Issue link: https://maltatoday.uberflip.com/i/1314505
6 OPINION 3.12.2020 THE Economist Intelligence Unit (EIU) predicts a fairly sharp slowdown in America, from 2.3% to 1.7%, as trade tensions continue to depress trade and investment. A con- tinuation of the global slow- down in manufacturing will also drag down growth world- wide. It goes without saying that a steam roller attitude towards a no-deal Brexit next month could make matters worse, for Britain and its trading partners. In Malta we also have our own home-grown unrest. Six weeks ago, the government submitted its final Moneyval report to the Council of Eu- rope's experts which includes new legislative changes im- plemented by the country after it failed an assessment of its anti-money laundering regime. Even if the coming Moneyval verdict on our per- formance in the fight against financial crime may not be as damning as some fear, the in- dustry faces a major challenge to restore Malta's reputation in international financial cir- cles. Years of disregard for an- ti-financial crime regulations cannot be wiped out merely through public relations and marketing. In an interview, the chairman of FinanceMalta said he was eager to get on the first available flight to spread the good news that Malta is open for financial services business as soon as the incon- veniences caused by the pan- demic are behind us. This may be a forlorn wish, since during the past year marking his appointment, there was nothing he could do to prime the pump. Although financial markets have recov- ered from heavy devaluations in spring, yet COVID-19 has now entered into a stronger second wave. Authorities around the world are called upon to re- main vigilant, quickly identi- fy adverse developments and react, using the full scope of their mandates, where need- ed. Many agree that the repu- tation damage to the island as a financial domicile resulting from political turmoil is pal- pable. As they say - it does not rain - it pours. Another scandal of international scale concerns the use of shell companies in Malta to shield dubious bil- lionaires in their drive to avail themselves of the favorable tax regime. A particular case involves an African princess of the dos Santos dynasty in a scheme valued at $2.2 bil- lion by Forbes. The damage is exacerbated by the forced closure of three local banks. These were small private banks: Nemea, Satabank and an Iranian owned bank, Pila- tus. The reprimand on Bank of Valetta by the ECB over AML and governance issues did send shock waves since this is a major bank with a major- ity shareholding held by the state. Since 2013, it was run by a chairman appointed by government. The chairman then was the ex-managing di- rector of RSM - the firm au- diting the Labour Party. He has since been replaced by a popular economist in gov- ernment circles – Dr Gordon Cordina. More sad news followed such as the fine of €340,058 imposed on Lombard Bank by The Financial Intelligence Analysis Unit (FIAU), which found the bank breached five separate anti-money laun- dering provisions. It report- ed that in one case the bank failed to properly ascertain the source of funds of a polit- ically exposed client. The inadequate information held on file about the origin of wealth of three other cli- ents convinced the FIAU that it needed to penalise Lom- bard on inadequate enforce- ment of anti-financial crime directives. Lombard informed its stakeholders that it has al- ways been and remains com- mitted to preventing financial crime contemplated by its cli- ents and appealed the fine. The Malta Financial Ser- vices Authority (MFSA) launched enforcement pro- ceedings against four local operators last month, levying fines of €15,000 each on two entities and stripping the oth- er two of their licenses. The sudden resignation of the MFSA CEO, appointed only 18 months ago following the scandal of his accepting a free Las Vegas trip from Yorgen Fenech – seemed to break the camel's back. The arrest of Yorgen Fenech, owner of the secretive 17 Black company, as a person of interest in the assassination of journalist Daphne Caruana Galizia, and having close links with the former prime minis- ter's chief of staff (now also probed by police), heightened the anger of the crowd fearing collusion. All these factors have taken their toll on public opinion while we are still feeling the cold blast of negative public- ity following the disclosure of secret Panama companies in 2015 registered by Nexia BT (representing disgraced Mos- sack Fonseca) destined for top members of cabinet. To return to normality, Mal- ta needs to look ahead; all stakeholders, including the government, national au- thorities and market opera- tors must put financial crime compliance at the top of their agenda and continue en- hancing internal controls to strengthen the fight against money laundering and terror- ism funding. The past years has seen sev- eral protests sparked by the damning revelations by the independent media and de- velopments which emerged during the staggered public inquiry in the Caruana Galizia murder. To exacerbate mat- ters, there have been occa- sional power blackouts which Enemalta (the state-owned utility) promptly blamed on ships laying anchor and se- riously damaging the Sicily/ Malta submarine electrical cable. Moving on, Abigail Mamo, CEO of the Malta Chamber of SMEs, said that the cham- ber received calls from res- taurants, retailers, grocers complaining of reduced busi- ness once the surge of orders spurned by the issue of cash vouchers abruptly ceased. Other worries concern poor trade during Black Friday. Back to the theme regard- ing the reputation of Malta's financial services sector, this can only be regained through hard work and patience. Hopefully, Moneyval's grey listing will never material- ise. Then, Malta will have its work cut out to convince in- ternational regulators that we do not only enact good laws to prevent financial crime but also actually implement these laws with a steely determina- tion. Undoubtedly, the pandemic has caused many business- es to accumulate losses and some even close down. How- ever, those who took the right steps to mitigate the situation are still making some profit, even if not so much. The truth is, the pandemic will go away next year with the help of vaccines and when it does, all industries that sharpened their knives during the slow-down will thrive and start making money. We recently witnessed a ma- jor reshuffle of cabinet posts in the hope that new blood may speed up further AML reforms. Our redemption can triumph, if we plant a root and branch reform backed by checks and balances in a con- certed drive to strengthen the three pillars of good govern- ance, the rule of law and de- mocracy. Redemption – leading the path to normality George Mangion George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island Clayton Bartolo