Updated - Adds PN, PL reactions - A number of persons are under arrest following investigations into abusive granting of residence permits.
Rackets and abuses had been going on "for at least five years", the government said in a statement, underlining that such action was evidence of a "serious administration".
It said the investigations were started by the Security Service and the police after the government handed information to the authorities.
The government said the way the investigations were being conducted showed no persons were being protected. It reiterated that the abuses were going on for years without serious action having been taken before.
Prime Minister Joseph Muscat said the time when no action was taken over such rackets was over and no abuse would be tolerated.
It is understood that staff members of Identity Malta are among those being questioned by the police.
PN: GOVERNMENT HAS ADMITTED INSTITUTIONAL CORRUPTION EXISTS
In a reaction, the Nationalist Party said the prime minister's comments amounted to an admission that Malta has institutional corruption, spread in various government agencies led by people who are close to Dr Muscat or who had been personally appointed by him.
The announcement that several arrests had been made underlined the urgency of Simon Busuttil's call for an independent inquiry into this scandal. The call for an inquiry had been made several times but had, inexplicably, not been taken up by Dr Muscat so far. What was the prime minister hiding?
The PN said abuses in the granting of residence permits were not only evidence of corruption, but also a threat to national security as foreigners viewed Malta as a country of lax controls where one could get a permit through bribery.
Dr Muscat therefore needed to start acting against corruption.
Auditor and former Labour Party treasurer Joe Sammut was arraigned last month and accused of facilitating the setting up of foreign companies so that residence permits could be issued.
Times of Malta revealed earlier this month that the number of residence permits issued by Identity Malta rose by more than half last year, to reach a record 13,800. The biggest proportion, nearly 3,500, went to Libyans.
According to the figures, the 3,500 permits granted to Libyan nationals last year was also a record. It was more than double the number issued in 2013 and some eight times more than the figure of 2011, during the Libyan uprising.
The National Security Committee subsequently held a meeting to discuss the issue.
LABOUR PARTY'S REPLY
The Labour Party said in a brief statement that the Labour government was cleaning up the mess initiated in the Simon Busuttil administration.
Dr Busuttil's partisan speech, it said, confirmed that he was a politician of the past.