Issue link: https://maltatoday.uberflip.com/i/933296
13 maltatoday SUNDAY 28 JANUARY 2018 News MATTHEW AGIUS LEGAL representatives from the Swedish pensions authority this week told a Mal- tese court that some €79 million in savings had been lost by the Maltese fund Falcon Funds. Michael Westberg was testifying in court in the case filed by Falcon Funds against investment managers Temple Asset Man- agement. The latter has since had its li- cence revoked by the Malta Financial Ser- vices Regulator, while Falcon was placed under control of auditors KPMG. Westberg said that pensioners' savings in the Malta-run Falcon Funds had been lost through suspicious investments car- ried out by Temple to the mysterious Swedish trader Emil Ingmanson, who in the first place had promoted Falcon Funds for its inclusion in the Swedish pension platform. Falcon Funds collected pensioners' sav- ings, but all investment decisions were taken by Temple. Falcon was one of sev- eral pension plans available to Swedish savers. Westberg said there were at least three similar instruments designed to benefit Ingmanson, who was recently arrested in Sweden, and that these investment deci- sions were taken by Temple. "We discovered that large amounts of the fund's money were invested in so-called ETIs (Exchange Traded Instruments). These instruments had been tailor-made by Temple for Falcon Funds. We arrived at conclusion that they had not been de- signed for the purposes of being a suitable investment, rather to conceal the real un- derlying investment, that is the real ad- dress of the invested money. "This led us to suspect that FF could very well have been the subject of fraud," West- berg said. Westberg added that KPMG Malta had since confirmed their suspicions that the ETIs were issued by special purpose com- panies that had "virtually no restriction as to what they could do with the money invested." The consequence was that Falcon suf- fered substantial damages, and after ter- minating the fund on the Swedish plat- form it had returned approximately €160 million but final losses to savers amounted to some €79 million. The MFSA also fined Temple over €600,000 for its investment breaches, and issued reprimands to Falcon's directors: former finance minister Tonio Fenech, Ian Zammit, and Joseph Zammit. "Temple was not being as transparent as they should have been with us, especially on the involvement of Mr Ingmanson in its operation. He was not directly involved but was influencing its operations," the MFSA's director of securities and markets Christopher Buttigieg told the court. Ingmanson was planning to set up his own investment management company, Falcon Asset Management, with an office in the same building as Temple, ostensibly to take over the investment decision-mak- ing for Falcon Funds. "Temple director Anthony Farrell had said that Ingmanson was not involved in decisions, but in a conference call in Oc- tober 2016 Farrell told the MFSA that Ing- manson was 'behind everything'." Buttigieg said that although Ingmanson had no official post in Temple, he had ap- plied with MFSA to be founder-sharehold- er of Falcon Asset Management. He later withdrew the applications. "Ingmanson was not authorised for investment man- agement," Buttigieg said. Ingmanson was later revealed by an in- vestigation carried out by the SPA that he was involved in other pension funds, and that he had orchestrated a merger of cli- ent records from one fund to the newly set-up Falcon Fund, allowing the Maltese pension fund to raise millions in savings almost immediately. The Swedish pensions authority termi- nated the fund in June 2016, identifying mis-selling practices and fraudulent trans- fers of savers' money into Falcon Funds. "The investigation found evidence that Ingmanson was behind the marketing and that he was the ultimate beneficiary of the unsuitable investments. All these amounted to a substantial and material breach of the cooperation agreement be- tween the two parties," Michael Westberg said. Court battle for lost pension savings: Swedish trader 'pulled the strings' Anthony Farrell (left) and Emil Ingmanson However, access to informa- tion on a beneficial owner of an association may not be granted, if it can be justified that such ac- cess to such beneficial ownership information would expose the owner to the risk of fraud, kid- napping, blackmail, violence or intimidation, or whether the ben- eficial owner is a minor or other- wise incapable. The register of beneficial own- ers will be held by the Registrar for Legal Persons, who will be ap- pointed by a government minis- ter. The register will be intercon- nected with the central registers of other member states. Since the introduction of harsh- er anti-money laundering rules at a European level, Maltese banks had already stated extensive due diligence exercises for politically- exposed persons. In one example, HSBC Malta's CEO informed then Opposition leader Simon Busuttil that a VIP team at the bank would be re- sponsible for the management of PEP due diligence obligations. Hundreds of people across the Maltese islands could be affected under tighter rules to fight money laundering, as the definition of a politically exposed person now in- cludes not just people with politi- cal functions, but also their spouses and close associates and relatives. The obligations of customer due diligence for banks are legal- ly binding, and all PEP customers must complete them in order to retain their accounts with the banks. For PEP relatives, the new AMLD rules will mean that opening a bank account will now be subject to enhanced due dili- gence measures. Not only politicians, or party executives and directors of gov- ernment entities will be subject to enhanced due diligence, but also their family members, such as spouses and partners, chil- dren, the PEP's parents, as well as 'close associates' who have busi- ness relations or joint ownership of companies. This will mean that institutions such as banks or insurance com- panies will have to obtain senior management approval to even establish a business relationship with such persons, as well as make sure they can establish the source of wealth and funds that PEPs and their associates have. Even after a PEP is no longer entrusted with a public function, banks will still have to continue applying their enhanced due dili- gence for the next 12 months at minimum, until that person can be considered to be no longer a 'PEP risk'. mvella@mediatoday.com.mt rules, Malta trusts beneficial owners