Money laundering: Will Malta’s prosecutors fumble the ball?

A court in Panama has acquitted twenty-eight people charged with money laundering in connection with the 2016 Panama Papers scandal. 

Those exonerated include Jurgen Mossack and the late Ramon Fonseca, founders of law firm Mossack Fonseca — the very same firm that opened secret offshore companies for Konrad Mizzi, Keith Schembri and the owner of Egrant.

The judge ruled that evidence collected from Mossack Fonseca’s servers hadn’t been gathered in line with due process and that the chain of custody had been broken. Other evidence “was not sufficient and conclusive to determine the criminal responsibility of the accused.”

This raises questions over whether Malta’s many money laundering cases will lead to a similar dead end.

Defence lawyers in Panama had argued that the prosecution failed to submit a report from Panama’s Financial Analysis Unit (UAF) on the alleged money laundering activities carried out by members of the firm, and that the charges were not supported by testimony, legal assistance or financial reports. Was this simply a way of botching a politically sensitive case involving powerful people?

Prosecutors in Malta had better be on their toes because money laundering is very difficult to prove, especially when it comes to specific intent.

Laundering money is a convoluted process designed to break the link between the perpetrator and illicit funds by running it through a tangled web of banks and offshore companies incorporated in tiny tax havens at the fringes of the map. 

How does money laundering work?

For the sake of simplicity, money laundering can be broken down into a three step process: Placement, Layering and Integration.

Placement happens when dirty money is inserted into the financial system. 

The funds have to be deposited into a bank account before they can be moved, but walking up to a bank with elastic-wrapped bundles of cash won’t work — not even in Malta. The bank will request proof of the source of funds for every deposit.

It’s a lot easier to deposit dirty money when the perpetrator has access to banks and compliance officers who are willing to look the other way or to accept generic nonspecific information. You might recall reading about issues like these in the FIAU’s report on Malta’s very own Pilatus Bank.

Step two is Layering. This is where the launderer tries to put some distance between the source of those funds and their ultimate destination by moving the money between offshore companies in different jurisdictions, or by passing along the ownership of shares, bonds, high-value art or exclusive collector’s items like fashion pieces.

When the financial system works as intended, such funds are stopped. The VGH inquiry established that Accutor AG’s monthly payments of €15,000 to Joseph Muscat were stopped because Swiss bank UBS froze the company’s account and all subsequent payments on suspicion of kickbacks. Bank of Valletta also flagged payments from UBS to Joseph Muscat on suspicion of money laundering and kickbacks.

But even the world’s largest financial institutions have limited resources. Money launderers attempt to fly below the radar by breaking transactions into smaller wires. Doing this to avoid the $10,000 threshold is illegal. It’s called ‘structuring’.

And then we come to the final step. The money has been ‘cleaned’ through a blizzard of movements and companies designed to throw prosecutors off the track — or to make badly under-resourced units like Malta’s FIAU give up in frustration. 

Integration is when laundered funds are put back into the normal economy by making it look like they came from legitimate sources. 

Consulting contracts are a common way of doing this because prices for such services are non-transparent and performance is difficult to measure objectively.

Shortly after leaving office, Joseph Muscat entered into a series of consulting agreements with companies that benefitted financially from controversial decisions made by his government. This looks an awful lot like deferred bribes: a bribe promised for some service that is paid only after the politician has safely left office. He raised red flags due to the timing of his agreements, who they were with, and because of other entities that his ‘clients’ were connected to. 

Another common ‘integration’ tactic involves real estate transactions using dirty money and artificially inflated property prices to produce clean funds when the property is sold.

Prime Minister Robert Abela’s many land speculation and property deals have raised questions both because of large discrepancies in his personal wealth declarations and because of land speculation and development deals involving a former client of Abela’s law firm and deals with contractors close to the government.

Secrecy matters

A secret offshore structure is only useful as long as it remains a secret. Give a skilled investigator the right clue and they’ll start making connections between companies. Once you have a company name, you can follow the money trail. But money laundering is very difficult to prosecute successfully, especially when it comes to intent, and Malta’s track record is nonexistent.

