Reporter’s Death Sheds Light on Maltese AML Issues

 In AML Surveillance, Anti-Money Laundering, Compliance, Political Corruption, Risk

One of the largest and most tantalizing stories of 2017 has ironically emerged from one of the ten smallest countries in the world, and with new details continuing to emerge in this case, it seems that for the first time light is being shed on some of the major issues this country faces. In mid-October, many across the globe were put on notice to a significant event that transpired in the miniscule Mediterranean country of Malta, lying just 50 miles south of Italy, where investigative journalist and anti-corruption activist Daphne Caruana Galizia was killed in a car-bombing while leaving her home just outside of Malta’s capital of Valetta. The event is unfortunately a relatively common one in today’s society, specifically overseas where terrorism continues to be a pervasive issue that international bodies have attempted to combat, but continue to struggle with. However, this act in particular hits much closer to home than do most random acts of terror, leading to pressing questions about the true motive and the individuals behind the fatal explosion.

Galizia was a free-spirited reporter, often voicing her displeasure for, as well as challenging, government officials, unpopular policies, and political corruption on the island, while using her position to speak on behalf of the general public of Malta. Galizia’s past stories had included hot-button topics in the country including its reputation as a tax haven, and its links to corruption in neighboring countries. As is the case with most successful reporters, opposition comes with the territory. For Galizia however, her opposition came in the form of multiple threats on her life, which many believe directly correlated with her stern personal and political criticism of Maltese Prime Minister Joseph Muscat. Earlier this year, reports surfaced that Galizia had obtained information on documents from a small bank based in Malta that showed that “Muscat’s wife was the beneficial owner of a company in Panama, and that large sums of money had been moved between the company and bank accounts in Azerbaijan” (FoxNews, 2017). Although Muscat and his wife denied the claims, many believe the potential scandal was the driving force behind Muscat’s call for early elections in June as a “vote of confidence to counter Galizia’s allegations of corruption” (FoxNews, 2017).

Galizia left behind three sons, who together have rallied to call for increased political responsibility through the upholding of fundamental freedoms, a common dream found amongst Maltese citizens who have grown frustrated with the political corruption and financial crime that has plagued the country for several decades. An assembly was organized by the men in late October, which united many prominent officials from Malta’s two dominant political parties with the countries citizens who continued to mourn the loss of one of their own. However, Muscat, who on behalf of the Maltese government has offered a one million Euro reward for any information relating to the crime, was surprisingly not in attendance. Disgusted with his absence, Galizia’s sons reportedly refused to endorse “Muscat’s call for a reward to lead to their mother’s assassins, saying ‘we are not interested in justice without change’” (AP, 2017). The European Union’s police agency, Europol, has dispatched a team of organized crime experts to Malta to aid the island’s investigation into the suspected assassination, which has been denounced as an attack on free speech. The team will be granted access to all of “Europol’s databases on organized crime, drugs, money laundering and other major criminal threats” (Corder, 2017). Many hope that the influence of Europol will aid in providing answers in this case, as none of the six similar car bombings that have occurred in the country over the last two years have been solved to date.

While the EU has already made its presence felt in this case, they continue to press forward in their attempts to correct other issues within the country that pose a threat to domestic and international security. Prior to Galizia’s death, the EU’s stance in Malta had been far different however, with the Union being far less demanding in regards to the prevention of money laundering and other financial crime on the island. EU and Maltese data obtained by Reuters has shown that in recent years, “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” (Guarascio, 2017). When compared to the rates of suspicious transaction reports (STR’s) filed by other EU states, Malta has consistently ranked towards the bottom of the list, which is disconcerting considering the country has a rather large financial sector despite its small geographic size. As a result of Europol’s indefinite presence in Malta as they investigate Galizia’s murder, European Parliament has decided to double-down, calling for a vote on rule of law in Malta, which will address multiple serious allegations of corruption and breaches of anti-money laundering legislation which were not investigated by the Maltese police.

While Prime Minister Muscat has maintained that Malta’s financial sector is “as transparent, solid and compliant as any other European jurisdiction”, the fact remains that there is a profound “culture of impunity and fiddling between political and economic elites”, one that will require extensive input from the European Commission to resolve. Unfortunately, Galizia’s extensive work in digging into Malta’s extensive corruption and laundering issues ultimately did little more than create political enemies for her, which may have led to her eventual demise. Although her goal had been to publicize the numerous improprieties that were swept under the rug in the country, it remains to be seen whether her death will lead to the rectification of the issues that she worked so hard to bring to light.

Weekly Roundup

Romanian Party Leader Under Fire for Corruption

In a shocking development, Liviu Dragnea, the embattled leader of Romania’s Social Democratic Party, saw an anti-corruption investigation brought against him by anti-graft prosecutors on November 13th. Dragnea, who recently faced other criminal charges and potential prison time over his role in rigging a 2012 referendum, is now facing charges of suspicion of providing false statements to prosecutors and forming an organized criminal group in order to siphon funds from state projects between 2000-2012, several of which were funded by the European Union (EU). According to reports, the current investigation focused on a construction firm titled Tel Drum SA, which was controlled by a county council that Dragnea headed until 2012. Investigators believe that “Dragnea and eight other people conspired to privatize the company through intermediaries, so that it came under ‘the influence and control of the suspect Liviu Dragnea’” (Reuters, 2017).

