Caruana Galizia public inquiry: FIAU deputy director says reports on Schembri and Mizzi were passed on to police

17:19 That's it for today. Thank you for following this live blog. David Hudson

17:18 The inquiry will continue on Wednesday. David Hudson

17:18 Scicluna's open court testimony has concluded and the rest will be heard behind closed doors. David Hudson

17:16 The host regulator, in this case the UK, would hold interviews with the key players in the bank. But this had been stopped. David Hudson

17:15 The MFSA wanted to go into Pilatus Bank in May for a top-down inspection but they only stepped inside in November. The MFSA were handed documents from the bank during that four-month period. David Hudson

17:15 The inquiring magistrate had originally prevented them from entering the bank, so to avoid delays they had obtained the documents from the bank to inspect at their premises. David Hudson

17:12 They didn't want the media exposure, she replies. David Hudson

17:12 "Was it so terrifying?" asks lawyer Jason Azzopardi. David Hudson

17:11 The employee in question didn't want to have anything to do with the bank or the review. David Hudson

17:11 The FIAU had carried out a forensic review of the bank. David Hudson

17:11 In order not to delay the process unnecessarily, we obtained the documents from the bank and reviewed them at the MFSA by our inspectors, she says. David Hudson

17:11 The employee who resigned was a banking inspector. David Hudson

17:10 The MFSA's position had been that the checks had to be carried out. One employee resigned from the MFSA as a result. David Hudson

17:09 An on site visit was needed, she says. “We had a situation with our inspectors who were not feeling comfortable going on site. The reason they gave me was because of the media scrutiny and did not feel comfortable with being filmed going on site and so on. The MFSA addressed the issue internally.” David Hudson

17:07 "We started a number of actions," she replies. "We immediately got in contact with the FIAU and requested updated Due Diligence checks and issued a directive prohibiting the destruction of documentation." A UK based intelligence firm was also spoken to. David Hudson

17:07 "Can we say the allegations were substantially correct?" Said Pullicino asks. David Hudson

17:06 Said Pullicino asks if the MFSA had any issues with the inspectors. "There was the Caruana Galizia blog which contained certain allegations. We used it as an open source," Scicluna says. David Hudson

17:06 On the other set of findings, the FIAU on the alert from the MFSA, had gone inside the bank. After that visit there were anti-money laundering perspective concerns. On the basis of that, the bank's passport application had been halted. David Hudson

17:04 There were two sets of findings, one from a credential perspective and others which they felt they had to refer to the FIAU. On the credential findings the MFSA continued to monitor the bank closely. David Hudson

17:01 There were no alarm bells, there was some concentration of business that we saw. When the MFSA checked with the FIAU, they decided to monitor it more closely. The FIAU had later said that certain anti-money laundering concerns had been addressed, Scicluna says. David Hudson

17:00 The MFSA liaised with the FIAU, who carried out their own on site inspection, passing on feedback to the bank who made representations. It was confirmed that any shortcomings had been rectified. At the time of the inspection the FIAU had shared their concerns with the MFSA, who had stopped the passport application to establish a branch in the UK and started to monitor the bank more intensively. David Hudson

16:57 No surprise inspections were carried out. At that point in time meetings were held with the FIAU. David Hudson

16:57 From the regulatory returns, the MFSA saw an increase in business. Inspections revealed that there were jurisdictions which were troublesome. Maltese PEPs also featured, she says. David Hudson

16:57 They had also applied to transfer their business to the UK as part of their business development. David Hudson

16:56 Money was coming in from countries not mentioned in the business plan, Comodini Cachia points out. "Questions are put to the bank in that situation. The reason given by the bank was that they were in the initial stages of their operation and needed to develop their business as part of the business plan. This happens, a business plan takes some time to develop." David Hudson

16:56 Our inspectors identified certain shortcomings, but they weren't big ones from our perspective. The report was passed on to the FIAU, who carried out an on site inspection, Scicluna says. David Hudson

16:51 In this case it was a top-down inspection of the entire Pilatus setup, she says. David Hudson

16:51 "This is part of our standard process. We give notice that we intend to visit and notice of the point of the inspection. We have carried out surprise inspections but not in this case... when there were serious concerns." David Hudson

16:50 Once a bank is licensed, it doesn’t operate immediately; there is a period where it establishes offices and so on. Once it starts, it needs to report to the supervision team on a regular basis. About a year and a half after it was set up, the MFSA carried out an on-site inspection because there was certain growth on the part of the bank. "There was no particular suspicion." David Hudson

