Given the highly topical subject of money-laundering and criminality in Malta, a timely conference focusing on company law, organised by the University of Malta’s commercial law department and the Malta Law Association, heard two important addresses by Finance Minister Edward Scicluna and by David Fabri, head of the commercial law department.
The minister said legislation setting up a registry of companies’ beneficial owners would be published shortly. The registry, which was a requirement of a new EU anti-money-laundering directive, seeks to introduce greater transparency in company ownership as well as facilitating information-sharing with anti-money-laundering agencies. He stressed the importance of authorities and those carrying out due diligence having immediate access to the information, particularly in the case of complex ownership structures.
By contrast, Dr Fabri spoke on the way Malta’s regulators functioned in this field. He accused regulators of using “confidentiality” as a “fortress to hide their rot and incompetence”, criticising a culture of “secrecy and defensiveness”.
He said it was “unhealthy and dangerous” for regulators to write their own laws and rules without being sufficiently challenged about them. These bodies, he noted, often enjoyed exemption from liability, with no concrete or expert scrutiny. Moreover, their extensive powers were not suitably balanced by greater accountability.
This was straight-talking from somebody whose job is to study the way commercial law functions in Malta and how the vital role of the regulators is conducted. Even if only a part of the bleak situation described by Dr Fabri is correct – and this seems highly unlikely - it should give policymakers serious pause for thought.
If our regulators are as “rotten”, “incompetent” and “devoid of proper oversight” as implied by him, is it any wonder that the concerns about Malta’s governance have reached such an international and national fever-pitch?
At the conference, Prof. Scicluna pledged that the government would take every step to ensure Malta was not used as a base for money-laundering, assessing the risks associated with Maltese companies and putting in place every measure to protect the financial services sector and to comply with international standards. In normal times, the minister’s words would have been allowed to stand unremarked as a sensible statement of the obvious and the least that a citizen should expect from a government. But these are no longer normal times.
The assassination on October 16 changed everything and has shone a powerful searchlight on the way we regulate this vital sector of our economy. International confidence has been grievously undermined.
Malta must refute any suspicion about the involvement of its financial services and gaming industries in money-laundering and financial crime. Dr Fabri’s description of what he perceives is happening does not fill one with confidence. The government should take the initiative to demonstrate that, far from being “rotten”, our regulation is good.
An external independent auditor should be appointed immediately to ensure that the Malta Gaming Authority has an up-to-date and accurate register of the ultimate beneficial ownership of Malta’s gaming companies.
In parallel, an independent investigation into the effectiveness of the Malta Financial Service Authority’s licensing of financial institutions should be launched to ensure the risks of money-laundering and financial crime involving politically-exposed people are vigorously addressed.