A country built on dirty money

For almost 20 years, Malta has built much of its international and domestic image around the online gambling industry.

In 2004, just after joining the European Union, it became the first state to enact a comprehensive legal framework for online gambling. Over the following years, the Malta Gaming Authority, tasked with overseeing the sector, became considered one of the most respected gambling authorities in the world.

By 2019, iGaming was worth $2 billion to the Maltese economy or 13.6% of the Gross Domestic Product. Even during the COVID-19 pandemic, this only dipped to 12%, showing that the sector was almost entirely immune to mass unemployment and global economic downturn.

Malta is home to several hundred gambling companies, affiliates, game development firms, specialist marketing agencies, recruitment companies, specialist law firms and corporate service providers, iGaming “consultancies,” payment processors, hardware, and software companies. It’s also home to thousands of iGaming employees, many of whom come from Europe and live in Sliema and Gzira on EUR 3000- plus salaries that they blow (quite literally) in the fancy bars of St Julians five nights out of seven.

It’s a rich and ruthless industry that cares only for making money at the expense of others, but that’s not where my criticism lies.

My criticism is that the iGaming industry in Malta is fast becoming the last nail in its coffin and the burden that’s weighing down an already sinking ship.

Earlier this year, Malta came under scrutiny in a Forbes piece that dissected its long and convoluted history of gambling scandals. As The Shift has also reported on numerous occasions, the success of the gambling sector is underpinned by links to the Mafia, underground criminal networks, financial crime, and fraud.

While all the warning signs were there, it wasn’t until 2017 that the country’s gambling problem began to make headlines. Leaked emails surfaced, which showed that the MGA had failed to abide by its own rules between 2012 and 2014. Lax supervision meant that betting companies were operating in conditions where money laundering and other criminal practices were occurring.

In May 2017, The Malta Files laid bare more than 150,000 documents demonstrating how Maltese companies and institutions were complicit in financial crime. But it was too late; the EU was already furious with Malta for the mounting allegations that it was allowing financial crime to go on right under its very nose.

Malta tried to combat the bad PR by introducing the Gaming Act in March 2018, but if anything, this made it easier for operators to be established. The application process was simplified, meaning less paperwork for those wishing to get a Maltese license.

Then, in January 2021, former MGA CEO Heathcliff Farrugia was charged with corruption. It’s alleged he colluded with the man charged with giving the orders to assassinate Daphne Caruana Galizia, shady businessman Yorgen Fenech. The media reported he provided commercially sensitive information to the accused killer.

Amidst the backdrop of Malta being used as a jurisdiction to avoid tax and ongoing corruption prevalent in all aspects of government and institutions, there were other issues at play. Accounts of Mafia clans using Malta to launder money and facilitate illegal betting were mounting.

Over the last four years, a significant amount of The Shift’s virtual column inches have been given up to these reports. 

In 2015, six Malta-registered companies had their assets seized as a part of a clampdown on illegal gambling activities instigated by the Calabrian ‘Ndrangheta group. Further links were discovered as some of the Italians on the ‘wanted list’ had companies and addresses in Malta.

At the same time, the Malta Gaming Authority said that Italians held 10 out of every 200 licenses. This was the same year they revoked the licenses of nine companies, including BetUniq, for links to the Calabrian Mafia.

In 2017,  Italian Carabinieri arrested 30 individuals as a part of Operation Beta. The arrests were about money laundering and illegal gambling carried out by the Sicilian Mafia clan Santapaoloa-Ercolano. Several Maltese companies and individuals were identified in the investigation.

Benedetto Bacci was then arrested with 31 others in an illegal gambling bust. He allegedly agreed with the Cosa Nostra and used a Maltese company, Phoenix International, to launder money.

Less than a year later, Operation Galassia revealed how mafia clans, including the ‘Ndrangheta used Maltese companies, including SKS365 holdings, to launder the proceeds of crime of up to EUR 1 billion. One of the involved companies, Centurionbet, held a license to operate a gambling site in Malta.

The Investigative Reporting Project Italy described Malta as an “ATM for the Italian Mafia.”

During the same year, 2018, Malta topped the list of countries with the highest presence of Italian Mafia. The map was made by Transcrime using annual reports from the Italian Anti-Mafia Prosecutors and Anti-Mafia Police Directorate. The country was highlighted as being a leading jurisdiction for Mafia criminals on the run.

In 2019, the aforementioned SKS665 was accused of failing to declare a staggering EUR4 billion in taxable income deriving from illegal gambling in Italy. This amounted to evading EUR 124 million in tax.

Then, in March 2021, an unnamed Maltese company was identified as having been involved in a EUR 600 million tax evasion scam. Individuals involved are believed to be linked to the Santapaola-Ercolano clan. 