16:49 What sort of influence did Sadr wield on the bank, Comodini Cachia asks. David Hudson

16:49 One of the licence conditions was that there is a number of non-executive directors on the board to counteract any dominance. David Hudson

16:48 She is asked if things changed after the licence was issued, and says that they continued to monitor the bank. David Hudson

16:48 This was ascertained. He had no experience in banking but had experience in financial services and had a team of directors who had experience in banking, and the MFSA at the time concluded that the board had the required competence to licence the bank. David Hudson

16:48 As part of the process Sadr had explained that he had already been the owner of an asset management company in Switzerland and wanted to offer financial management to his pool of clients. David Hudson

16:44 As he was an Iranian national, this required enhanced due diligence. Nothing negative emerged from the intelligence report at the time, she explained. David Hudson

16:42 This is an approach used from time to time, she says. David Hudson

16:42 Where due diligence comes in, we had a standard process which was applied to the shareholder and the management team. In that case, we felt that apart from the standard due diligence checks we went beyond and commissioned an intelligence report on Sadr as the owner of the bank. David Hudson

16:41 Said Pullicino asks about Sadr, who was not a banker by trade when he set up the bank. David Hudson

16:40 The process began in Feb 2013 when the authorizations unit went through all the application documents. The process focuses on the requirements established by law, including suitability of management. This process took around 9 months. David Hudson

16:40 Pilatus Bank had formally approached the MFSA in September 2012. As part of procedure there are pre-application meetings. In the case of Pilatus, this had been held that month. There was the promoter, Mr. Ali Sadr and Ms Juanita Bencini, and on MFSA side there was Prof. Bannister and two other employees. David Hudson

16:37 In this case, we passed on the file to the FIAU because we saw things which we felt were relevant to their work in ensuring compliance to the law they regulate, she says. David Hudson

16:37 When her unit had concluded the investigation, it passed on all the information to the FIAU who continued their work. They continue to liaise closely, she said. David Hudson

16:34 "We saw certain risks from jurisdictions from which they were operating." David Hudson

16:33 From a compliance visit at BT offices, she recalls that there were some things that they had asked the company to fix, including the appointment of another director, governance and business which the companies were bringing. She was not directly involved in the on-site inspection herself, she says. David Hudson

16:32 the MFSA has a much wider remit, primarily for compliance with the rules dealing with financial standing, corporate governance and so on David Hudson

16:32 The FIAU is the competent authority for money laundering, the MFSA is the credential regulator, she says David Hudson

16:31 She is asked whether Konrad Mizzi, Keith Schembri, Brian Tonna, Nexia BT and Karl Cini were at any time involved in MFSA action. David Hudson

16:28 "Public persons, yes, but not from the Panama Papers," she says. David Hudson

16:28 Comodini Cachia asks if the MFSA had ever taken action against persons in public life, especially those mentioned in the Panama Papers. David Hudson

16:27 Scicluna was a member of the supervisory council as head of the authorisation unit and then as chief officer, supervision. David Hudson

16:26 The supervisory council, which no longer exists, was a committee established by law which was made up of the heads of supervisory units and chaired by the Director General. Its role was to take every regulatory decision required, Scicluna explains. David Hudson

16:25 She is asked what the MFSA board does in cases of compliance with money laundering regulations. The competent authority is the FIAU, she says. In this case the MFSA acts as an agent of the FIAU. This agency has changed over the years. Previously, the MFSA would carry out on site inspections for the FIAU, other times it would do so jointly. David Hudson

16:23 Scicluna has been working with the MFSA since 1995. David Hudson

16:23 Borg explains that there is a court case by Pilatus shareholders against the MFSA, including an action for damages. There is also a case where they are contesting the withdrawal of its licence. There may be questions which require the courtroom to be vacated, he says. David Hudson

16:22 Lawyer Kris Borg has appeared to assist her. David Hudson

16:21 MFSA director-general Marianne Scicluna now takes the stand. David Hudson

16:21 We are back inside the courtroom. David Hudson

15:55 Reporters are now being ordered out of the courtroom so Zammit can continue to testify behind closed doors. David Hudson

