How the silly Maltese mouse twisted the tail of the American lion

Have you ever asked yourself why should the government of the United States of America turn its big financial guns on our small island?

FATF was set up by the G7 in 1989 to fight money laundering, but in 2001 it expanded its role to fight terrorism, under the watchful eyes of USA. The countries of interest included Iran and Venezuela, high on America’s blacklist.

Many believe Malta’s FATF grey-listing was provoked by money laundering activities; conveniently forgetting that the amount of money that is laundered by 10am every morning, in the City of London, Zurich and New York exceeds all the money that might have been laundered in Malta in the last ten years.

So, what was it? And when did this roadmap start to go awry?

One cannot really say, but it may have started when Joseph Muscat, after fighting vehemently against Malta joining the EU, got elected as a Labour MEP. These guys on the gravy train need to be kept busy, so our Joseph Muscat was appointed a member on the EU-Azerbaijan Parliamentary Cooperation Committee. No doubt, this was a great opportunity for a young, intelligent politician from a small island to expand his horizons.

Fast forward to the first labour landslide, with Muscat – now Malta’s PM – making an ultra-secret visit to Azerbaijan, accompanied by Konrad Mizzi and Keith Schembri. We never were told what went on behind closed doors, but the Panama Papers revelations give us a good idea of what probably happened.

Still, it was not all roses. What is the use of untold riches if one cannot enjoy them? And how does one move money from one place to another for it to be used? We will never know the whole story but leaks in the media suggest that Nexia BT – who had an ‘office’ at Castille and whose owners are now being accused of money laundering – had tried to open accounts in some 28 banks all over the world, but was blocked by some irksome anti money-laundering regulations.

Enter Pilatus Bank. Why not have friendly banks in Malta? This is where things started to go wrong. Ali Sadr Hasheminejad – known as Ali Sadr – the face of this new bank is a sleek Iranian businessman. Iran has a long border with Azerbaijan that is run by Ilham Aliyev, with the reputation of being one of the most corrupt politicians in the world. A bank based in Malta is regulated by the Maltese financial authorities, and authorities in Malta were so friendly.

So far it is not that bad. After all we have read in the media of many other similar banks in Lithuania, Denmark and other countries. But Pilatus Bank was so conveniently placed, that it was used to service Maltese clients with connections to Azerbaijan. In Malta we were even regaled with photos of the attractive daughter of the Azerbaijani President having tea with Michelle Muscat. What is wrong with a cup of tea, after all?

Later on things started to really get out of hand. Meanwhile, we had been used to see the lights of some 20 oil tankers – at a standstill outside Malta’s territorial waters on Hurd’s Bank – visible from the Sliema promenade. Guess what? Mr Putin decided to send one of his warships, stationed off Syria, to Venezuela and it asked to refuel in Malta, a request strongly refused by the then Muscat administration. Rumours have it that the Russians did refuel the tanker on Hurd’s Bank, which is not part of Malta, of course.

I am not privy to this sort of cloak and dagger stuff, but what is sure is that, much later, Malta tried to get UN sanctions on two suspected Maltese fuel smugglers. One presumes that this US pressure was behind the request, as this sort of business had been going on for years. Guess what? This Maltese initiative was blocked by the Russians with a last-minute veto at the UN Security Council.

Messing around with Russia and Venezuela should not be the cup of tea of anyone living on a small peaceful island, but money talks. Later on, one of the suspected smugglers was accused in court of money laundering.

To complicate matters further, the Maltese Courts ordered the release of thousands of euros that had been frozen under American sanction laws. Of course, these American sanction laws do not hold water in Malta, but I do not think that Uncle Sam was overjoyed.

Meanwhile, as luck would have it, while attempting to move some legally earned money from Venezuela, the Iranian was arrested in America. He broke no international law, of course. It was worse than that. His unforgivable crime was breaking the US sanctions on Iran, listed as a terrorist state in America. Once again, we do not know what happened behind closed doors, but the Iranian was subsequently set free. The official reason given was that the prosecutors did not have the money to cover the legal costs. If this was not happening in the US, I would have just said: say it to the marines!

The Iranian got off the hook and dodged himself out of many years in an American jail. We will never know what he told the Americans, though I am sure that this can make interesting reading to those following the Pilatus Bank saga.

Fast-forward to Robert Abela, now Malta’s PM. One of the problems inherited was a long-standing request by America for Malta to be a signatory of SOFA – an agreement giving privileged status for American military personnel stationed abroad. The Labour administration received a lot of flak after media reports suggested that it had approved a SOFA agreement under pressure to curry America’s support on the Moneyval test. The US request for this privilege had been refused for years on end by different administrations, all proud of Malta’s sovereignty.

And this is where things got really out of hand. It seems that US Defence Secretary Mark Esper was in Malta in September last year for high-level talks with Abela that also included the SOFA on the agenda. The Americans had been led to believe that this long-standing refusal was to be dropped by the Maltese government.

It was not a happy meeting as the Maltese side decided to withdraw its prospective acceptance of a SOFA deal and Esper left for the airport within one hour, fuming in a cloud of dust.

This is how a silly mouse twists the tail of a lion.

The rest is history. Malta is now with a list of what to do to get off the grey-list. There can also be other unrecorded items on the what-to-do-list, but by the looks of it, we will have to wait for the next election to get a glimpse of these.

FATF grey listing is not the end of the world, but meanwhile the PM has no choice but to continue running the gauntlet.