Issue link: https://maltatoday.uberflip.com/i/1174220
17 maltatoday | SUNDAY • 6 OCTOBER 2019 INTERVIEW Onto more specific matters. Malta has been singled out for harsh criticism – by Moneyval, among others – over its fight against money laundering. This has given you quite a headache over the past two years, hasn't it? This is not a problem of today. Let's be clear about this. Awareness about mon- ey laundering started in the 1990s: when the talk was all about tax havens, etc. I was chairman of MFSA at the time. Moneyval came to Mal- ta back then as well, as did the FTAF. In fact, the FIAU was established at the same time. So it's been a step-by-step process: we began with the FIAU, then we changed leg- islation to reclassify certain offences as 'crimes', where before they were not. If you look at the reports, you'll see that we always looked after our reputation. In my time as FIAU chairman, together with Central Bank gover- nor Michael Ellul, we turned down a lot of licence applica- tions from Russia to open a bank. They were sources we knew nothing about, and we were advised to refuse them. That's how it started. The problem is getting worse to- day, because of the awareness raised by large international scandals… Mexico, Deutsh- bank… it would be impossible to name them all.. You have to admit, however, that Malta has been implicated as well… Yes, I'm not saying Malta is an exception… … and certain mistakes have been made. You yourself have faced countless calls for resignation… I have always stuck up for the regulatory authorities. [My position has been] that, in all this mud-slinging between po- litical parties, by foreigners, by certain NGOs who have their own agenda… we do not dam- age the authorities we should be strengthening. And if they are weak, we have to look at how to strengthen them: what software are they using? What are their methods? To this end, we are now getting help from overseas. Just last week, for in- stance, we brought over a team from the FBI, and another from the IRS [American taxation of- fice] to give courses. So I see a positive side to this. First, the reaction was: 'this is unfair… why only us, out of all of Eu- rope?'. Now, however, we are realising that there has never been a better opportunity to strengthen both the FIAU, the MFSA… as well as the new agency we're in the process of creating… Would you agree that the murder of Daphne Caruana Galizia – whether or not there was a connection between the murder and the money-laundering stories she wrote about – placed further responsibility on the shoulders of politicians, to respond much faster? Of course. When a person has been murdered, the onus falls on you [government] to ex- plain. It's nothing new. It's not easy, for the government or the authorities. But I feel that – in terms of explaining – we have made progress… And yet, you have often been confronted by foreign journalists who do not treat you with kid gloves on this issue. Were their moments when you felt you were actually not convincing them at all? No, quite the contrary, in fact. We have managed to convince…it's just that some niggling doubts remain. But many of the letters and arti- cles that have appeared, seem to have been instigated by… I don't know what or where, exactly, but it is clear that they are instigated by some form of organisation. I have no doubt about this. Just this week, for instance, the EU Observer car- ried an opinion column with a disclaimer that it did not re- flect the editorial opinion of the newspaper. Obviously, the Maltese press all reported that 'the EU Observer said that…' The EU Observer said noth- ing. It was an opinion column in that newspaper. Now: where it came from, who was behind it… I don't know… Are you saying that the bad press Malta has been receiving over the past two years has been instigated 'by a hidden hand'? Yes. Maybe not all, but the dose has certainly increased. There will always be some kind of negative reporting: the Econ- omist, the FT, will always carry critical articles. But when you look into it more closely, with the experience to recognise certain things, you will feel it. The same pattern; sometimes the same words… quoting the same sources. I'm not saying it's all political, or all instigated by a hidden hand. But the dose has been increased to massive proportions. This is an indica- tion… But there have been cases where investigations have either not taken place properly, or taken too long. Do the police have enough manpower and resources to investigate crimes of this nature? They find it difficult, let's put it this way. Because there a number of restrictions: includ- ing the kind of salary they of- fer, and whether it can attract professionals in the field. This is, in fact, why we are setting up a new agency. We looked at the systems in place in the UK, Italy, the USA, etc., to see how to create a system where nobody has a monopoly over the prosecution. In America, there's the FBI, working in conjunction with the local forces. In the UK, there is a National Crime Agency to as- sist the police. Because, when dealing with serious organised crime involving hundreds of millions of euros… the ordi- nary Bobby on the street is not equipped to deal with it. He needs help…. Meanwhile, there have been three separate cases involving local banks – Pilatus, Satabank, and Nemea – which, although in the news for different reasons, were all cases where the necessary due diligence process was shown to be flawed. This is, in fact, the cardinal point in much of this criticism… In the case of Pilatus Bank, the applicant for the licence had a history in the USA, which was known only to the Ameri- can intelligence services. Did they pass on the information to the local regulators? As far as I know, they didn't. The FIAU, which performed the due dili- gence exercise, said that this information was not passed on- to them. So they found nothing about the applicant's history [to suggest he shouldn't have been given a licence]. Having said that, I don't exclude that mistakes were made… There have been other problems concerning local banks, however: the issue concerning correspondence banks; the closure of certain accounts…. There is an international focus on the Maltese banking sector at the moment, and the stories that have emerged are not positive. Are you concerned that this may be the beginning of a banking crisis? No, not at all. This is some- thing that is happening all over Europe at the moment – and I could add globally, too, but our concern is with Europe. Every bank operating in the EU – es- pecially if in the bankers' union – is facing more scrutiny than ever before. Naturally, because it happened in 17 other Euro- pean countries, it doesn't mean that we shouldn't be concerned that it is happening here, too. But this is not an issue related to 'Maltese banks', as such. It is a European issue… Is all this extra scrutiny having an effect on the economy, though? Is it making it harder to open up new businesses, for instance? It boils down to risk-manage- ment. Every bank transaction, or account that is opened, en- tails a risk. Some ventures will be high-risk; others low-risk, and so on. It is up to the bank to decide whether to take the risk or not. I-gaming, to give you an example, is considered 'high-risk'. What happened with HSBC is that… it's called 'de-risking'. In other words, they took a decision not to ac- cept bank accounts from any I-gaming sources. If we did the same thing… we would have closed down the entire sector. BOV, on the other hand, de- cided to take the risk. But when you look at how it all appears on the books…there is 'high- risk' everywhere. Entire coun- tries can be considered 'high- risk'; so you can't open any accounts from that country at all. I have seen countless letters from people who have been de- nied bank accounts in Malta… Surely, this adds up to a threat to the entire banking sector, however. Is there a solution to this? Yes, through new initiatives: including new banks which employ better methods and practices. PHOTOGRAPHY JAMES BIANCHI