Malta’s credibility as financial centre takes another hit over battle for Gaddafi’s money

Malta’s credibility as a financial centre has taken another hit as news broke this week about a legal battle for the millions of euros accumulated by Mutassim Gaddafi – son of Libyan dictator Muammar Gaddafi – currently frozen in a Bank of Valletta account.

Malta’s role in all this came under the spotlight in an article in the internationally-renowned Wall Street Journal, which says that “for years, many European lenders were so eager to win new business that they sometimes engaged with shadowy individuals or did business in countries that were subject to international sanctions”.

The Libyan government has opened a court case against BOV, arguing that the millions of “stolen” euros should be returned to Libya.

Although BOV is not being accused of breaching any sanctions, the Libyan government is insisting that the bank should have never accepted Mr Gaddafi as a client, and by doing so it violated “know-your-customer” rules that banks are bound to abide by.

Malta has ruthlessly positioned itself as a financial hub since EU membership in 2004, taking advantage of its strategic position in the middle of the Mediterranean in order to position itself as a tax haven with liberal regulatory policies.

In 2013, international aid agency Oxfam mentioned Malta, along with a number of other EU member states, as acting as tax havens with billions of euros stashed in its banks.

The report estimated that there were €45 billion in “dubious” foreign deposits parked in Maltese accounts.

Malta’s willingness to sell itself to rich individuals was also highlighted internationally a few years ago with the government’s ‘cash-for-passports’ scheme, which in its originally guise would have allowed millionaires to simply buy a Maltese passport for €650,000.

Malta eventually bowed to EU pressure and tightened the requirements for the ‘cash-for-passports’ scheme, adding an effective residency clause and requiring additional investments in property.

The island has come in for some flak from the EU in recent years for inadequate reporting of suspicious transactions, particularly those involving politically exposed people such as the Gaddafis.

Just last month, British Prime Minister David Cameron’s electoral guru, Australian Lynton Crosby, came under fire for his alleged links to two companies based in Malta, after the Evening Standard reported that Mr Crosby was a director of Rutland Ltd and a shareholder in Rutland Holdings Ltd, and that both companies shared a Maltese address with Bentley Trust (Malta), a financial services firm offering “legitimate mitigation” of tax.

The Libyan government says the money was stolen by the Gaddafis during their reign, when the dictator was supposedly on a €45,000 annual salary.

BOV chief executive Charles Borg told the Wall Street Journal that neither the bank nor its executives are being investigated for any wrongdoing in accepting Mr Gaddafi’s business.

Finance Minister Edward Scicluna also played down the controversy, saying the funds were accepted as business, and the Gaddafis invested in Malta just like they did in other countries.

Legal filings show that the dictator’s son had as much as €55 million dollars in his BOV account, often racking up €100,000 on his BOV Visa Platinum card in a matter of weeks.

The Wall Street Journal says that Mr Gaddafi started opening BOV accounts in 2002, under the guise of Malta-incorporated companies that he controlled. The accounts’ assets swelled from €700 to at least €60 million in early 2011, just before the Libyan revolution.

The role of auditor Joe Sammut, who opened a number of shell companies on Gaddafi’s behalf, has also been called into question.

Court transcripts of the testimony given by Mr Sammut show that he did not flag the large money transfers in and out of the BOV accounts in question as suspicious.

Mr Sammut – a former Labour Party treasurer – frantically sought visas for his Libyan contacts at the height of the 2011 revolution.

The Malta Independent on Sunday reported a few years ago that the majority of individuals on Mr Sammut’s visa wish list were Gaddafi acolytes.

Mr Sammut had, at the time, fiercely lobbied the appropriate authorities to recommend visas for his Libyan friends, as Malta was an attractive safe-haven for them.

Mr Sammut was not available for comment yesterday.