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Send them to the cleaners

Few can deny that Malta is suffering a bad press from the perception that it tolerates money laundering and is less than fully committed to eradicating tax evasion, corruption, financing of criminal activities, fraud and bribery. Perceptions could damage a country’s reputation as much as evidence-based real stories. Yesterday’s reports on 17 Black certainly don’t help matters.

The government commissioned an assessment of the risks posed by money laundering activities in Malta last year. The main conclusion of this investigation, which has so far not been made public, is that Malta is at high risk of being used for money laundering and at a “medium-high” risk of terrorist financing.

These conclusions come as no surprise to those who have their ears to the ground and follow what is going on in various sectors of the local economy. Occasionally, the foreign media remove the lid from the boiling pot of certain economic operators based here and reveal activities that, at face value, at least, appear illegal.

The alleged laundering of vast sums of money from Venezuela by the former owner of Pilatus Bank in breach of US sanctions is one case where people came to know about abuses by locally-licensed financial institutions through the foreign media and institutions. Similarly, alleged money laundering incidents were brought to the Maltese public’s attention thanks to the Italian media that reported investigations by Italian authorities relating to criminal practices by Italian gaming companies based in Malta and Maltese oil smugglers allegedly trafficking oil illegally.

In its latest formal opinion delivered over the last few days, the European Commission has demanded that the Maltese authorities step up supervision of banks in its jurisdiction. In its usually diplomatic style, Brussels said it required the FIAU to take additional measures to comply with its obligations under the anti-money laundering directive fully.

The government is underestimating the risk posed by money laundering for local banks and the local economy. It is a fact that most US-based banks are refusing to transact US dollar business with local banks. If other incidents of money laundering come to light, it will not be surprising if Malta is blacklisted by even more banks, thereby endangering the operational viability of many legitimate local businesses.

European Justice Commissioner Vera Jourova told the Financial Times Brussels would list the action that Malta’s FIAU must take to tighten up its money-laundering monitoring. Former prime minister and MEP Alfred Sant adopted a local stand and slammed her for pointing the finger at Malta while ignoring other bigger countries like Estonia, the Netherlands and Latvia that allegedly are tolerating money laundering activities.

One can understand politicians indulging in schadenfreude – pleasure gained from another country’s misfortune – but the government’s attitude when confronted with legitimate concerns about the tolerance of money-laundering is not convincing.

The FIAU says the right things when reacting to the European Commission’s instructions. But what matters is the political will to tackle money laundering. The continued presence of politically-exposed persons tainted with the Panama Papers scandal in the highest echelons of government is not a good omen. The government must ensure that those suspected of illegal activities should go to the cleaners to reform their shady practices rather than continue to launder dirty money. The sooner this is done, the better chance will Malta have of regaining respect in the international community.

This is a Times of Malta print editorial

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