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No dice with financial services

The new, hand-picked chief executive officer at the Malta Financial Services Authority comes from the Malta Gaming Authority. That has advantages because Joseph Cuschieri is already versed in regulation, although the game at his new post is entirely different.

Some in the financial services sector think it inappropriate to bring someone from the gaming industry to regulate the financial services but the government thought otherwise. The new post of CEO was not in the original MFSA law but the government changed that. There is now a non-executive chairman, which means, Mr Cuschieri runs the show.

Mr Cuschieri told TimesTalk that following the transformation he carried out at the gaming watchdog it was now time to do the same at the MFSA. That is a tall order. Mr Cuschieri thinks there were a lot of exaggerations in reports connecting the Italian Mafia to the Malta gaming industry. While that is possible, it sometimes does not look like it.

The Investigate Reporting Project Italy, which forms part of the Daphne Project, found, for example, that a Gżira-based gaming company continued to operate even though its parent company had its licence cancelled in February. That company had alleged Mafia links, and, yes, it happened under Mr Cuschieri’s watch.

The reaction to that from the Malta Gaming Authority was that the report contained factual inaccuracies, speculation and untruths. It even called them “rehashed” stories, echoing the government’s reactions to Daphne Project reports on the Dubai-based company 17 Black. That was no rehash and it is delusional to ignore the immense seriousness of what is being reported, which included money transfers. The gaming regulator does the same mistake and its former chief is taking that mindset to the MFSA.

Mr Cuschieri thinks that the MFSA needs to learn from the “Pilatus Bank experience”. He says he wants to focus on repairing damage reports and will not shy away from the situation. But Pilatus Bank was not an oversight, or some small mistake on the part of the MFSA. The whole saga has immense political ramifications and goes far beyond the financial services sector and the damage it could have done to the country’s reputation.

The new CEO thinks the situation at Pilatus Bank should not be over-dramatised. That the bank’s Iranian owner has been arrested by US authorities over alleged sanctions busting and money laundering is already dramatic in itself. But the association of leading members of the government with this bank is immensely more dramatic and serious from a local angle. Pilatus Bank does not come across as an issue of proper supervisory mechanisms. There was the hand of elements close to the government in that bank. That is now Mr Cuschieri’s problem, but there is more.

Mr Cuschieri says the MFSA is understaffed and that there are over 80 vacancies, although only one vacancy is advertised on its website. It will take more than recruitment, smooth talking and whitewash to undo the damage done to the MFSA and the essential economic sector it polices.

Maybe, the situation is actually out of Mr Cuschieri’s hands. To undo the onslaught the MFSA, the Financial Intelligence Analysis Unit and the financial services sector took, deservedly or not, needs political will from above and robust, truly autonomous and independent regulators for it to be undone.  

This is a Times of Malta print editorial

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