Our regulators: men of straw

Guest post by financial services practitioner Paul Bonello

On Wednesday, the Public Appointments Committee re-confirmed John Mamo for another year at the helm of the Malta Financial Services Authority (MFSA).

Prof Mamo has not provided any justification for him agreeing to pay extra money to former CEO Joseph Cuschieri for attending MFSA Board of Governors meetings.

Cuschieri was apparently unhappy with his over €100,000 pay package.  Yet Mamo, instead of outrightly rejecting the demand and sending Cuschieri packing, referred the matter to then Prime Minister Joseph Muscat (behind the backs of the Board of Governors) on the petty excuse “that he was responsible for MFSA”, who as expected approved the payment to his buddy.  In the meantime, the Board of Governors got to know of this only because it was flagged by the Internal Audit Committee.

This case of absconding one’s duties at the MFSA by having it referred to a political office that ought to have nothing to do with the administration of the organisation is very serious.    It is believed to be of the highest importance that monetary and financial regulatory institutions such as the Central Bank and the MFSA act autonomously without being under the direction and control of the political class.

They must jealously guard their independence from the Executive.  If the MFSA top echelons felt the need to refer such a trivial matter to the prime minister, one wonders what happens with more serious regulatory matters and authorisations.  This endemic practice is anathema to monetary and financial supervision.

Mamo had also tried to belittle the seriousness of his former CEO loverboy’s trysts in Las Vegas, at the invitation of Yorgen Fenech. Mamo’s response at the time was one of trying to belittle the seriousness and implications of it all, saying: “It was a misdemeanour, not a serious offence”.

Evidently annoyed at the inevitable conclusions reached by the independent committee set up to consider the escapades of Cuschieri, consisting of former Chief Justice Joseph Azzopardi and lawyer Mark Simiana, Mamo did his best to torpedo the significance of the report, implying it lacked substance.

Mamo had already made similar gaffes during a parliamentary appearance four years ago – the first vetting of his appointment as MFSA Chair in April 2018.  At the time, in his nonchalant manner, he castigated Germany, Sweden and the UK as money laundering centres in an attempt to justify so many of our regulatory failures, starting many years before his appointment and continuing under his tenure.

What is culpable is not so much the non-diplomatic language used, but the failure to appreciate and admit that while money laundering is omnipresent, especially in the large financial centres, the institutional set up in the Maltese State –  the police, the FIAU and MFSA – had, at least in the years preceding the greylisting, chosen to turn a blind eye to what was happening right in front of them in order to please the political masters that appointed them.  This institutional breakdown at the highest levels of the State does not happen in Germany, Sweden and UK, the countries he had tried to lambast.

At the Public Appointments Committee hearing on Wednesday, Mamo was at it again.  This time he showed his obvious irritation at The Times of Malta for publishing the notorious interview with the new MFSA CEO, Joseph Gavin.  Mamo tried to belittle Gavin’s far from exemplary behaviour by saying, “he is Irish and bad-tempered”.

I, for one, did not know that Irish are generally bad-tempered.  My Irish clients are most definitely not bad-tempered.  Mamo continues to show abhorrence at The Times of Malta for carrying the interview expecting that no mention of it ought to have been made since Gavin had “scrapped the interview” when he decreed, “kill it, kill it”.

A chairman and two CEOs, our men of straw.