Why fix what you can hide?

In their latest attempt to make things look better — or less terrible — than they are, the Malta Business Registry did a little housekeeping.

They deleted the online records of tens of thousands of shell companies which had been dissolved or liquidated.

Now, cleaning the servers of defunct companies might not seem like such a big deal. But why would anyone go to the trouble? It’s not as though they’re running out of room. Digital storage space is limitless.

And why do it now, when everyone’s so busy trying to avoid the MONEYVAL grey list?

Well, if you want to understand how criminals think, ask a reformed criminal.

US financial crime expert Kenneth Rijock — a former money-launderer who now works with law enforcement and who followed The Shift’s findings this week — wrote: “Readers who are familiar with the tradecraft of money launderers know that they generally allow shell companies formed on their behalf to lapse for nonpayment and nondisclosure of required information at the earliest possible time, because they ‘use them and lose them’”.

In other words, if you’ve got a lot of money to move but can’t provide documents to show you earned those funds through legitimate means, then shell companies are one way to do it.

Maybe you got the money from selling something illegal, like drugs. Or maybe you got it from taking kickbacks on a major political project, like a power station or a public hospital.

Either way, you need to get that money into a bank account so you can spend it. But you also need to hide the fact that you earned it from committing or being an accessory to crime.

Imagine how odd it would look if a politician with an official income of €55,978 showed up with a few hundred thousand or a million euros to deposit?

In a normal country, the bank would be legally required to file a Suspicious Transaction Report with the FIAU, and the police would eventually show up to ask him where this cash windfall came from.

I mean, it’s not like him and his friends could just find a compliant banker and license a private bank to move their dirty money. That only happens in banana republics.

Everyone else has to apply the sort of strategies that MONEYVAL grey lists were created to draw attention to.

And so you find a useful corporate service provider who is willing to put his name on a document as company director, or act as a registered agent, without wanting to know what that company is being used for.

In Malta, such a company can be opened in one to two days.

Once you’ve got a structure in place, you use it to transfer your big pile of money straight away, before anyone notices. But don’t worry if the transaction raises a few red flags. That company was just the financial equivalent of a single use pair of rubber gloves.

The shell company is quickly abandoned after the money is transferred. It’s not usually closed because closing a company by normal means requires the filing of audited accounts.

Instead, the former owner simply doesn’t pay the annual dues, allowing that company to lapse, or he doesn’t make the required annual filings. Either way, the company will then be dissolved by the regulator because it didn’t fulfil its legal obligations.

The only indication that this company was used to launder money is its brief presence on the corporate registry, and perhaps the name of a lawyer or director who has already raised red flags of his own.

The Malta Business Registry contains records of tens of thousands of companies like this — or rather, it used to.

They’ve just been deleted.

And that means investigators can no longer search them. Yes, they can still access such records — if they travel to Malta in person and fill out an application to obtain paper copies of the specific company records they’re looking for.

But they can’t follow hunches, sorting through massive amounts of information, testing a range of possible names, addresses and other data via an online search.

This won’t be a problem for the Malta police, who have been content to look away when it comes to high level financial crimes.

No, it’s mainly a problem for foreign law enforcement agencies and officials from entities like the Financial Action Task Force (FATF) who are investigating financial crimes with Maltese connections.

If there aren’t any searchable records to find, did a crime really exist? Maltese logic at its finest.

By some odd coincidence, the Malta Business Registry’s online system was also altered several months ago to make a key change to its ‘search’ function. It’s no longer possible to search for directors’ involvement in Maltese companies.

The director of a shell company is normally a corporate service provider or lawyer who is paid an annual fee to list themselves on the registry so the actual beneficial owners can remain hidden. Could someone be trying to hide the fact that certain names come up over and over again in connection to shady companies?

Unfortunately, pulling a rug over the steaming turd on the carpet won’t get rid of the smell. You actually have to clean up the mess.

And once that stain has been scrubbed away, you need to deal with the people who keep sneaking in and squatting in your living room. Otherwise, they’ll continue to crap there again and again.

It’s not like Malta wasn’t given plenty of time to sort out its mess.

Everyone knew the country would fail the fifth round MONEYVAL evaluation in 2019, but nothing was done about it short of crying “fake news”, and trotting out Slow Eddie the Spineless to tell the world, “It looks bad, but it’s not.”

They were given a year to implement a very clear set of recommendations. And they got an extension of several months due to the coronavirus crisis.

So why are we only now seeing a frantic scramble of last minute efforts to scrape by as the deadline approaches?

I don’t think this is a case of the kid who played video games all night rather than study for an exam, only to cram desperately on the morning of the test.

No, the stakes here are much higher. A journalist has already been violently murdered in broad daylight for looking too closely at what’s been happening in Malta, and telling others what she found.

Being put on the FATF / MONEYVAL grey list makes plain what everyone’s already whispering.

Malta is a haven for money laundering and terrorist financing. The sort of place where anything goes as long as the right people get a cut.


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