Accountants fined €59,000 by FIAU, clients included firms in Operation Dirty Oil

Accountacny firm fined €59,000 by FIAU over shortcomings in adminstrative set-up

An accountancy firm that had, among others, provided corporate services to one of the companies implicating in the Operation Dirty Oil fuel smuggling ring, has been fined €58,900 by the Financial Intelligence Analysis Unit (FIAU). 

Their clients included ADJ Trading, a company implicated in the €30 million Libyan fuel smuggling ring, that was controlled by former national team footballer Darren Debono, the Libyan smuggler kingpin Fahmi Slim Ben Khalifa and Egyptian national Ahmed Ibra-him Hassan Arafa. 

Baldacchino also audited Oceano Blu Trading, a company that used to be controlled by Italian national Nicola Orazio Romeo, who was also implicated in the ring. Romeo was registered at the same home address as Darren Debono. 

Chris Baldacchino & Associates was fined for lax anti-money laundering controls that could have “possibly led the firm to be used and abused by money-launderers to bypass checks that would otherwise have been carried out”, the FIAU said in a notice on its website

The firm had failed to have in place and carry out customer risk assessment procedures and the risks of certain jurisdictions it was exposed to, including the US, British Virgin Islands, Libya and Egypt. 

The firm had also provided “inaccurate” information to the FIAU about its compliance with anti-money laundering rules, hindering its ability to perform an effective risk assessment of the firm. 

The firm had also failed to establish who was behind the companies it was servicing.

Right of Reply (28 October, 2020)

I refer to the article entitled “Accountants to fuel smuggling ring fined €59,000 by FIAU”...

Allow me to first of all make it abundantly clear that I am not in any way contesting the facts relating to the administrative fine imposed by the FIAU on my firm. That administrative fine was issued on the basis of findings from 2019 that identified a number of shortcomings in our administrative set-up, including staff that had not yet effected proper training in relation to their ‘anti-money laundering and terrorism financing obligations’. These matters have, since then, been addressed and resolved via a fully-fledged remediation plan carried out during 2020 in full cooperation with the FIAU.

Unfortunately, the story upon which your own article is based was not built solely on the facts of the matter of the administrative fine imposed by the FIAU, facts that were already in the public domain, and which we are not contesting. The justification presented by the FIAU for the fine did not make reference to any specific client but solely to our own administrative set-up.

What we found to be very worrying and damaging to our firm is that the ‘Times of Malta’ article in question made certain associations with alleged criminal activities by third parties. By selectively naming just two clients out of our client portfolio the article created a picture that could very easily lead your readers to come to the conclusion that our firm was directly involved in the alleged criminal activities. This mosaical construction is causing serious harm to our professional reputation and business goodwill by implying that, since we provided services to the two companies referred to in the article, we were somehow involved with the said companies, their shareholders or directors in any business activity, be it legitimate or illegitimate, which they might have been carrying out.

I would like to underline the fact that the day-to-day management, accounting, financial reporting and other related matters concerning both companies referred to in your article were handled directly and exclusively by the management of the companies.  Our only involvement was that of conducting an end of year audit of the companies based on the I would like to underline the fact that the day-to-day management, accounting and other related financial matters concerning both companies referred to in your article were handled directly and exclusively by the management of the companies. Our involvement was that of conducting an end-of-year audit of the companies based on the information that was provided to us as at year-end, including banking transactions, contracts and related paperwork, which we request from all of our clients on an annual basis. My firm had absolutely nothing to do with any decision-making of the companies involved, even though readers of the article would be forgiven for linking the lacunae in our systems highlighted by the FIAU, to the activities mentioned, and subsequently jumping to the incorrect conclusion of an involvement with the alleged fuel smuggling ring.

On behalf of my firm, I would therefore like to reiterate that we were fined by the FIAU solely for shortcomings in our systems for checking on clients, that we addressed these shortcomings immediately in full cooperation with the FIAU, and that there is no association with any other activity that your article might have led readers to believe.

Having explained our position, and given the facts in full transparency, I shall reserve my position at law should similar implied allegations be unwarrantedly disseminated by your newspaper or its online portal in the future.

Chris Baldacchino CPA,
Certified Public Accountant and Practicing Auditor,
Chris Baldacchino & Associates