It’s not me, it’s them

I can’t remember when I realised there was a wall across the street where no wall had been before.

I was standing on the roof of the house I was renting in Zejtun, watering the olive trees and plucking withered leaves from sun-burned potted plants, when I noticed my neighbour across the alley was putting an addition on his roof.

Judging by his progress, he’d been at it for weeks, but I hadn’t noticed because he only laid a block or two of stone at a time.

He didn’t have a building permit, and so he was adding another storey by stealth, so gradually the neighbours would assume it had always been there. By the time he was comfortably ensconced in his new third floor bedroom beneath the pigeon coop, it would all be a fait accompli.

Some things are taken very seriously in Malta.

Securing a position in a ridiculously bloated Cabinet, for example. Inflating one’s status. And making a quick buck, regardless of the ethics involved, or the conflicts of interest. The cry of “I have a right to feed my family!” is justification enough.

Other things — like getting a building permit — are not taken seriously at all, or are regarded as a nuisance.

Unfortunately, the world of finance doesn’t work this way.

It used to be possible to take that same lax approach to taxes and registration and following the rules when Malta was a quiet backwater with a budget too small to attract much attention. But the utter free-for-all during the reign of Joseph Muscat resulted in the brutal murder of a journalist who shone a light into the country’s darkest corners, and the outside world finally took notice.

Given the country’s reputation as a dodgy tax haven where lax financial oversight has been a jurisdictional selling point, it’s no surprise Malta’s finances are under the microscope.

EU funds have long been the incumbency gift that keeps giving; a bottomless shimmering pile of largesse to be scattered among friends of friends. But there’s a very fine line between awarding tenders without competition and crimes perpetrated using EU money.

The European Public Prosecutor’s Office (EPPO) was established in 2019 to investigate and prosecute cross-border VAT fraud and shenanigans involving EU funds over €10,000.

All but four EU Member States have signed on to the EPPO. Always keen to rise above the rest, Malta distinguished itself as the only participating member that hasn’t opened any investigations at all.

Such an outcome was entirely predictable in a country with a strong track record of passing laws on paper and doing nothing to enforce them in practice.

European Chief Prosecutor Laura Codruţa Kövesi met with European lawmakers this week and told them about her visit to Malta.

“I had meetings with the national authorities,” she said, “and after two days it was very difficult for me to identify the institution that is responsible for detecting crimes.”

I wish she wouldn’t let such things worry her. No one in Malta has a clue who’s detecting crimes, either. It certainly doesn’t seem to be the police.

Kövesi was given the sort of runaround that anyone on the island would recognise as par for the course where responsibility is concerned.

“All of them said that ‘It’s not me. It’s them’,” she reported. “And when I visited them, they said ‘It’s not us’.”

Perhaps she should have cracked open a Cisk and drowned her sorrows with the head of Malta’s Permanent Commission against Corruption, which hasn’t produced any results in its entire existence.

“You cannot find it if you don’t search,” Kövesi said, confirming that maybe she does understand Malta after all.

The European Prosecutor for Malta is Yvonne Farrugia, a former senior police inspector for the Economic Crimes Unit. Her boss was Ian Abdilla, who admitted to the board of the public inquiry into Daphne Caruana Galizia’s assassination that his department had failed to act on any of the Panama Papers revelations, and didn’t question any of the politicians whose highly suspicious deeds had been exposed.

Their colleague, Superintendent Ray Aquilina, has also been charged for allegedly leaking information on the murder investigation.

In case the EPPO is looking for a place to begin, I suggest they read The Shift’s 2019 investigation into VAT fraud, which this newsroom undertook as part of a big multinational investigation.

Malta has long been a useful node in a range of scams that defraud billions in taxpayer funds.

What makes it so attractive to fraudsters? The same lax approach to building without permits and enforcing traffic laws is also applied to paperwork, allowing a dog’s breakfast of corporate service providers to form new companies in record time, shielded behind nominee directors.

Thanks to badly understaffed and under-equipped regulatory authorities, no one’s likely to look too closely when these shell companies fail to file the required audited accounts and VAT returns. Hell, even highly visible companies belonging to the two main political parties or Keith Schembri get away with that.

Even better when these businesses remain “inactive” on the Register of Companies after the money’s been siphoned off. “Nothing to see here! Move on…”

Cash-for-passports are useful, too. According to VAT fraud expert Marius-Cristian Frunza, most of the big VAT carousel fraud cases involved gang members holding at least two different passports. It’s difficult for law enforcement to make connections between separate acts of cross-border crime when the perpetrators are hiding their ownership of companies behind multiple identities using multiple nationalities.

You won’t be surprised to learn that one of Malta’s most lucrative fraud carousels involves the import and export of petroleum.

The Maltese authorities never seem to catch these people, not even when fuel smugglers dock their boats in the Grand Harbour and launder profits through popular local restaurants. It always seems to be the Italian Guardia di Finanza who busts them, just like they do with Malta’s mafia-cash-infused gaming sector.

The EPPO won’t find much support in a country where voters openly told foreign reporters that corrupt officials “can take whatever they want because they haven’t taken it from me and I don’t care because I have money in my pocket.

Laura Codruţa Kövesi has her work cut out for her. Malta won’t crack down on the fraudulent use of EU funds until it is forced to.


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2 years ago

Malta is when part of the population works “like crazy,” part of the population has no work, and most of the unemployed hide under the name of “government.” 

For doing nothing (such as the police commissioner Angelo Gafá) they are paid double and triple, just that they look the other way while the state treasury is plundered daily to the maximum.
(In this is thanks to EU-money really really much!)
Shame on incompetent ROBBER Abela and his cronies.

2 years ago

the most upsetting part is that the local authorities namely the FIAU and the MFSA have been conducting ongoing witch hunts and scaring the living hell out of legitimate and law abiding service providers, and fining them for “breaches” which most of the time are just minor administrative shortcomings, when they themselves do not have the balls to answer to higher authorities. funnily enough the FIAU is advertising a seminar its organising in the next two weeks covering the Beneficial Ownership & Tax-Related Money Laundering and charging €110 for it. The irony is that the same FIAU conducted a thematic review on CSPs between nov 21 and feb 22, and the result was that over 95% were compliant. Hence the question than why did the FATF find this as being lacking – which other segments of the financial services has caused such failure. Furthermore the seminar will touch upon tax -related money laundering – one begs to understand what exactly will the FIAU fill up 2-3 hours of seminar when they seem to be either toothless or otherwise.
the whole charade being carried out by the authorities pretending to be seen as doing something in terms of tax-related money laundering (which includes tax evasion), has created an environment whereby honest professionals are living in fear and trying to attract qualified talent is impossible. Because of the arrogance and complacency, especially within the MFSA, many are deciding to abandon the industry only for the benefit of those entities that have political strenght to show the middle finger to fiau/mfsa and police alltogether.

2 years ago

As ever a thought provoking piece by Ryan which draws the pieces together which allows everyone, bar the government and its appointed agents, to see what is actually going on.

2 years ago

What you say is true. But it is also true that the prime destination for Russian oligarchs was London, with New York not far behind. And that a British bank opened accounts for Ryan Schembri, out on a European arrest warrant. This from a country which has much more resources than Malta.

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