The Pana Committee visited Malta on a fact-finding mission into the Panama Papers, taxation and money laundering on Monday. Philip Leone-Ganado unpacks the outcome of a day of high-profile meetings.

With a wide remit to lead an inquiry into money laundering, tax avoidance and tax evasion, Pana Committee MEPs largely aimed to steer clear of the local political controversy surrounding the Panama Papers leak.

While Minister Within the Office of the Prime Minister Konrad Mizzi and OPM chief of staff Keith Schembri were both on the list of invitees to face the committee in Malta, so too were financial services officials, police, journalists and politicians, including PN deputy leader Beppe Fenech Adami and ex-minister Ninu Zammit.

“We are not part of any internal political discussion in Malta,” committee chairman Werner Langen said. “Our remit in this regard is to clarify the implications of the Panama Papers leak at Union and Member State level.”

Mr Langen stressed it was too early to reach conclusions or make recommendations and the committee would continue to hold meetings until the end of its mandate in June.

But a day of meetings raised questions on Malta’s taxation system and the potential for money laundering, among others, with MEPs identifying several avenues for future inquiry.

Konrad Mizzi fails to convince

Dr Mizzi’s decision to appear before the committee was welcomed by MEPs, who described the minister as well-prepared, pre-empting many of the more challenging questions in his opening remarks.

Socialist MEP Jeppe Kofod said Dr Mizzi had been “transparent” and had given an explanation the committee could take back to Brussels.

But the minister’s assertion that his trust in New Zealand and company in Panama were intended for family estate planning did not appear to convince.

“The facts and the situation as we see them would point to a potential case of money laundering, but we do not have any documentary evidence,” Mr Langen said. “We will have to dig deeper into this.”

Asked what would have happened if a sitting minister in his German homeland had been caught with an offshore structure, the chairman said: “I find it hard to imagine that after a year, the government would still be in the same situation.”

According to Greens MEP Sven Giegold, the meeting highlighted a tension between Dr Mizzi’s claim of family estate planning and the recycling and remote gaming businesses mentioned in the Panama Papers.

“Dr Mizzi told us he had never said this himself and that it had been written by Nexia BT and Mossack Fonseca,” Mr Giegold said. “But you don’t just make that up.”

Dr Mizzi claimed to be a victim of “fake news” and accused the committee members of making “politically charged statements”, implying that the committee hearings were not objective.

Taxation system in the crosshairs

Finance Minister Edward Scicluna put forward a defence of Malta’s taxation system in his meeting with the committee, rejecting the conclusions of a recent report by the European Greens that Malta was a tax haven.

The analysis had highlighted “the presence of preferential tax measures that could be regarded as harmful”, facilitating offshore structures aimed at attracting profits which do not reflect Malta’s real economic activity.

Mr Giegold claimed the report had been based on EU criteria, and therefore the Maltese government’s own criteria were “not in line” with the EU. “Prof. Scicluna made big accusations about the Greens report, but he never substantiated them,” he said.

The German MEP also noted that the finance minister and PN deputy leader Beppe Fenech Adami had both made identical arguments in defence of Malta’s tax system.

“There appears to be a revolving door between politics and the financial sector,” Mr Giegold said. “We observed a worrying closeness between public and private interests on both sides of the political fence.”

Malta’s system ‘prone to money laundering’

Meetings with the police and the Financial Intelligence Analysis Unit, as well as its former head Manfred Galdes, who resigned amidst the Panama Papers scandal, proved frustrating, as the respondents relied on the legal obligation not to provide details on specific cases.

Mr Giegold said Malta’s that anti-money-laundering system appeared “fine on paper but weak on enforcement”, with a gap between investigated cases and police action. The committee was told of some 25 reports from the FIAU between 2013 and 2015, with no indication of subsequent prosecutions.

The Greens MEP also highlighted a lack of Suspicious Transaction Reports when new set-ups could point to potential money laundering. “The government must tackle the whole chain,” he said.

S&D MEP Ana Gomes said the visit had confirmed her fears that the Maltese system was “prone to money laundering”.

“We know of concrete cases where corporations in Malta are being used by Political Exposed Persons as a conduit for diverting money from corrupt or criminal sources into legal business in Europe and elsewhere,” she said.

Ms Gomes mentioned, among others, allegations that Isabel dos Santos, daughter of the president of Angola, uses Maltese shell companies to hold her major interests in state-owned diamonds, banking and telecoms.

Her company interests are managed here by former PN MP Noel Buttigieg Scicluna.

‘Zero tolerance towards no-shows’

Keith Schembri, former PN minister Ninu Zammit (named in the Swiss Leaks data dump), Nexia BT managing partner Brian Tonna and Nexia BT partner Karl Cini all refused to appear before the committee.

Mr Schembri’s refusal provoked particular outrage, as it was presented in a letter hand-delivered to MEPs as they stood in the street just hours before the meeting and called into question the legitimacy of the committee.

Leading MEPs described it as a “scandal” and “outrageous”.

Ms Gomes said: “The allegations against him are very serious and have not been responded to in any way.”

While the committee has no power to oblige individuals to appear, Mr Giegold said it was a question of “respect for European democracy”.

“We should have zero tolerance towards no-shows,” he said. “Mr Schembri and Ninu Zammit will be re-invited in Brussels.”

While Nexia accountants Mr Tonna and Mr Cini answered questions in writing, Mr Giegold said that a key part of their response – the ownership of the third Panama company, Egrant – raised “serious doubts”.

“Mr Tonna said that he was the ultimate beneficial owner, but there is the clear suggestion that there were further plans for the company. This will have to be followed.”