Russian woman told MEPs she was not Daphne Caruana Galizia’s ‘original source’ on Egrant

Konrad Mizzi and Keith Schembri should be removed from public office and investigated over allegations of money laundering, MEPs have concluded.

The recommendation is one of several others found in a report released this evening by the European Parliament’s Committee on Civil Liberties, Justice and Home Affairs following its fact-finding mission to Malta last November.

The 36-page report gives a breakdown of the exchanges the MEPs had with various individuals summoned to appear before them, including Prime Minister Joseph Muscat, the Police Commissioner and representatives of Pilatus Bank.

​The report calls for investigations by the European Banking Authority and the European Central Bank into the circumstances under which Pilatus Bank continues to hold a license to provide services in the EU. 

However, the report also lifts the lid on two things that have not been known so far.

Egrant: Russian woman not original source

The report quotes Maria Efimova telling MEPs, she was not Daphne Caruana Galizia’s original source on the story linking the Prime Minister’s wife, Michelle, to the Panama company, Egrant.

Efimova was employed at Pilatus Bank but had her job terminated. The termination happened almost a year before, Caruana Galizia published the Egrant story on her blog.

Efimova had claimed to have seen bank documents indicating Michelle Muscat as the ultimate beneficial owner of Egrant. The company was the third mysterious firm revealed by Panama Papers, which had been set up by Maltese financial services firm Nexia BT at the same time as the two companies for Mizzi and Schembri were set up.

The Muscats had denied the allegation and called for a magisterial inquiry, which is ongoing.

According to Efimova’s testimony to MEPs – she testified by video conference from an undisclosed location – she was not the original source on Egrant.

Jonathan Ferris seeks whistleblower protection

Another, previously unknown fact that emerges from the report is that former Financial Intelligence Analysis Unit inspector, Jonathan Ferris, has formally asked for whistleblower protection.

The information comes from what the Prime Minister told MEPs when they met him at Castille. When committee chair Ana Gomes asked that protection be given to Ferris and his family, the Prime Minister is quoted saying that Ferris had applied for whistleblower protection and this would be offered in accordance with the law.

In a recent interview with BBC, Ferris reiterated that he feared for his life after having been axed from the FIAU last year because of what he believes were his investigations of people close to the government. The FIAU insists his termination was performance based. Ferris has instituted a court case for unfair dismissal and has publicly said that damning information in his possession would be released by third parties if he is murdered.

David Casa reacts

Meanwhile, Nationalist Party MEP David Casa, who formed part of the fact-finding mission said the "damning report is very clear" that Mizzi and Schembri should be removed immediately from public office and investigated and brought to justice.

Casa noted that the report called for a change in method for appointment of the Police Commissioner and the Attorney General. “We need an overhaul of the offices of the Police Commissioner and the Attorney General that have not prosecuted clear cases of corruption and money laundering despite the overwhelming evidence in their possession,” Casa said.

On the operations of Pilatus Bank and Nexia BT, Casa said they continue to operate in Malta with impunity, despite the overwhelming evidence that "they are complicit in corruption and money laundering".

In a short reaction, the Labour Party said the only revelation from the report was Efimova's statement that she was not Caruana Galizia's original source on the Egrant "lie" about the Muscats. It said the new information made it even more difficult for former PN leader Simon Busuttil to accept the challenge put to him by the Prime Minister last year to resign if the magisterial inquiry into the Egrant allegations found no link whatsoever between the Muscats and Egrant.

Muscat has continued to insist that if the magisterial inquiry finds any shard of evidence linking him or his wife to Egrant, he would pull out of politics.

Read also: Key findings from the European Parliament's report on rule of law in Malta

The report's recommendations in full

European level:

• The European Commission should assess whether Maltese authorities are fully compliant with the European Anti-Money Laundering directive and the Capital Requirements Directive, especially regarding the application of customer due diligence provisions;
• The European Banking Authority should assess whether the MFSA is fully equipped and free from conflicts of interest to perform its supervisory duties;
• The European Banking Authority should assess whether the MFSA has fulfilled its obligations as national supervisory authority in view of the apparent lack of action against Pilatus Bank and Nexia BT that continue to hold a license to provide services in the EU;
• The European Central Bank and the European Banking Authority should investigate whether the fact that Pilatus Bank continues to hold a license to operate in the EU warrants ECB/EBA intervention;
• The European Commission should take note of the recent report made by Mapping Media Freedom with regard to SLAPP practices currently being used by Pilatus Bank and Henley & Partners and actively ensure the protection of media freedom and journalism across the EU by proposing legislation that would curtail these abusive practices;
• The European Commission should assess the implications of the IIP (Individual Investors Programme) through which Malta sells European citizenship and Schengen Residence permits, for distortion of the Internal Market and attempt against the security of the European Union, fomenting corruption, importation of organized crime and money laundering. The Commission should also assess fiscalincentives which treat local income of individuals or corporations differently than international income.”

National level:

• Persons perceived to be implicated in serious acts of corruption and money laundering, as a result of Panama Papers revelations and FIAU reports, should not be kept in public office and must be swiftly and formally investigated and brought to justice. Keeping them in office affects the credibility of the Government, fuels the perception of impunity and may result in further damage to State interests by enabling the continuation of criminal activity.
• Work is needed to ensure stronger checks and balances in the Maltese legislative framework to better separate powers and to limit possible interference of the Prime Minister in the judiciary and the media; an assessment of media pluralism and independence from political power should be conducted.
• The functions of Chairman of the MFSA and the function of promoting investments into Malta should be decoupled;
• Reform the Attorney General functions, to decouple the role of advisory to the government from the role of prosecution;
• Reform the Judiciary, namely on the basis of recommendations made in 2013, in order to reinforce the separation of powers and the independence of the Judiciary;
• The Police Commissioner should no longer be appointed by the Prime Minister but by an appropriate independent body. Similarly, the veto power of the Prime Minister should no longer exist regarding the nomination of the Maltese Chief Justice;
• The Whistleblower Protection Act should be revised to cover workers in the public sector. Mr Ferris should be granted police protection and serious consideration should be given to his application for protection under the Whistleblower Protection Act;
• The Maltese Government should separately publish the list of persons being granted Maltese Citizenship under the Individual Investment Programme and should start an independent assessment of this programme and of the anti- money laundering procedures applied to it;
• The Maltese Government should start an action programme against corruption and financial crime and increase the number of investigations and prosecutions. This should include special units in police and judiciary with sufficient and highly qualified staff;
• Civil society organisations and any Maltese citizens should be encouraged to provide evidence and bring formal complaints to the Police forces, FIAU and MFSA, regarding white collar crimes and money laundering in Malta, in order to trigger criminal investigations.
• An investigation is needed over the alleged influence of elections through increased hirings in the public sector, issuance of construction permits and regularisations of irregular constructions, as well as pay increases and promotions in the military
• An investigation is needed on allegations of the smuggling of Libyan petrol;
• Reassess the importance for Malta joining the EPPO in order to work together with participating MS against EU fraud and other crimes affecting the Union' financial interests.