the FIAU will carry on with the implementation of its action plan, which I understand they agreed with the EBA prior to this debacle.

I can assure them that in this task they will find my full support.

 


Ask Edward