Around the same time, Operation Double Game by the Organized Crime and Corruption Reporting Project investigated some 336 individuals involved in illegal gambling in Sicily, Italy, and Malta. They used Malta as a jurisdiction to funnel money derived from unlawful bets.

By June 2021, Juventus coach Massimiliano Allegri was under investigation by Italian authorities for using a Malta-based company to facilitate money laundering, potentially linked to mafia gang ‘Ndrangheta.

The Shift recently highlighted a report that discovered a Malta-licensed company could potentially be founded and funded by a cyberscam that ripped off 200,000 people and left two dead in mysterious circumstances.

Current company director Iosif Galea, a self-styled iGaming consultant with ties to now-defunct Nexia BT with its directors implicated in grand corruption and money laundering, didn’t answer questions on the alleged fuelling of illicit funds. He continues to enjoy close links to the government and members of parliament

It’s an exhausting list, isn’t it?  And remember, this is only the very tip of the iceberg. As we know all too well, one of the Maltese governments and institutions’ most finely honed skills are concealing wrongdoing, illegality, and financial crime. Furthermore, given their rather impressive track record of profiting off wrongdoing going on under their nose, I would imagine there is little incentive for them to nip it in the bud.

Instead, the Malta gambling industry is driving the island’s reputation further down into the pits. 

I wish they could harness their adeptness and enthusiasm for being involved in wrongdoing and channel it into putting the country straight. Perhaps then, we might see Malta being lifted off the  FATF Grey List sometime this decade.

Instead, what we have is a nation that is unashamedly built on the proceeds of crime. Each steel beam, concrete plinth, and even state investment is tainted with the stain of illicit money. There is no escaping it; if Malta is consistently named as having received tainted money, and these companies and license holders are paying the state, it is logical that politicians’ salaries are being paid with it.

But more than that, this money finds its way into every crevice of society. An entire industry built by upstarts and oiks, fuelled by coffee and cocaine, and relentless in its pursuit for wealth. Corruption and links to drugs, fuel smuggling, and illegal gambling are dressed up in shiny suits and glossed over at swanky conferences. Shiny faced politicians and “entrepreneurs” who give keynote speeches talking about “holistic growth”, “innovative verticals” and “integrated multi-faceted business solutions.

Meanwhile, the reality on the ground is that respectable operators are leaving in droves. International corporate service providers worth their salt have distanced themselves from the MGA, and only the desperate and dastardly remain, using terms such as “flexible tax regime” and “hands-off regulatory approach” as code words for “you can get away with murder.”

I know all this because I have worked among them. I’ve been to the conferences and hear the spiel spun by ruthless lawyers. I’ve also heard the bravado on nights out and witnessed serious wrongdoings being swept under the carpet and made to go away quietly.

This culture of impunity reigns supreme. The protagonists will continue to get richer while the average person will struggle as one of their beloved country’s primary sources of revenue dries up. Even if it doesn’t dry up, the continued reputation plundering at the hands of the government and their cronies is already causing irreparable damage to Malta, its economy, and its credibility.

Until something changes, Malta will continue to be an EU Member State built on Mafia money, tax evasion, corruption and kickbacks, and of course, the dirty cash of criminals who buy themselves Maltese citizenship.

                           
                               
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Paul Bonello
1 month ago

Dear Alice Elizabeth, you appear to be a genuinely concerned ethical young person. What a relief to come across solitary specimens of young people who are not oblivious of the double standards of the amoral larger part of the population who find nothing wrong with white collar crime as long as they profit from it as well.

James
James
1 month ago

Yet another clear synopsis by the Shift detailing why change cannot happen until international pressure reaches the level that the country can no longer borrow from the IMF and other similar sanctions are imposed.

The next step will be the black list unless there are successful prosecutions brought against all those who are empowered to do so and fulfill the changes demanded by the FATF etc.

Godfrey Leone Ganado
Godfrey Leone Ganado
1 month ago

Excellent article.
When gaming was developing, as Chairman of the Archdiocese Peace and Justice Commission, I had sent the Minister of Finance, our Commission’s reaction to the pre-budget report.
Two of the main issues were gaming and underage drinking. As a Commission, we insisted that gaming was a way of ‘stealing’ money from the poorest of the poor who considered gambling their last cent to try and turn their lowlife around, and would ultimately go deeper into their financial pits. We also considered gaming as a means to criminality on a local and international level.
At a professional level, the International audit firm, Price Waterhouse, that we used to represent in Malta, had warned us to refuse to service any company operating in the gaming sector, which sector they considered as High Risk.
When I retired and started acting as director of low to medium risk companies, I was asked by a leading legal firm to attend an interview for acting as director of a company that was being set up. My first question was to be informed of the intended activity. The reply was ‘gaming’. I immediately responded tbat I was a conscientious objector to gaming, and would therefore not take the interview.
That was, is and will remaim my attitude to the gaming sector.

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