The sky has turned grey

Last Wednesday, Malta and Romania become the first two EU members to be placed on the grey-list of the Financial Action Task Force (FATF). It is understood that the US and Germany were the main instigators for the unfavourable vote for Malta.

After this vote, our Prime Minister, Robert Abela, described the decision to add Malta to a financial crime watchdog’s grey list as “unjust” while claiming that most concerns flagged by global assessors had been addressed. He even insisted a ‘majority’ of countries had not agreed with the FATF’s verdict.

Then he confidently predicted that “Businesses will continue to find this government at their service”... “We will continue to work to generate business and investment – both local and foreign.”

On his part, our Finance Minister, Clyde Caruana, said that the government even insisted that the decision would not have a serious impact on Malta’s economy and there will be no “sudden shocks to the system” – even boasting that he did not see “any major shock that will impact the country.” He insisted that Malta will not be reviewing its plans for economic growth or its financial targets, to the extent that he was confident enough to declare: “I do not forecast this to have a negative impact on the economy, as I am certain that the country will continue to work.”

On the other hand studies suggest that ending up on the greylist could impact banking, ease of doing business and Malta’s attractiveness to foreign investors.

Are Robert Abela and Clyde Caruana acting with bravado in the face of international opprobrium?

Malta will, in fact, now be given an action plan that it will have to adhere to before it can be deemed to have satisfied FATF criteria and moved off its greylist.

Encouraging the Maltese people to move on despite the greylisting is the right way in the circumstances, even though the Prime Minister and his finance minister probably overdid it, and almost sounded as if they were purposely dismissing the negative effects of this greylisting – much like a defiant schoolboy telling his teacher that his undeserved punishment will not have any impact. The Prime Minister even brought up the excuse that lax regulation was an ‘endemic’ problem in Malta that dated back decades, and that it was only recently that the country had tackled problems head-on.

I think the government is missing the wood for the trees.

There is no doubt that there were money scandals involving crime and money laundering in many developed countries, none of which were greylisted. Gauged by the amount of money involved, Malta’s scandals were not as enormous of those in other countries.

But the problem is that many seem to be missing is the involvement of the state – i.e. persons who run the state of Malta – in the scandals. It’s one thing to say that a private bank in Denmark was caught laundering huge amounts of money and it is another thing to say that the chief of staff of the Prime Minister was involved in money laundering, when the world knows that many decisions made by the Maltese state were being taken by this man.

The difference is obvious even though many Maltese have reacted to the FATF decision by ignoring this important difference. Lax regulation on a national scale – which is true – does not excuse the people in the centre of power not observing financial regulations.

Why now, some might ask. After Muscat’s resignation, international observers waited to see how the Abela administration would tackle the ‘inheritance’ received from the Muscat administration. Did Abela’s tactics and actions show that the Maltese government had turned a new page? I think Abela’s failure to cut off his administration completely from what he inherited played a very important part in the greylisting decision.

This does not mean that Abela and Caruana did not take important actions to distance them from the Muscat administration. However Abela’s juggling game in order not to lose the votes of Joseph Muscat fanatics has been assessed by foreigners in a much different way than Maltese observers have assessed those same actions that were considered as half-measures by many.

Abela’s juggling act to move away from Muscat while retaining the support of Muscat’s aficionados has proved an impossible task, at least in the eyes of foreign observers. In their eyes and in the eyes of many Maltese as well, Abela’s administration was just a continuity of Muscat’s. Can we blame them for that?

The promised new beginning never was and the list of people in the Muscat administration who should have been brought to justice but were not, is not small. Muscat’s interference in Labour’s election of his successor continued to strengthen this perception.

There are also other issues that have irked and continue to irk powerful countries. US-Malta relations took a steep dive down after the infamous SOFA debacle when the US thought Abela had accepted signing a SOFA agreement and a very high official of the US State Department flew to Malta with a huge delegation, only to find that they were misled by Abela or that Abela had changed his mind. No one should treat any country like this, let alone the USA.

France and Germany are irked by the number of French and German companies using Malta’s system to avoid paying millions of tax in their country.

These issues – on their own – should not have led to an FATF greylisting, but I am sure that they were at the back of the minds of those who pushed for this greylisting.

Malta has surpassed the expectations of even its most positive supporter of its Independence. In the course of this exciting trip that started on the 21 September 1964, Malta made many political mistakes on the international front but these were eventually neutralised. Subsequently, when Malta became a fully-fledged EU member, we arrived at our natural home – only for the Muscat administration to run Malta in a way that was perceived as that of an unruly undisciplined child.

Many thought that Malta needed a lesson.

Should we blame them?

I do not think so.