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maltatoday, SUNDAY, 30 MARCH 2014 10 MAT THEW VELLA THE Malta Freeport's chief ex- ecutive Aaron Farrugia has told MaltaToday the corporation has managed to avoid a substantial €67 million penalty that would have been borne by taxpayers. According to Farrugia, the global financial services firm UBS will not unwind a currency swap transac- tion it entered into in 2004 with the Freeport. "A US dollar and euro deposit collateral has been agreed to by both parties and it is understood that this will be signed in the com- ing days. This means that UBS will not unwind the swap agreement with the consequential heavy loss- es," Farrugia said. The Freeport was facing an im- minent bill of $58 million (€43 million) and a further $32 million (€23 million) in losses, after UBS warned it would pull the plug on a €200 million currency swap trans- action. The Malta Freeport is a govern- ment corporation that owns the land on which Malta Freeport Ter- minals operates. In 2004, Malta Freeport took out a $250 million loan to develop the Freeport infrastructure. Under the terms of the 'bullet loan', the Freeport would pay 7.25% interest every year until 2028, and then pay the $250 million capital in one fell swoop in 2028. Since the Freeport books its ac- counts in dollars, it entered into a swap transaction with UBS to buy its dollar currency. The swap meant that the Freeport would pay UBS €14 million every year in ex- change for $18 million, which the Freeport would use to pay its in- terest on the bullet loan. And in 2028, the Freeport would pay UBS €200 million in exchange for $250 million for its final payment on the bullet loan. But in 2013, UBS informed Malta Freeport that due to EU demands asking banks to increase their cap- ital reserves, they will be changing their strategic direction and no longer enter into so called "deriva- tive transactions". Under the terms of the agree- ment between Malta Freeport and UBS, both parties had the option to terminate this swap either in January 2014 or in January 2024. But the termination would have come at a cost of $58 million for the Freeport and another $14 mil- lion it has accumulated since 2004 on exchange rate losses. The Mal- tese government guarantees up to €32 million on currency losses – which means it is the taxpayer who funds these losses. The fluctuations in the dollar and euro exchange rates have been so violent that the Freeport lost $5.1 million in interest on the swap agreement in 2012, when the year before it actually made a gain of $8.4 million and another $21 mil- lion in 2010. This shows how volatile markets for foreign exchange swaps are. MATTHEW VELLA TWO Maltese MEPs have justified their vote against a parliamentary resolution on a stronger anti-mon- ey laundering directive approved by MEPs in Brussels. Both Labour MEP Marlene Mizzi and Nationalist MEP Roberta Met- sola described the resolution on the AMLD, which will require banks, realtors and casinos to be more vigilant about clients' transactions, as going against the interests of Malta's gaming and financial serv- ices sectors. The proposed rules will require banks, financial institutions, au- ditors, lawyers, accountants, tax advisors and real estate agents, among others, to be more vigilant about suspicious transactions. Mizzi displayed a protective view of the proposed laws, saying "dra- conian" rules could be of interest to certain member states who view Malta as a strong competitor on gaming laws. "Financial and fiscal sector rules should be the remit of the member state and not subject to a one-size- fits-all legislation. Malta has a very robust regulator and vigilant fi- nancial institutions. Our financial services sector is healthy, not least because of the solid reputation Malta and its banks and financial institution enjoy." Both Mizzi and Metsola said the final text, discussed at committee level, did not take into considera- tion Malta's specific make-up. "In the end we could not bridge all our views to secure a compro- mise text," Metsola said. The MEP is a member of the Special Committee on Organised Crime, Corruption and Money Laundering (CRIM). "I know how important it is to tackle this type of crime and I remain committed to doing so, but we must work harder to find ways to do this that does not disproportionately and negatively affect the systems of one member state. Having a one-size-fits-all ap- proach to this type of sensitive leg- islation on a European level simply does not work," she said. Both MEPs said they consulted government authorities on the ef- fects of the AMLD. "The vote was not against money laundering as such," Mizzi said. "But against the report in its total- ity and its repercussions on Malta's financial services… I would also vote against the financial transac- tions tax, and any report implicat- ing Malta as a tax haven." Five out of six Maltese MEPs voted against the resolution on the review of the Fourth Anti-Money Laundering Directive that is ex- pected in late 2014. Apart from Mizzi and Metsola, Labour MEPs Claudette Abela Baldacchino, John Attard-Montalto, and Joseph Cuschieri also voted against the draft law. Nationanlist MEP David Casa was not present for the vote. Under the AMLD, the ultimate owners of companies and trusts would have to be listed in public registers in EU countries. Online gambling will require due diligence measures for all customers as soon as a business relationship is estab- lished. The vote is not the final decision as the EU Council may reject the positions of the European Parlia- ment. A second reading and fur- ther negotiations are expected to take place after the European elec- tions. The legislative resolution on the AMLD was passed by 643 votes to 30 with 12 abstentions and the legislative resolution on transfer of funds by 627 votes to 33 with 18 abstentions. Organisations like Transparency International, the global coali- tion against corruption, say that EU money laundering rules need better enforcement and more in- formation required to identify the source of funds passing through European financial markets. "In- formation on who ultimately owns and controls companies, trusts and other legal structures needs to be made publicly available in registers across the EU." mvella@mediatoday.com.mt News MEPs protective on anti- money laundering rules MEPs Mizzi and Metsola say 'draconian' anti-money laundering rules will affect Malta's financial services and gaming businesses MEPs Marlene Mizzi and Roberta Metsola said that a one-size-fits-all approach on money laundering rules 'simply does not work' Freeport avoids €67 million currency penalty YOUR FIRST CLICK OF THE DAY www.maltatoday.com.mt