The Financial Intelligence Analysis Unit had given the police a number of updates about their suspicions of cases of money laundering linked to former chief of staff Keith Schembri and former minister Konrad Mizzi, Deputy Director Alfred Zammit told a public inquiry board.
Zammit mentioned four specific reports, published in the media, that were related to Mizzi and his offshore structures, Schembri and Adrian Hillman, Schembri and possible money laundering activities and Pilatus Bank.
The reports were presented to Zammit by lawyer Therese Comodini Cachia, who is representing the family of murdered journalist Daphne Caruana Galizia during a hearing of a public inquiry board that was set up to establish whether her death could have been prevented.
Speaking about the first report, Zammit described it as an internal working document that was “work in progress” as it was not yet finalised. The report on Schembri and Hillman had been handed over to the police, which was in turn updated by the FIAU.
“We had submitted an additional number of reports to the police over time,” he said referring to the two reports. These updates “did not really change the conclusions as to whether there was a reasonable suspicion of money laundering”.
“Once we determine whether there is reasonable suspicion, then that would be the case,” he said. “The additional reports would just contain more information”.
The third report was about Schembri’s money laundering activities of former Chief of Staff Keith Schembri. When asked whether action had been taken, he said the FIAU had taken the required action and that, as far as he knew, the police had done the same. Zammit pointed out there was an ongoing magisterial inquiry but Comodini Cachia noted that it had been requested by third parties.
The fourth document was an extract from a compliance report on Pilatus Bank.
Zammit said he was disappointed that the documents had been leaked to the media and that “unfortunately” no one had been found guilty for doing so.
Comodini Cachia asked the reason why Pilatus Bank had been received a clean bill of health. Zammit explained that, in the initial examination into the bank in March 2016, shortcomings were identified and the bank was given one month to provide the necessary documents. The FIAU received these in June and then held a meeting with owner Ali Sadr and its auditor KPMG.
The bank had insisted and stressed that the independent reports drawn up by KPMG and Camilleri Preziosi did not match the FIAU’s findings and that it had all the required documentation. Zammit said that he was not aware that KPMG was initially involved in the licencing of the bank, creating a potential conflict of interest.
Sadr had asked the FIAU for a follow-up visit. The FIAU agreed and it was carried out by the same team, Zammit said. Following that, “the FIAU did not have a strong basis to take action” on Pilatus Bank, and Sadr provided the information to “live up to compliance”.
“It was close to impossible to prove whether the information was produced in the interim or was there from the beginning,” he said. “We are not investigators – it is up to subject persons to live up to compliance. It is incredibly important for us to have strong backing so that if there’s a breach of law we are ready to prove it. Our procedures were not strong enough back then”.
Reading a letter from Zammit to Sadr, Comodini Cachia asked why the letter said the unit remained concerned about the bank.
“We remained concerned that, since March 2016, the bank did not give us all the documentation that we expected to see and in August 2016 it was there. We felt like we wanted to close the case… make sure our procedures are strengthened and then visit the bank again. “The work on Pilatus Bank is ongoing,” he told the board. “The FIAU is still working on it,” he added.
Asked about the police representative and police liaising officer to the FIAU, Zammit said Deputy Police Commissioner Silvio Valletta was on the board and was then replaced by Martin Sammut. The liaising officer was Police Inspector Ian Abdilla. Contrary to the testimony by Jonathan Ferris, former FIAU Manager, Zammit denied carrying Mizzi’s file into a “secret meeting” but confirmed that he had a meeting with Abdilla which was “one of the many”. “The red file was not Mizzi’s files as reported by the media,” he said.
Zammit reiterated that Caruana Galizia’s blog was often used as an open source. When the board expressed its view that hardly anything was done following the revelations by the Panama Papers, Zammit assured that everything was done from the FIAU’s end.
Speaking about Ferris’ resignation, Zammit said the FIAU had handed over a detailed list of points on his dismissal to a court that is overseeing the case Ferris filed regarding his employment.
“We employed him as manager of the intelligence team and we made a mistake because he did not perform well as a manager. This was not the first time that someone did not make it through the probation period,” he said.
When asked when the FIAU had first known that Yorgen Fenech, the suspected mastermind of Caruana Galizia’s death, was the owner of Dubai registered 17 Black, the media were asked to leave the room.
Marianne Scicluna, Malta Financial Services Authority Chief Officer of Supervision, said the authority has not taken action against Mizzi, Schembri, Nexia BT, and Nexia BT’s Karl Cini and Brian Tonna. However, there have been investigations into Tonna and Cini because of their two companies BT International Limited and BT Limited Management which are registered with the MFSA.
Schembri, Mizzi and Nexia BT were not licensed by or registered with the MFSA.
“We saw some risks from jurisdictions from within which they were operating,” Scicluna said about Tonna and Cini’s companies, following on-site inspections together with the FIAU. The investigations are still ongoing.
Turning to Pilatus Bank, Scicluna said the authority immediately started investigations when Caruana Galizia broke the story on her blog. The authority got in touch with FIAU for due diligence checks, demanded that documents were not destroyed, got in touch with the UK authorities and the intelligence authority and carried out an onsite visit.
Scicluna said that the inspectors were “not comfortable” to conduct an on-site inspection due to possible media attention. Following this, one of the inspectors resigned.
Magistrate Aaron Bugeja then instructed the MFSA not to go on-site due to the ongoing magisterial inquiry, and the MFSA’s inspection was by asking the bank for the required documents.
Scicluna recalled that the bank had approached the authority in September 2012 and applied for a licence in February of the following year. The preliminary meetings included Sadr and Juanita Bencini from KPMG as an advisor. Former FIAU Chairman Joe Bannister would also attend the meetings.
An in-depth intelligence report was done on Sadr “mostly because he was an Iranian national and Iran was a high-risk jurisdiction,” Scicluna said. This report did not reveal anything negative or worrying about Sadr.
An on-site inspection was done at Pilatus in September 2015 after the bank had been operating for a year and a half and the MFSA had identified particular growth in its business. “The inspection found nothing serious, but some operations were questioned,” she said. Following this, the FIAU was asked to step in for their first on-site inspection of the bank.
Following the FIAU’s findings on their on-site inspection, the MFSA stopped the bank’s passport application to open a UK Branch in to “look at the bank more intensively”.
The MFSA then started keeping eye on the bank on a monthly basis rather than a quarterly basis and kept a prudent approach while working closely with the FIAU, according to Scicluna.