Malta - Corruption

On 10 November 2017, the European Parliament passed a resolution on the “Rule of law in Malta” [2017/2935(RSP)) ], which noted that media outlets in Malta had reported coming under severe pressure from Pilatus Bank, which is at the centre of money-laundering allegations, to retract or remove stories concerning that bank. "Pilatus Bank has commenced legal action in the USA against Maltese media for tarnishing its reputation; ... a leaked Financial Intelligence Analysis Unit (FIAU) compliance report reveals that Pilatus Bank’s clients are predominantly Politically Exposed Persons from Azerbaijan, but that the bank did not apply enhanced customer due diligence to these clients as required by the Anti-Money Laundering Directive (AMLD)..."

Maltese law provides criminal penalties for official corruption, and the government generally implements these laws effectively. The Malta Police and the Permanent Commission against Corruption are responsible for combating official corruption. The U.S. Embassy is aware of an increasing number of government corruption allegations; however, few have yet to result in legal action or resignations.

Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions.

Public sector corruption, including bribery of public officials, is a minor challenge for U.S. firms operating in Malta. The Council of Europe’s Group of States Against Corruption (GRECO) completed its fourth evaluation of Malta in the summer of 2015. Following the three previous rounds of evaluation and follow-up compliance review, Malta introduced a number of legislative measures to combat corruption. The reviewers noted that, “the pace given to these changes and their reactive nature have not always provided reassurance to the public that unethical practices are unacceptable and that effective action will be taken to punish transgression. Moreover, the current complexity and delay in the Maltese judicial system mean that cases often take many years to reach conclusion. In a small community such as Malta, handling interpersonal relationships and addressing real or potential conflicts of interest are clearly critical challenges.”

Despite these challenges, Malta has taken significant steps to combat corruption, including the establishment in 2002 of the Financial Intelligence Analysis Unit, to support domestic and international law enforcement investigative efforts. The Prevention of Money Laundering and Funding of Terrorism Regulations were transposed into Maltese law in July 2008, and conform to the EU legislation under Directive 2005/60/EC (the Third Directive) and Directive 2006/70/EC.

A 2008 report by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) confirms Maltese authorities have taken measures to ensure the anti-money laundering/combatting the financing of terrorism (AML/CFT) regime in Malta is consistent with recognized international standards and practices.

On 04 April 2016, the International Consortium of Investigative Journalists released 11.5 million files from the Panama-based offshore law firm Mossack Fonseca, known collectively as the “Panama Papers,” which showed that the minister of health and energy, Konrad Mizzi, and the chief of staff to the prime minister, Keith Schembri, had undeclared holdings in Panamanian companies through a trust based in New Zealand. The disclosure led to street protests, and Prime Minister Muscat stripped Mizzi of his energy and health portfolios; he stayed on as minister without a portfolio within the Office of the Prime Minister, with the responsibility for implementing the government’s energy policy.

In June 2016 police reported that they would not carry out further individual investigations into the Panama Papers case, as they lacked the necessary evidence that a crime had been committed. Minister of Home Affairs and National Security Carmelo Abela denied that police were ignoring the case or that they were under any sort of pressure not to conduct investigations.

Events (factual or alleged) since the outbreak of the Panama Papers had shaken the very core of the country’s moral fiber, placing at risk the “serenity” of a stable and mature democracy. These developments implicated the prime minister himself in huge secretive money transfers in personal bank accounts. The situation was very dynamic, and new facts are constantly hitting the media.

In early 2017 allegations were made by journalist and blogger Daphne Caruana Galizia against prime minister Joseph Muscat’s wife, Michelle. It was claimed that she was the true beneficiary of Egrant Inc, a company named in the Panama Papers scandal. The Prime Minister could also be the owner due to his half share in the community of acquests. Galizia also alleged that a daughter of the Azerbaijani President, Leyla Aliyeva, through a Dubai company with a bank account at Pilatus Bank, Ta Xbiex, paid US$1.017 million to Egrant. The chairman of Pilatus Bank was filmed by a Net TV crew leaving the bank through an emergency exit holding two pieces of luggage.

The Opposition Leader claimed that the chief of staff had taken kickbacks from the sale of citizenships, and he said he had the hard evidence to back up exactly what he was saying. The Nationalist Party, through its leader Simon Busuttil, was allowed to bring fresh allegations, this time involving Pilatus Bank, the Prime Minister’s chief of staff Keith Schembri and Nexia BT managing director Brian Tonna. It was alleged that Tonna had received €166,831.90 in fees for the sale of passports to three Russian individuals.

On 16 October 2017 a blast blew up Daphne Galizia's car just moments after she left her home. It set the vehicle on fire and sent it careening into a field. Galizia’s son saw his mother’s car explode, but there was nothing he could do to save her. "My mother was assassinated because she stood between the rule of law and those who sought to violate it, like many strong journalists," Matthew Caruana Galizia wrote. "She was also targeted because she was the only person doing so." Just 30 minutes before her death, Galizia wrote on her blog "There are crooks everywhere you look now. The situation is desperate."