15:55 "I read Mr. Ferris' testimony from last week and wanted to comment. I was a bit surprised to read that he was not aware of the reasons for which he was dismissed. The FIAU had given the employment tribunal a list of 23 reasons for which he was dismissed. There were lots of reasons. We employed him as a manager of the intelligence team and we made a mistake, he was a terrible manager, in the end we had to take action." David Hudson

15:54 "In other countries, things happened, people resigned. But here I’m representing the FIAU. It is unrecognizable from the FIAU of years ago, we are free to open cases... it has done everything it can, sending reports to the police, to other international bodies... We're working hard. We met MONEYVAL every single day for two weeks… They concluded that the FIAU, from an intelligence point of view, were doing a very good job. On the supervisory point of view we weren't doing very well... " David Hudson

15:49 "I'm a bit confused about your question. Pilatus is separate from Panama Papers. Work is ongoing but we don't have results,” Zammit says. David Hudson

15:49 Said Pullicino says he is preoccupied that after the Panama Papers, in Malta with all the due diligence proceedings in place, "nothing really happened." David Hudson

15:49 "I'm not going to answer this in the open stage." Zammit indicates that he will, however, behind closed doors. David Hudson

15:48 When was it that the FIAU realised that Yorgen Fenech was involved in 17 Black? David Hudson

15:48 No... I mean yes. You impose a penalty after having given the opportunity to the subject person to represent itself. We impose penalties in serious cases and where we know we can succeed. "Our mission isn't penalties, but to drive compliance. Before imposing penalties we would require a subject to remediate, after which we would consider imposing penalties." David Hudson

15:48 Comodini Cachia asks whether penalties are imposed on a subject person who conceals or doesn't have information readily available. David Hudson

15:47 "I can't remember, but there is a famous CCTV screenshot taken illegally of me holding a red file. It was not Mizzi's file as reported in the media." David Hudson

15:41 Zammit is asked whether he had met with Abdilla about testimony on parts of a report on Pilatus, on the eve of an interview with the magistrate . David Hudson

15:41 "We often work beyond office hours beyond office hours at 6, 7 or 8 in the evening. David Hudson

15:41 Did you have meetings with Abdilla outside office hours about these reports? David Hudson

15:41 "I can't recall the details of the meetings, appreciate that we have lots and lots of meetings." David Hudson

15:40 "I probably did but I can't recall exactly." David Hudson

15:40 Zammit says he is sure that he had held meetings with Ian Abdilla, the FIAU police liason, about a number of different things. He is pressed as to whether he had met with him to discuss the reports mentioned earlier. David Hudson

15:39 Zammit is asked who the police representative on the FIAU board is. “It’s Silvio Valletta… he was on the board of the FIAU, not as a liaison or a representative.” David Hudson

15:37 "As I said before, once I am in a position to speak more freely, everything will become clearer," Zammit says. The board seems to indicate that he would testify behind closed doors at a later stage. David Hudson

15:37 At the moment FIAU is carrying out new work on Pilatus bank, adopting an entirely new process. Now they are asking the bank to provide a copy of all the data. "Everything. This work is ongoing." David Hudson

15:36 The main issue was not identifying customers, but the source of wealth and source of funding for the customers. David Hudson

15:32 "There seems to be something hidden from you," the board tells Zammit. David Hudson

15:32 The panel says that it understands that sometimes documents go missing, but they mention that he had described the missing information as "significant." David Hudson

15:30 It is important to note that Camilleri Preziosi and KPMG had been appointed the next day after we sent our letter to the Bank, he says. David Hudson

15:28 In a letter from 2016, he wrote that a significant amount of follow-up documentation had been provided at the second visit and he had expressed that he was concerned. David Hudson

15:28 He recognises "most of them," he says. He identifies his signature and says that they were documents drafted internally and then signed by him. David Hudson

15:25 Witness is being shown an article from newspaper Illum and is asked to identify any documents reproduced in it. "Do you recognise it and what do you think [the document] is?" David Hudson

15:25 "We were very concerned about Pilatus bank... something which the FIAU had decided was that at the time we did not have enough information to proceed against it, but we had written to it saying that we were very concerned... we were not happy with the situation, so we decided to give it some time and go again." David Hudson

15:23 Judge Said Pullicino asks whether he had the impression that the bank was a matter of concern to the FIAU. David Hudson

15:23 A meeting on the 22nd June was held between Galdes, himself, Ali Sadr and Juanita Bencini, Zammit says. There was another meeting later between Sadr and Galdes. No other FIAU personnel were present, he says. David Hudson

