Murder and money laundering in Malta: a challenge for EU

By Francesco Guarascio

BRUSSELS (Reuters) - The European Union has called very publicly for Malta to bring to justice the killers of a journalist who accused the Mediterranean island's leaders of profiting from global corruption.

But it has for years been much less vocal -- and had little success -- in ensuring Malta act to prevent money laundering, according to sources familiar with the work of the Maltese authorities and a Reuters review of EU and Maltese data.

The data show the smallest EU state has been slow to apply international guidelines on naming firms that do not take action against dubious practices, and the number of convictions and sanctions for money laundering has been low.

Malta has also consistently registered fewer reports of "suspect transactions" from banks, casinos and other financial operators than any other EU state, according to the data, despite having a disproportionately large financial sector.

The European Parliament on Tuesday debated the rule of law in Malta, and will vote on Wednesday on a resolution that says "several serious allegations of corruption and breach of anti-money laundering" obligations were not investigated by the Maltese police.

But criticism of Malta on money laundering -- in low-key reports by international supervisory bodies and by anti-corruption campaigner Daphne Caruana Galizia, killed by a car bomb on Oct. 16 -- appears so far to have had little impact.

"Malta has sold its sovereignty to dirty money. The European Commission should take a more active role in investigating the condition of rule of law in Malta," Sven Giegold, a member of European Parliament from Germany's Greens party who campaigns against financial crime, told Reuters.

He said an international investigator was needed to counter a "culture of impunity and fiddling between political and economic elites" in Malta.

Prime Minister Joseph Muscat told Reuters last month Malta's financial services sector was "as transparent, solid and compliant as any other European jurisdiction".

European Commission Vice President Frans Timmermans told lawmakers on Tuesday the EU executive had "no general concerns" about Malta's compliance with anti-money laundering laws though "improvements could be made on various levels."


Despite having a population of only 420,000, Malta, a former British naval stronghold south of Sicily, has a financial sector that dwarfs many EU countries. It is also the European leader in online gaming.

In 2016, assets of banks and financial institutions in Malta were more than 20 times its gross domestic product, about five times the equivalent figure for Germany and nearly four times the euro zone average, European Central Bank figures show.

Yet in a report on the EU's anti-money laundering efforts that was released without fanfare in September, Europol said Malta reported fewer suspect transactions than other EU states between 2008, when it adopted the euro, and 2014.

Europol also raised concerns that Malta and Cyprus may be failing to report as many cases as they should.

The supervisory authorities "receive very few reports given the size of their banking sectors and the significance of these jurisdictions in offshore financial services," Europol said.

Malta's Financial Intelligence Analysis Unit (FIAU), the country's anti-money laundering agency, received 202 reports of suspect transactions in 2014, the last year for which Europol data are available.

Lithuania recorded the next fewest -- over 50 percent more than Malta in a financial sector one sixth the size. By contrast, the Netherlands, a much bigger economy, reported 277,532 dubious movements in 2014, the highest number in the euro zone.

FIAU's deputy director, Alfred Zammit, told Reuters it was impossible to conduct a "meaningful comparison" among EU countries based on available statistics because of different structures and reporting regimes in member states.

"It is indeed arguable that given the size of the financial sector in Malta, one would expect to see more suspicious transaction reports submitted to the FIAU," Zammit said. But he said Malta was tackling the problem by increasing awareness of the obligation to report by organising training sessions.

The annual number of reports in Malta more than doubled from 2014 to 2017 although the proportion of those that were passed to the police fell to 11 percent last year from 24 percent in 2013, FIAU data show.

The Maltese police and the FIAU did not respond to questions from Reuters on how many of these cases were investigated or led to successful prosecutions.


Malta's court handed down four money laundering criminal convictions last year but disclosed none in the financial sector.

The results of a European Parliament inquiry released this month said the number of convictions was "extremely low" and the institutions implementing and enforcing rules on money laundering were "highly politicized".

Banks not complying with money-laundering rules have received small fines which in few cases were made public, contrary to guidelines recommending exposure to deter wrongdoing.

Zammit said the public disclosure of a higher number of sanctioned institutions would have been "disproportionate when compared to the nature of the breach".

Moneyval, the anti-money laundering watchdog of the Council of Europe, Europe's leading human rights organisation, has also raised concerns. It said in a 2012 report that Malta's reporting of suspicious transactions was low for the size of its market.

In a subsequent report in 2015, Moneyval found the country "largely compliant". A Moneyval spokesman told Reuters the latest report was however not based on a full assessment of the Maltese legal framework.

(Editing by Alastair Macdonald and Timothy Heritage)