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11 maltatoday | SUNDAY • 20 OCTOBER 2019 NEWS GEORGE Degiorgio had bought the boat from where he detonated the bomb that killed Daphne Caruana Galizia for €30,000 in cash, according to court testimony. The detail emerged last year in a separate court case in which Caruana Galizia's mur- der suspects were charged with money laundering. The evidence submitted in court showed how cash pay- ments were the preferred transaction method to remain below the radar. The Degiorgio incident is by no means unique. Malta is still a cash-based society. A recent survey commis- sioned by the GRTU showed that 40% of all expenditure in 2018 was conducted in cash. Significantly, the survey also found that a third of mer- chants refused card payments. Ordinary expenditure in cash encourages tax evasion but for the more luxury items, where transactions can run into tens and thousands of eu- ros, the issue becomes one of money laundering. There is no law that prohib- its large cash payments for purchases, a situation flagged in the recent report drawn up by Moneyval, a committee of experts from the Council of Europe. However, that is set to change next year when the government is expected to introduce legislation capping cash payments at €10,000. Finance Minister Edward Scicluna said the cap on cash payments will apply on the sale of real estate, cars, yachts, precious metals, and art. The selected areas are prime tar- gets for 'cleaning' ill-gotten money. But while this could be a key plank in the fight against tax evasion and money launder- ing, it remains to be seen how this measure will be enforced. In the real estate sector, the mere presence of a notary to register property transfers is in itself a control mechanism because notaries are public of- ficials with legal responsibili- ties. However, it is hard to imag- ine a luxury car dealer refusing a €60,000 cash payment for a sports car, or an antique shop reluctant to sell a precious art- work for €20,000. Nonetheless, the intro- duction of a legal deterrent will empower the authori- ties to pursue criminal ac- tion against the players in- volved when such instances come to their knowledge. But the fight against finan- cial crime is expected to up a notch next year with the crea- tion of a new agency, which the government has indicated will have the power to investi- gate and prosecute crimes. New crime-fighting agency The budget has earmarked €1 million for the setting up of a Financial Organised Crime Agency (FOCA), which Sci- cluna said will complement the police's Economic Crimes Unit. The government has been tapping expertise in the US and Britain to help in the set- ting up of the new agency. The Moneyval report ex- posed the dismal rate of pros- ecutions carried out by the po- lice whenever suspicious cases were flagged by the Financial Intelligence Analysis Unit. A breakdown of figures shows that less than 3% of cases in- dicated by the FIAU to the po- lice ended up with a prosecu- tion between 2014 and 2018. Details on the composition of FOCA have so far been scant but the creation of a distinct agency means that its wages will not be constricted by the public service pay scales, as the police are. The authori- ties hope this will enable them It's about the money… and political will The government will be setting up a financial crime busting agency next year but with the criticism Malta has been receiving over its lax attitude towards money laundering, KURT SANSONE tries to find out how the Budget has responded to attract specialised indi- viduals in the complex fight against financial crime. The €1 million fund will definitely not be enough to create a strong agency but it is an encouraging start, which cannot come too soon. Police, FIAU and MFSA As for the police force, the increase in recurrent ex- penditure is primarily due to a higher wage bill but the Home Affairs Ministry has allocated €15.7 million for IT software, hardware, and support services. This investment in IT for next year represents a hike of €7.1 million over the budget for 2019. Although the capital in- vestment in IT falls under the ministry, in the wake of the Moneyval report, the police had announced they were investing in specialised intelligence software. This software will create a centralised database of in- formation that would facili- tate financial investigations and enable the police force to be in constant contact with other Maltese entities. But the Budget presented last Monday also allocated €8 million to the FIAU, which is almost double the budget for this year. The FIAU increased its re- sources over the past couple of years after severe criticism from the European Banking Authority over shortcom- ings in the case involving Pi- latus Bank. The bank's licence was eventually withdrawn by the Malta Financial Services Authority after its owner was arrested in the US and charged with evading Ira- nian sanctions. The MFSA's share of pub- lic funds are expected to increase by €1 million next year to €13.6 million. Although significant, the in- crease may not be enough to cover the ambitious reform outlined by the MFSA to beef up its supervisory mecha- nisms. MFSA CEO Joseph Cuschieri had told Malta- Today that the organisation will have to invest anything between €8 million and €10 million to upgrade and change the technology that underpins its operations over the next three years. The au- thority has remained, by and large, a paper-based organi- sation unsuitable to modern- day needs. The organisation's budget will also have to increase over the period to sustain a bigger and more specialised work- force. But the authority wants to aim for self-sufficiency by increasing the fees for opera- tors, eventually cutting all its funding ties with the govern- ment. The National Co-ordinating Committee on Anti-Money Laundering received a fund- ing boost of €1.1 million, al- most doubling its budget to €2.6 million. Another important com- ponent in the fight against financial crime is the State's ability to recover assets con- fiscated from criminals. In this regard, the Asset Recov- ery Bureau will see its budget increase by €70,000 to reach €520,000. These measures will help to strengthen the fight against money laundering and other financial crime but much as the injection of funds is an important step, the proof of the pudding is when more prosecutions are filed in court. It has to be seen whether the political will to crack down mercilessly on financial crime will follow the money being invested in the authori- ties vested with the power to tackle it. Budget numbers €15.7m Home Affairs budget for IT, an increase of €7.1m €13.6m Funds allocated to the MFSA, an increase of €1m €8m Budget allocated to the FIAU, almost double the current year €2.6m Allocated to the National Co-ordinating Committee on Anti-money laundering €1m Earmarked for new Financial Organised Crime Agency €520,000 The Asset Recovery Bureau's budget has increased by €70,000 €10,000 Cash limit for car, yacht, real estate, precious metals, and art sales Source: Budget 2020, Finance Ministry Problem numbers 1,275 Suspicious transaction reports filed with the FIAU in 2018 26 Number of convictions for money laundering between 2014 and November 2018 <3% Rate of police prosecutions for suspicious cases flagged by FIAU 5% of GDP Level of tax evasion according to national risk assessment 40% The level of expenditure in the country conducted in cash Source: Moneyval report, September 2019 It has to be seen whether the political will to crack down on financial crime will follow with authorities vested with the power to tackle it The Caruana Galizia assassination suspects taken to court: details of their undeclared riches were discovered in court