15:19 Asked why he had informed the bank that Galdes had resigned, he said he could not recall but Galdes had a number of meetings with the bank and they would no longer be receiving any communications from him. David Hudson

15:17 Answering a question from Said Pullicino, he said This work on Pilatus is not to find money laundering, but to see if it is adhering to its obligations. If money laundering is suspected it is passed on to a specific team. David Hudson

15:16 He explains that it is very typical to find files containing Customer Due Diligence information which may wish to be kept restricted to the compliance team. It happens very often that we find a dual filing system. David Hudson

15:13 Normally before the examination, we would ask for information. In the case of Pilatus we looked at all the connections with PEPs. David Hudson

15:13 He is asked about what prior indication was given to the bank about information which would be sought. David Hudson

15:13 The compliance visit lasted from March 15 to March 22. David Hudson

15:12 The MFSA had carried out a credential examination in 2015 and noticed a high concentration of PEPs in the bank. This increases the risk and is taken on board when deciding on what to give attention to, he explained. David Hudson

15:10 He is confronted with the assertion that the bank was "born under a cloud." David Hudson

15:10 As far as I know the departure of Galdes had no effect on this. In fact it was Galdes who ordered the second visit. David Hudson

15:09 The onus of demonstrating compliance is on the subject person. Oftentimes subject persons do not show information at first, but later produce it. Sometimes the information is scattered across the organisation, he explains. David Hudson

15:08 The first visit to Pilatus was in March 2016, Zammit said. Asked when the compliance failures were remedied he replied that he wouldn't use the word "remedied." When they returned, the documentation was sufficient, although he could not vouch for when it was created or whether it was always there. David Hudson

15:06 "Today we do things very differently. We are much stronger and do things very differently." David Hudson

15:06 It was decided that the FIAU had insufficient information to say that Pilatus bank had failed. It was next to impossible for us to deduce whether the information was created in the interim or existed at the time of the initial visit. We are not investigators. At the end the committee decided that we did not have a strong legal basis to take action against them. If we conclude that there is a breach of the law we would have to be able to prove it. Our procedures were not strong enough at the time, he said David Hudson

15:05 The same team was sent and looked at the same file. Towards the end of June, an internal committee meeting was held. On 12 July, the bank was informed of a follow-up visit. Galdes resigned soon after. David Hudson

15:05 Galdes had accepted to go again on site. David Hudson

15:04 Sadr stressed that the findings in the FIAU's letter did not subsist and that the bank had all the documentation it was supposed to have. He invited the FIAU to carry out a follow-up visit. David Hudson

15:04 After the march examination we issued this report in May 2016, he says. “The bank had one month to provide its representations. On 8 June we received them and on 22 June, a meeting was held with the Bank and the FIAU. Present were Ali Sadr, Manfred Galdes, Juanita Bencini.” David Hudson

15:01 He is shown a report on Pilatus Bank. He says it is an extract from a compliance report, an initial findings letter sent to an individual, detailing the findings of an on-site examination. David Hudson

15:00 “As far as I’m aware, the police have taken action but I can't speak about it in this court,” he says. David Hudson

15:00 He is asked whether he had any follow-up meetings with the police and he replies that he's sure that the FIAU had. David Hudson

14:59 Was this one forwarded to the police and further action taken? Zammit confirms that further action was taken on this report and that it was forwarded to the police. “When it comes to what the police have done, it's a different matter,” he says. David Hudson

14:58 This one appears to be copy-pasted or very similar to a report from the FIAU. Its not the usual format. David Hudson

14:58 He is now being shown a report on the sale of passports and former chief of staff Keith Schembri. David Hudson

14:57 The FIAU's role is simple : to determine whether there is a reasonable suspicion of money laundering. Once this is established we proceed with the case, Zammit explains David Hudson

14:54 Commodini Cachia asks if further action was taken. David Hudson

14:54 She asks him again about the nature of the report. "Offhand I can say it looks like a report which we handed to the police." David Hudson

14:53 Zammit apologises for raising his voice, saying that he is incredibly frustrated and upset that someone has leaked the report and that nobody has been convicted of breaking the law in question. David Hudson

14:52 Commodini Cachia asks if the report which the FIAU forwarded to the police indicated reasonable suspicion on money laundering and whether the police should continue to investigate. "Yes," he replies. David Hudson

