What a difference a year makes. Last year, we were asking ourselves if Keith Schembri, Joseph Muscat’s chief of staff, really did have a secret Panama company. This year, we have to strain to remember that not all his companies are secret and based in doubtful jurisdictions.
It is claimed there are at least three reports on Schembri compiled by the FIAU, the national financial intelligence agency. All were lodged with the police, urging a thorough investigation of Schembri’s financial affairs, which the agency says strongly smack of money laundering. This newspaper has cited extensively from one of the reports.
Meanwhile, Matthew Caruana Galizia, of the International Consortium of Investigative Journalists, has published various documents found in the Panama Papers. None of them help Schembri’s case that he is not involved in money laundering.
Caruana Galizia has now been temporarily blocked from Facebook, following complaints about his reports. But that’s not going to make Schembri more persuasive.
The sheer volume of documents, and the number of different companies, is mind-numbing. So much information, so little time. It is so difficult to absorb it all, the fresh allegations are barely registering in our minds.
But rest assured they are registering in the minds of Malta’s financial competitors. They have a vested interest in noting any news that could weaken Malta’s reputation in financial services.
One of these competitors is Germany. Last week, when a German regional minister proclaimed that Malta is the Panama of Europe, he no doubt did have ulterior, nationalist motives. But the accusation is dangerous precisely because it is credible.
Schembri’s tangled, secretive financial dealings makes things easy for such accusers. It’s made easier still by the fact that Schembri’s boss, Muscat, continues to say that Schembri enjoys his full trust.
Thus, almost daily we have news about post-Brexit investors who decide to migrate from the UK to our industry rivals... but not to Malta. News of other investors shying away because of Malta’s damaged reputation. Of Maltese audit firms losing bids to foreign rivals and business relations becoming more difficult.
Make no mistake. It’s not only the financial services industry that is suddenly feeling vulnerable. So is the maritime sector, where national reputation is also important. Riding on the success of these two industries are other sectors, like construction.
It is this jittery situation that the finance minister, Edward Scicluna, is seeking to contain and repair. On Tuesday he was in Germany to reassure his counterparts that Malta is no Panama. Alas, Scicluna is being undermined by his own Prime Minister.
Scicluna claims that the swirl of sleaze around Malta’s name is due to fake news – a “fabrication” originating in Malta and driven by malice and purely partisan interest. But that argument has a serious problem.
It might, at a stretch, cover the Egrant allegations. That is, Daphne Caruana Galizia’s charge that around a million euros were transferred, from the account of a member of Azerbaijan’s corrupt ruling family, to an account held in the name of Michelle Muscat, the Prime Minister’s wife.
Caruana Galizia is basing herself on a Russian whistleblower, who has proved reliable on a number of incidental minor claims, according to journalists who tried to verify them. But the Muscats are vehemently denying the charges and, so far, no original documents have been published.
Edward Scicluna’s problem is fourfold
The Egrant story, however, is hardly the only one fuelling the dangerous environment that has provoked Scicluna to take remedial action.
The Panama Papers are not a fabrication. Nor were the secret companies set up by Konrad Mizzi, the minister closest to Muscat, and Schembri. Nor were their verifiable multiple attempts to open bank accounts while promising to deposit annual amounts of money they couldn’t possibly earn legitimately.
The financial intelligence agency’s strong suspicions about Schembri, too, are not based on fabrications but on movements of large sums of money between accounts, with odd coincidences of timing and unpersuasive excuses.
Nor do these suspicions and claims originate in Malta. The Panama Papers are an international story. The journalists who have considered the cases of Mizzi and Schembri include distinguished professionals based in Germany and Australia.
In addition, last June, the Carnegie Endowment for International Peace published a report, by Sarah Chayes, called ‘The Structure of Corruption: a systemic analysis using Eurasian cases’. It closely considered the corruption in Azerbaijan and it mentions Malta.
One of its assertions is that Malta is a “significant external facilitator” of the corruption of the Azerbaijan ruling family’s network – by letting it bank its dirty money. Remember, this report was published many long months before the allegations about Pilatus Bank surfaced in Malta.
Another of the pathways of Azeri corruption identified by the study is the flow of money stemming from international gas purchase agreements, arranged by Socar, Azerbaijan’s state oil company. No international observer scrutinising Malta will have missed that Socar is supplying Malta with gas, or that it has claimed that it sees Malta as a “model for the future”.
Perhaps the Carnegie report has it all wrong. But that’s not the point, which is that the trouble affecting Malta’s reputation in financial services emphatically does not arise solely from ‘fake news’ in Malta.
The trouble can be sourced to reports by reputable international organisations. They predate Pilatusleaks.
They begin to gain traction after the Panama Papers. It is surely no coincidence that the Carnegie remarks on Malta were published a few weeks after Muscat notoriously failed to take significant action against Mizzi, and after he affirmed his full trust in Schembri.
Any prime minister of a country with a reputable financial jurisdiction would have sacked the two immediately. But Muscat delayed and prevaricated, only to retain the two. Evidently, at least some observers drew the conclusion that, if this is what happens at the top, then the jurisdiction cannot be very reputable.
It’s grossly unfair to the industry. But it’s disingenuous to blame the journalists.
Scicluna’s problem is fourfold. First, he needs to persuade people who have a vested interest in not being easily persuaded. They are our industry rivals and, however intellectually honest they are, will grab at any piece of evidence to strengthen the argument that suits them.
Second, Scicluna’s case for Malta’s probity is completely undermined by the undeniable facts surrounding Schembri. His secret companies, with at least one set up shortly after Labour came to power. His financial affairs, some of which raised the suspicions even of Malta’s own financial intelligence agency. The fact that the police never investigated him.
Third, there is Muscat’s behaviour. The refusal to take the necessary political action to save Malta’s international reputation. If the Prime Minister doesn’t seem to value our reputation, why should others rate it highly?
Fourth, a Labour electoral victory wouldn’t solve Scicluna’s problem. If Muscat returns to power, so would Mizzi and Schembri. Why should investors and international banks change their mind?
ranierfsadni@europe.com