The beam in your eye

On FATF: It will be nasty to have the Americans taking out the speck of Malta’s eye while we are powerless to remove the beam in theirs

An FATF plenary session from February 2020
An FATF plenary session from February 2020

I cringed at reading PN leader Bernard Grech’s statement on the possible outcome of FATF on Malta. 

A grey-listing for Malta at the hands of the FATF will have a direct impact on our financial services industry as well as our own little dominance in hosting so many foreign companies. I have no proof of this impression of mine, but I almost suspected a Richard Cachia Caruana touch in this move. Perhaps. 

What I do say is that Grech is reading off some teleprompter and it is doing him few favours. I can say it from this newspaper’s experience when it calls out such schemes like Malta’s corporate tax rebate for foreign multinationals: the Maltese will rally behind their government when the proverbial shit hits the fan. That’s the way patriotism usually creeps in when the big boys ‘pick’ on small Malta. 

I have no doubt that our financial services industry and other service providers and banks are in a serious need of fine-tuning. The FIAU decisions show clearly the lack of due diligence that is carried out when onboarding and monitoring high-risk clients. 

But there is no doubt that both the FIAU of today and the industry has risen to the occasion, in the latter case with obvious effects to their otherwise profitable bottom-line, and of course, having been pushed into fast forward after the assassination of Daphne Caruana Galizia, 

But the crowd that wants Malta to adhere to higher standards belong to two categories: those that want Malta to flounder so that they can take the business that comes our way and secondly those (Maltese) who believe that this particular government does not deserve a reprieve and needs to be punished. 

That desire may not come that easy for them. If say, the latter feel ‘enlightened’ to want the Labour administration to be punished, one has to remark that so many of these critics did find their voice after 2013 when this government was elected. Prior to that, it was all plain sailing with a financial services industry that delighted in hastening the international tax avoidance ‘industry’, going light on AML rules... it seemed everyone was oblivious to this financial jamboree in Malta. 

I never used to believe there are those who are unwilling to see the bigger picture. By this I mean those refusing to understand how countries like the United States, the United Kingdom and Germany are wielding their enormous influence to inflict hardship on Malta. Ironic too, given the excellent relations that Malta has historically had with these very three countries (the other two important friends, I’d say, are Italy and China... more of that later). 

Indeed, Malta has been historically a US partner in the last 20 years on many areas of collaboration in terms of sea patrols and transhipment monitoring. The annual congressional budget justifications laud Maltese cooperation in this field and the US seems keen on extending its influence with its soft power and regular meetings with the press. The nastier stuff is left for the real political world, then. 

The same goes for the UK naturally, which, apart from its colonial past here, still retains the Maltese hand of friendship. The UK is the last country to patronise anyone over financial irregularities. London today is a mecca for trillions of financial transactions from dubious sources and jurisdictions which face much weaker regulation, transparency checks and due diligence than in Malta. And, let’s admit it... the City of London is practically outside the UK. 

As for Germany, to seemingly allow an EU member state in the lurch after Brexit, again smacks of unkind opportunism. Why does nobody take it to task over the Cum-Ex scandal (a huge volume of transactions prior to 2012 involved exploiting a loophole on dividend payments that enabled a number of parties to claim the same tax refund. German authorities believe this has cost that country’s treasury €10 billion euros in lost revenue. But there may be more than ten other European countries affected; with estimates saying around €55 billion may have been lost to those nations’ treasuries). With its own tax evasion problems, Malta is truly the minnow in a lake rife with giant fleshy German pike. 

Simply stated, as a small country Malta will suffer greatly from a damning grey-listing far more than a larger country. My source insists the US has always diplomatically suggested that they see US interests holistically – namely our refusal of accepting SOFA, an agreement that would give unprecedented advantages to the US military on Maltese soil (say if US personnel commits a crime here) or for ship-boarding Maltese ships on the high seas without national clearance. 

And then there’s Malta’s reluctance in selling out ‘completely’ to the new agreement with Steward Healthcare – which is effectively a legacy of Muscat’s big mess with privatising healthcare – another serious consideration mentioned by US diplomats in the run-up to the FATF verdict. 

And one might add... Malta’s long-standing Chinese friendship, a fact that has never sat comfortably with the Western powers. 

It is hard to be pontificated at without exposing these countries’ hypocrisies: superpowers with no respect or fairness. 

So what happens next? The country joins forces to show it has raised its financial propriety standards and calls out the political and unfair verdict of these countries against one of the most stable of EU member states with a vibrant democracy and parliamentary system. 

Of course, it won’t excite the Americans, unable as they are to see the beam in their eye when it comes to its own financial misdemeanours, its own tax havens, ruthless self-interest, and the mortal sin of those who kow-tow to its desires in return for military assistance. 

An FATF grey-listing will be a tremor for many in the industry who have been traditionally aligned to the Nationalist Party, for historically this has been a strata of decision-makers in league with bankers and their enablers. Of course, where profits come in, lack of probity on matters financial can still sit comfortably with the pearl-clutching classes who tut-tut ‘shame’ at reports of corruption. Never does this industry question its own role in international tax avoidance, facilitation of financial speculation, destruction of the urban and rural environment on property transactions, and enabling of the global elites seeking Maltese passports. If making money is legal... why question the ethics of it, right? 

This is one of those moments where the schadenfreude on national mishaps is about to hit some of these brokers hard. It will be nasty to have the Americans taking out the speck of Malta’s eye while we are powerless to remove the beam in theirs.