14:52 Some of the most important information was not available to the FIAU at the time, he says. The information was later added to this report after it was leaked, he says, adding that it had a "significant bearing" on the report. David Hudson

14:51 “It is important to understand what this document is. It is an internal working document. Depending on the complexity of the task we can start working on a document and change conclusions and so on. This was a living document and continued to change over time,” Zammit says. David Hudson

14:47 Commodini Cachia asks if the document was handed to police in any other form. David Hudson

14:47 Witness is uncomfortable and is raising his voice at lawyer Therese Commodini Cachia, asking to be heard behind closed doors. "I want to make it clear Mr Zammit that we do not raise our voices in here," says judge Michael Mallia. David Hudson

14:46 The document is about former tourism minister Konrad Mizzi and the New Zealand Rotorua Trust. David Hudson

14:45 Asked if the document was ever sent to the police as it was an internal document, he replies "this document in itself is an internal document until someone broke the law and leaked it. It is not a report." David Hudson

14:44 "It's very familiar. Looks like one of our internal documents, not a finalised report which we refer to as a working internal document," Zammit says. David Hudson

14:43 He will testify in open court. David Hudson

14:43 Zammit asked to testify behind closed doors, but this was objected to as the document was already in the public domain. David Hudson

14:42 He is being shown an FIAU report leaked to the media to confirm their authenticity and explain what type of report it is. David Hudson

14:41 "I was immediately appointed as acting Director until the present day’s director joined the FIAU," he says. David Hudson

14:41 He was also acting director when Manfred Galdes resigned. David Hudson

14:40 He is the Deputy Director and has been working there since 2002. David Hudson

14:40 First witness is Alfred Zammit from the FIAU. David Hudson

14:40 The session has started. David Hudson

14:34 Good afternoon. We are waiting for the public inquiry sitting to commence. David Hudson

The public inquiry into the murder of Daphne Caruana Galizia continued today with FIAU deputy director, Alfred Zammit, and MFSA director general, Marianne Scicluna, testifying. 

Zammit told the board of inquiry that reports the FIAU compiled that concerned money laundering and the sales of passports, involving former tourism minister Konrad Mizzi and former OPM chief of staff Keith Schembri were passed on to the police.

"Whether the police followed up on these reports, I cannot say. I'm here representing the FIAU... it has done everything it can, sending reports to the police, to other international bodies. We met MONEYVAL every single day for two weeks. They concluded that the FIAU, from an intelligence point of view, were doing a very good job," he said.

He also criticised FIAU investigator, Jonathan Ferris, who had testified in the previous week, saying that he was surprised that Ferris had told the inquiry that he was unaware of why he was dismissed.

"I read Mr. Ferris' testimony from last week and wanted to comment. I was a bit surprised to read that he was not aware of the reasons for which he was dismissed. The FIAU had given the employment tribunal a list of 23 reasons for which he was dismissed. There were lots of reasons. We employed him as a manager of the intelligence team and we made a mistake, he was a terrible manager, and in the end we had to take action."

MFSA director-general Marianne Scicluna testified after Zammit's testimony concluded behind closed doors. She said that with regard to Pilatus Bank, she had issued a directive prohibiting the destruction of documentation and that while no surprise checks of the bank were made, a top-down check was needed. A UK-based intelligence firm was also spoken to.

In the last sitting, former FIAU investigator Jonathan Ferris repeated the claim that former European Commissioner John Dalli had told him that the Panama based company Egrant Inc belonged to the Labour Party and was short for “Election Grant”- a claim strenuously denied by Dalli last year. He also stated that Dalli had described Caruana Galizia as a “cyberterrorist”. Ferris had previously made the claim about the offshore company and its link to the Labour Party during the Egrant inquiry with Dalli insisting he never made any such insinuation.

Ferris told the public inquiry that at the time of his sacking from the FIAU after the 2017 general election he was working on an investigation into the LNG tanker that was part of the power station project. Ferris said he was looking into the financial structures that belonged to then energy minister Konrad Mizzi. While working for the FIAU Ferris spoke about feeling like he was being watched; having his offices searched and being followed by police cars. He said that he started to get paranoid.

The public inquiry is entrusted with the task of determining whether any wrongful action or omission by or within any State entity could have facilitated the assassination of Caruana Galizia or failed to prevent it, and particularly whether the State knew or should have known of risks to the journalist’s life at the time of her murder.