Tel Drum won several large public contracts during the 12-year period, and often benefited from their receipt of classified information, which helped give the company an edge over competing firms for the prized commission. Dragnea and his confidants then abused their lofty positions, using their seats of political power to their personal advantage, receiving large sums of cash from these public contracts, as well as other, non-monetary kickbacks as a result of the ploys. A significant percentage of the funds passed down through the contracts came from the EU for the development of Romanian infrastructure, making the charges against Dragnea and his group far more serious. The nine individuals involved also face fraud, tax evasion, and money laundering charges, among others. Dragnea has denied the legitimacy of the reports and has stated that he has no intention of resigning from his position. Transparency International, a transnational organization leading the fight against global corruption, currently ranks Romania as one of the most corrupt states in the European Union, with that ranking likely to be affected by this case.

Fox Sports Tied to FIFA Corruption

The world has been enlightened to the true issue that is corruption in the realm of international sports since the 2016 Olympics in Rio de Janeiro. The Olympics, marred in controversy given the extent of bribery and unethical activity that has been discovered since its conclusion, and the prominent individuals involved in these cases (most notably International Olympic Committee head Carlos Nuzman) ultimately saw Rio be named the coveted site for the games. The effects of the illicit activity stemming from the global celebration are still being felt today, as recent reports have indicated that several of the world’s largest broadcasting companies “including Fox Sports, Globo and Grupo Televisa SAB, were implicated in corruption of international soccer, with a former sports-marketing executive telling a U.S. jury that the companies paid bribes to win lucrative, multiyear rights for tournaments” (Hurtado, 2017). Many believe that Fox Sports had hoped to expand its broadcasting rights through the ploy, with the company planning to broaden its signal from North America to all of South America. A government witness in Brazil came forward earlier this month to testify at the trial of several FIFA officials implicated in the bribery scandal, where he disclosed that other companies including Brazil-based Traffic Group, and Full Play Argentina, were also involved in similar cases.

Fox Sports has refused to comment on the allegations, and although Globo Group has made themselves completely available to U.S. authorities, they have denied any wrongdoing. The bribery claims will likely have a significant impact on Fox’s ongoing acquisition of satellite provider Sky Plc., a process already complicated by stern U.K. regulators. In addition, the U.K.’s Competition and Markets Authority is currently “looking into issues of corporate culture at Fox, including sexual harassment allegations at Fox News, as part of its review of 11.7 billion-pound ($15.4 billion) bid for the rest of Sky” (Hurtado, 2017). The true repercussions on the bid made by the conglomerate are likely to be unveiled in the weeks to come, and Global RADAR will provide an update on its progressions.

Euro. Watchdog Warns of ICO Investment 

Europe’s most prominent financial watchdog, the European Securities and Markets Authority (ESMA), recently warned of the potentially high risks associated with the investment of funds into Initial Coin Offerings (ICO’s). ICO’s essentially function as a means of fundraising for individuals and firms who have created their own forms of virtual currencies and subsequently sell them to investors. Of the fears mentioned in ESMA’s report, the most notable is the fact that in most cases, firms issuing ICO’s can conduct their activities without complying with current EU legislation, leaving investors at risk of falling victim to financial crime or loss of their financial commitment altogether. Another significant risk is the extreme volatility that new coins hitting the market are subjected to, as in many cases investors may not be able to redeem them for prolonged periods of time. Additionally, “If such operations fall outside of EU rules and regulations, investors also cannot benefit from legal protection if the investment goes sour” (AFP, 2017).

There are also significant risks of fraud and money laundering involved with investments of this nature. Overall, the cryptocurrency market is currently experiencing a period of fluctuation, one that has seen its most prominent digital payment platform Bitcoin suffer a significant blow (30% drop) to its value this week, a value that had reached a record high on November 8th. Many have attributed this fall to “ pressure from rival “bitcoin cash”, which was created this summer by a breakaway group of bitcoin users” and believe that its decline could continue in the coming weeks.

 

Citations

AFP. “Watchdog Warns of ‘High Risk’ Digital Currency Offers.” Sci-Tech – Geo.tv, 13 Nov. 2017.

Corder, Mike. “Europol to Help Probe Malta Journalist’s Death.” Fox News, FOX News Network, 27 Oct. 2017.

Guarascio, Francesco. “RPT-Murder and Money Laundering in Malta — a Challenge for EU.” Reuters, Thomson Reuters, 15 Nov. 2017.

Hurtado, Patricia. “Fox, Globo Among Broadcasters Linked to FIFA Corruption.” Bloomberg.com, Bloomberg, 14 Nov. 2017.

Ilie, Luiza. “Romanian Ruling Party Leader Investigated over ‘Criminal Group’.” Reuters, Thomson Reuters, 13 Nov. 2017.

“Malta Investigative Journalist Killed in ‘Barbaric’ Car Bombing.” Fox News, FOX News Network, 16 Oct. 2017.

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