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Pilatusgate fallout - Mario de Marco

The European Banking Authority writes the rulebook for the financial services sector in the Europe. It is the authority, the main man when it comes to financial services. Last October, it was asked by the European Commission to investigate claims that the Malta Financial Services Authority and the Financial Intelligence Analysis Unit had failed to carry out their duties when they licensed and allowed Pilatus Bank to operate.

The investigation on the MFSA is still ongoing. Three days ago, the EBA published its findings on the FIAU. It reported “general and systematic shortcomings” in the FIAU’s application of anti-money laundering directives. The report does not make for pleasant reading.

This report has to be seen within a context.

Pilatus Bank was awarded a licence within a few months of Labour being elected to government in 2013. At the time, the chairman and sole owner of Pilatus Bank was being investigated in a foreign jurisdiction for serious charges, a fact that either was not picked up by the local authorities or was conveniently ignored. This bank’s clients were mainly made up of politically exposed persons, including people close to Prime Minister Joseph Muscat and people who are close to the Azerbaijan ruling elite.

Initial investigations into the bank’s activities found serious shortcomings and, possibly, criminal activity. A full-blown police investigation was recommended.

Sadly, no such thing happened. Instead, we had a series of unfortunate events.

Michael Cassar, then police commissioner resigned in April 2016, a few days after the initial FIAU report landed on his desk. His resignation was followed only a few weeks later by that of Manfred Galdes, the then head of the FIAU.

Jonathan Ferris, who reportedly worked on some of the Pilatus allegations, was summarily fired from the FIAU within days of Labour being re-elected in 2017.

He has since been fighting for his right to be granted protection under the Whistleblower Act but the government is refusing him such protection.

The initial reports on Pilatus were not followed up by the police and action against the bank was only initiated when its chairman and owner was arrested and charged in USA for serious financial crimes that included money laundering. Moreover, the EBA found that the FIAU was too quick in closing its files on Pilatus and had failed to impose any sanctions against it despite the serious infringements committed.

At every turn of this sorry tale, the Maltese authorities sought to protect Pilatus Bank rather than uphold the law.

This is the conclusion one has to draw from the EBA report.

At every turn of this sorry tale, the Maltese authorities sought to protect Pilatus Bank rather than uphold the law

The Opposition has called on the government to shoulder its responsibilities and for an independent inquiry into Ferris’s dismissal to be held.

We also appealed for an inquiry to establish what led to the shortcomings identified by the EBA within the FIAU and whether any legal action is warranted.

In a normal democracy, the Opposition would not have made this call. Such action would have been taken by the government and the competent authorities without any need from prompts by the Opposition. Sadly, we do not live in a normal democracy.

I am writing this opinion piece yesterday morning, more than 24 hours after the report was published. Till now there has been no reaction from the government. The silence is deafening. The FIAU issued a reaction, which, at best, can be described as pathetic.

Labour, in reply to the Opposition’s reaction, incredibly said the faults identified by the EBA happened when the Nationalist Party was in government. I will not even bother replying to this ludicrous statement given that the bank was licensed in 2014.

However, I will repeat my call for Finance Minister Edward Scicluna to assume political responsibility and do the honourable thing, if honour still exists in this country.

He may not have been personally involved in whatever was going on at Pilatus Bank. In fact, there is nothing that indicates he was involved in the shady dealings of Pilatus Bank.

But the Pilatus mess happened under his watch. He licensed the bank. He is responsible for failing to ensure the authorities under his political responsibility carried out their duties. They clearly did not.

Stating that he does not interfere is simply not good enough. His failures are a resignation matter. Furthermore, in April of 2017, in a desperate effort to dilute the credibility of the FIAU reports on Pilatus Bank, he had questioned whether the reports were written to be leaked

He still refuses to state which role he played in Ferris’s dismissal from the FIAU.

His actions and inactions helped precipitate the sorry Pilatus Bank affair. The EBA report is as much a condemnation of the FIAU as much as it is of the Finance Minister.

Scicluna is not made of the same ilk as some of his Castille colleagues. He started his political journey with noble intentions. His achievements, both on and off the political field, speak for themselves.

But these achievements are now totally overshadowed by his Pilatusgate. The longer he stays on, the darker that shadow will be.

Mario de Marco is shadow finance minister.

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