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

The police and FIAU investigations

The report presents two conflicting positions, just after each other, on what the Police Commissioner told MEPs about investigations into reports of money laundering drawn up by the Financial Intelligence Analysis Unit.

It first says this:

“The Police Commissioner confirmed to Members that several FIAU reports were sent to the police and registered (under the same file number) but no investigation was started. Given the fact that the Police Commissioner is directly appointed by the Prime Minister, questions were raised as to why investigations related to the Prime Minister’s chief of staff were not investigated. Members were reminded that only police forces can start an investigation in Malta.”

And then says this:

“In the Police Commissioner’s answers it was underlined that FIAU compliance reports never reached formally the Malta Police and that those reports that have fallen into the public domain were never formally reported to the Police; following questions from Members on why these reports that were leaked and are in the public domain did not enable the Police to start investigations, the answers were not conclusive: Police Commissioner and aides underlined the limited competences of the Police to start investigations and argued that the leaked FIAU reports were not backed by subsequent reports.”

Attorney General Peter Grech

Attorney General's plain 'no'

MEPs found the Attorney General defending his position as to why no criminal investigations were initiated on money laundering allegations against politically-exposed persons. When confronted with the provisions of the anti-money laundering law that allow the AG to issue an investigation order, Peter Grech replied so:

"The AG argued that to issue such investigation order, one must be in possession of concrete evidence in order to stand before the courts. When asked by Members if several media reports about serious suspicions of money laundering by Politically Exposed Persons, including one Member of the Government and the Chief of Staff of the Prime Minister, were not enough to request such an investigation order, he answered 'No'."

Grech added:

"On specific questions related to his competences to initiate proceedings based on the Prevention of Money Laundering Act, the AG noted that he needs a reasonable suspicion in a money laundering case to ask the Court to issue an investigation order. The same powers are vested in FIAU also and they can in their report conclude that there is a reasonable suspicion of money laundering."

Chief Justice Silvio Camilleri. (Photo: Ray Attard)

Chief Justice disputes police position

Contradicting the apparent restraint expressed by the police on their competence to investigate money laundering crimes, Chief Justice Silvio Camilleri told MEPs “reasonable suspicion” was not a requirement to initiate an investigation.

“Following questions on investigations of money laundering suspicions and the alleged limited competences of the authorities in this field, the Chief Justice underlined that ‘reasonable suspicion’ is not needed for the Police to start a criminal investigation. Investigations can be started by the Police with simple information of a crime brought to their attention, in any form. He noted that for court prosecution or for measures restricting freedoms, such as an arrest warrant, then the legislation requires ‘reasonable suspicion’

The Chief Justice also spoke of the need to split the dual roles the Attorney General has in the Maltese system

“The Chief Justice underlined the need for separating the roles of the Attorney General, as legal counsellor of the government and as public prosecutor; he believed that, according to the constitutional system, the AG was able, over the years, to distinguish between roles. But admitted that this combination of functions may no longer be suitable”

Questions on Pilatus Bank featured heavily during the fact-finding mission

MFSA on Pilatus Bank and Nexia BT

The Malta Financial Services Authority told MEPs it intensified its supervision of Pilatus Bank, described as a wealth management bank that catered for 130 clients, including politically-exposed persons and Azerbaijani clients.

“The MFSA explained that Pilatus Bank didn’t start operating on the first day they were granted the licence. MFSA immediately carried out an on-site visit in 2015 (within one year of licensing). MFSA compliance reports are confidential, so, they could not comment on the content of the visit. But MFSA was part of a second on-site visit in March 2016, together with the FIAU (which led to a compliance report raising suspicions of breach of Maltese anti-money laundering legislation by the bank, a report modified in September 2016). MFSA argued they didn’t have findings strong enough to withdraw the bank’s licence. They added that their supervision of the Bank has intensified since 2016.”

The MFSA told MEPs that to revoke a bank licence it could not rely on journalists’ revelations.

“The MFSA explains that, in general, they need systemic proof of money laundering to be able to revoke a license but this is not a one-off decision, rather a process, based on a series of information. MFSA argued that they cannot rely on journalists’ revelations or leaked FIAU reports in such cases, but need to find concrete evidence, otherwise the bank could appeal the decision. MFSA added it is working intensively with [Pilatus] bank, but admitted this may not be seen by the Maltese population. Asked about the share of PEPs in the Pilatus clientele, the MFSA said it has the information, but cannot share it.”

According to the MFSA, Maltese financial services firm Nexia BT was under supervisory attention over its involvement in Panama Papers.

“[Committee] members asked about Nexia BT, which allegedly is involved in setting-up of offshore structures for PEPs via, inter alia, Mossack Fonseca: “They are under supervisory attention by the MFSA together with the FIAU. An onsite inspection was carried out recently and we are looking into the findings. (There is also an ongoing magisterial inquiry). We are looking at what type of actions we need to make.

FIAU and Konrad Mizzi's alleged offshore structure

An FIAU official told MEPs the agency worked on a 'document' concerning allegations on an offshore structure in Dubai that was to receive payments from a company managing the LNG terminal in Delimara but this was not conclusive.

"According to the FIAU, a third document of around 130 pages concerning an alleged offshore structure of Minister Konrad Mizzi had been written, however it 'was not a report but a working document'. That document needed to be further checked with assistance of other FIU’s, Members were told. Four pages of this “non-report” were leaked to the press. 'This document never reached the FIAU’s financial analysis committee. When the time comes and we have enough information, we make a report,' Members were told."

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