Issue link: https://maltatoday.uberflip.com/i/871892
12 maltatoday, SUNDAY, 10 SEPTEMBER 2017 MATTHEW VELLA IT is a stark discovery that in a market of over 500 million people, 65% of suspicious transaction reports to European financial investigators come from just two EU mem- ber states: the UK and the Netherlands. Both countries are important financial centres. London and the Netherlands hold a substantial part of the world's corporate offshore investment from tax havens. But Europol has expressed doubts on the volume of suspicious transaction reports (STRs) that are emerging from Malta's con- siderable financial services sector, given the relative size of activity and company forma- tion on the island. Malta's financial intelligence analysis unit (FIAU) is responsible to collect STRs re- ceived from banks, financial services prac- titioners, notaries, insurance firms and even gaming companies. The system is ul- timately dependent on private firms alert- ing the FIAU to possible illegalities related to money laundering or terrorism funding when they process payments or carry out due diligence on clients. "We see that reporting figures across the EU are not always in line with what one might expect to see, given the extent of the regulated sector in particular jurisdic- tions. While volumes reported in Italy and France appear to reflect the size of those countries' regulated sectors, certain other jurisdictions, notably Cyprus and Malta, receive very few reports given the size of their banking sectors and the significance of these jurisdictions in offshore financial services." The Europol report deals with the failure of STRs – where millions of such reports are made annually – to lead to further investi- gation by competent authorities. According to executive director Rob Wainwright, just 10% of STRs lead to further investigations by authorities, and then barely 1% of crimi- nal proceeds are ultimately confiscated. "These stark findings make it impossible not to question why the success rate of the system is so poor and what can be done about it," Wainwright said. However, the data collected by Europol only goes up to 2014. Indeed in 2016, Malta's FIAU – whose job it is to sift through the STRs it receives be- fore passing them on to the police for inves- tigation – saw an unprecedented increase in FIAU disclosures, 284 reports over the pre- vious year, bringing the total to 565, a 101% increase. The 565 STRs included reports on 971 persons, of whom 63% were non-Maltese nationals. "This is representative of the ty- pology the FIAU noted involving Maltese- registered companies that are owned by for- eign nationals." Fraud featured as the predominant predicated offence (23% of cases), fol- lowed by laundering of funds from drug trafficking, bribery and corruption, and human trafficking. These STRs gave rise to 520 new cases, a 137% increase over 2015, and a further 47 cases following the receipts of information from various other sources, possibly inter- national. The absolute number of STRs, 344, hailed from credit institutions, a 198% increase filed by domestic banks. The use of ac- counts held with Maltese banks featured in a number of fraud cases, as well as bribery, corruption, illegal gambling, drug traffick- ing and other illegalities. Europol said that the majority of FIUs re- ported that the most common nationalities of individuals reported in STRs were na- tionals of their own countries, followed by individuals from neighbouring countries. But Malta was one of a number of coun- tries that generated STRs with respect to foreign nationals owning non-resident ac- counts: twice as many STRs concerned ac- counts held by foreign nationals. "Cyprus, Luxembourg and Malta all report that UK nationals are common subjects of these reports on non-resident activities. Both Luxembourg and Malta also note that Italians are another common nationality, while in the case of Cyprus, Russia is noted as more significant. More generally, across all EU FIUs, four nationalities were noted as generating comparably higher numbers of STRs: Russian, Chinese, Turkish and Ukrainian." Operation Gambling Europol made special mention of the crackdown on the 'Ndrangheta's remote gaming operation in Malta, which resulted in the arrest and extradition of several Ital- ian nationals. Operation Gambling, led by Italian police, led to the arrest of 41 persons in Italy and News MATTHEW VELLA DEPOSITORS of the online-only Nemea bank who are expecting the return of their monies after the bank went under administra- tion, will have to wait for the reso- lution of an appeal in the Europe- an Court of Justice. Depositors have already been paid up to €100,000 individually for savings held at the bank un- der the depositor compensation scheme. But those holding over €100,000 will have to wait until the ECJ rules on the appeal filed by the bank's owners. Nemea plc and its owners Ne- vestor SA, Heikki Niemela and Mika Lehto have demanded that the court annuls a decision of the European Central Bank to with- draw their banking licence. Nemea is now contesting the ECB's decision, and is demanding €10 million in damages in its ap- peal before the European Court of Justice. An MFSA source said it was not mandatory that a liquidator be appointed: "If the controller has gathered all the monies owed to the bank it could be possible to start the distribution of the remaining deposits. If a liquida- tor has to be appointed, it will be through a legal process in the Maltese courts. As things stand, depositors have to wait for the Eu- ropean Court of Justice's decision on the Nemea appeal." The bank has €68 million in as- sets, composed mainly of €30 mil- lion in loans and advances to cus- tomers and €22 million in loans and advances to banks. According to the unaudited fi- nancial position in March 2016, the bank owed €61 million to cus- tomers. The online-only bank was placed under controllership in 2016, with PricewaterhouseCoopers taking on the role of 'competent person' to ensure that all assets owed to the bank are collected, and to pro- tect depositors. The bank's licence was with- drawn on the MFSA's recom- mendation after the ECB flagged "serious regulatory concerns" at the bank. As an online-only bank Nemea could afford to operate with lower costs and overheads than tradi- tional banks, and earn income by generating interest, fees and com- missions, and financial income. Clients' deposits were invested by the bank in loans, deposits, other fixed income instruments and other low risk securities. But Belgian and Dutch deposi- tors targeted by the bank with some of Europe's highest interest rates, led to scepticism among fi- nancial observers. In one TV in- terview with Nemea Bank carried out by Dutch broadcaster RTL, the broadcaster described the 4% interest rate for five-year term de- Nemea: no liquidation possible before EU Malta generates too few suspicious transaction reports, Europol says Europol says Malta generates very few suspicious transaction reports, given its significance 'in offshore financial services' Clients waiting for the refund of deposits in excess of €100,000 can only be paid once the ECJ hears Nemea's appeal on the withdrawal of its licence