A leading academic consulted by The Shift described the VGH trials as “set up to fail”. Nearly every prominent criminal lawyer in Malta has been hired to defend those accused. The three young prosecutors representing the Maltese people are seriously outmatched.

The burden of proof lies with the prosecution. If the prosecution loses for whatever reason — inexperience, ineptness, a botched trail of evidence — those accused cannot be tried again.


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simon oosterman
simon oosterman
12 days ago

“Money laundering: Will Malta’s prosecutors fumble the ball?”I am convinced they’ll do everything in their power to do exactly that. The recent behaviour of the PC and AG leaves no room for doubt.

D. Borg
D. Borg
11 days ago

and i expect the Opposition to formally forewarn the PC and AG that they will be charged of dereliction of duty (at best) for having purposely strived to botch up the cases.
Moreover, one would expect the top brass from FIAU & MFSA to engage whatever expertise is necessary to assist & guide the Prosecutors – after all Malta’s reputation is as stake – that no bibles of questionnaires, procedures and impractical over the top procedures imposed on all bona fide operators can ever atone.

Paul Bonello
Paul Bonello
12 days ago

The suspicion that the Prosecution and AG may well succeed to torpedo their case, whether as a result of incompetence or conflicted loyalty, is well-founded. This in spite of the fact that the money laundering legislation in Malta provides that the accused may be convicted of a money laundering offence even in the absence of a judicial finding of guilt in respect of the underlying criminal activity and the existence of money laundering may be established on the basis of circumstantial evidence. Furthermore the law presumes that any property in the possession of an accused who commits the offence of money laundering shall be deemed to have derived same from money laundering and shall be liable to foreiture, unless the accused proves to the contrary. The problem lies in the fact that in the current situation in Malta one can never be sure on which side the Police and AG lies, whether on the side of the prosecution or the defence.

A. Fan
A. Fan
11 days ago
Reply to  Paul Bonello

Well summarised, Sir!

Seems that someone ougth to keep reminding the PC, AG and all other servants of the People (not of the political party in power at any given time) that they are expected to remain true to their office and on the side of law and order. To do otherwise is to invite unchecked retaliation and anarchy whenever the political tide inevitably turns.

11 days ago

None of the current acused or those waiting for a summons will see the inside of Corradino, the lack of senior prosecutors, the apppeals over the asset seizures, the freedom of movement they enjoy with restricions that are normally used for lowlifes in the system. It’s all a con. They need to make it look like they are serious in destroying criminality which is rampant on the island in all forms. Money Laundering and theft of State Coffers are great headline grabbers, if you are looking in from outside the island, like the EU members.
With the Police acting as postmen, the prosecutors still learning to shave, and NO protective custody awards to prevent witness intimidation, it’s most certainly a facade.
I even doubt that if they were all found guilty, there is sufficient room in Corradino to house them.
So don’t be surprised to see most of them walking, cleared of all charges, and the minnows who are found guilty will get suspended sentences and some hefty fines which will be reduced on appeal.
The outcome is a nightmare, we’ve lost €400,000,000, plus the millions and millions for this show trial, plus the money they will be awarded when the cleverer dicks sue the arse off the prosecution.
The AG and the CoP will be rewarded handsomely for their sterling service to the nation and promptly moved to higher pastures where they can get deeper into the trough, and disappear before some pertinent questions arise. So the shitshow continues.
You may think that this is conjecture, but I would put my pension on it, and it’s going to start happening soon.

Last edited 11 days ago by Mick
J Abela
J Abela
11 days ago

The prosecution office is one of the other key state institutions that has been hollowed out due to years of gross underfunding and under-resourcing. Deliberate I say.

For lawyers and others working in the legal field, working for the prosecution office should be the culmination of their careers, where they can obtain the best salaries and conditions offered in the legal industry. Obtaining a role in the prosecution office should also be through a serious meritocratic competition amongst the best of the best. The prosecution office should be in a position to easily pick the best people. But this is not the case.

The prosecution office should be seriously funded and reformed to attract the best lawyers and resources of the country through a serious, transparent, and meritocratic system. Only in this way the prosecution office would be an institution to be reckoned with.

How can it be expected to win and not make mistakes in the most complex cases, such as money laundering cases, otherwise?

Last edited 11 days ago by J Abela

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