€8 billion annual risk of money laundering

Malta’s threat places it 20th out of 27 states, Pana Committee told

Malta faces an annual €8 billion money laundering risk, according to figures quoted in a study presented to the European Parliament’s Pana committee.

The committee, which visited Malta in February for a fact-finding mission on the island’s involvement in the Panama Papers scandal, was this month presented with a study on offshore activities and money laundering.

The report says many European countries use offshore jurisdictions for their less transparent business, where regulations are laxer than in their home country.

Panama is listed as the seventh “top” offshore centre, right after Malta. Finance Minister Edward Scicluna has vehemently rejected the labelling of Malta as an offshore centre and a tax haven.

The report presented to the Pana committee shows that the annual money laundering threat is greatest in the UK, at €282 billion.

Malta is ranked last in terms of the money-laundering threat in absolute terms, but when compared to the island’s GDP, the €8 billion figure places it in 20th place out of 27 EU countries.

The report notes that Malta, along with four other countries, has a relatively high amount of offshore activities related to the country as evidenced by the Panama Papers data.

Customer due diligence by the financial intermediaries opening up companies for their clients is highlighted as an important tool in combatting money laundering.

The Pana committee raised various questions last month about Nexia BT’s role in opening up Panama companies for Minister Within the Office of the Prime Minister Konrad Mizzi and chief of staff Keith Schembri.

Nexia BT cited client confidentiality when it refused to answer questions from the committee on whether Dr Mizzi’s and Mr Schembri’s financial arrangements raised any suspicions.

Pana committee chair Werner Langen said during the visit that Dr Mizzi’s financial arrangements in Panama looked to him like money laundering.

The report says another key element in fighting money laundering is the obligation by financial institutions to report on their own initiative, any suspicions of money laundering to the Financial Intelligence Unit.

It notes that this reporting duty is contested by legal and financial service providers, who consider the reporting obligation to infringe upon their other obligations towards client confidentiality. The report says it is very difficult to create compliance among all the parties involved.

“Money launderers are the customers of the private sector: of banks, of real estate agents, of financial service providers, of lawyers and notaries. Having to report them to the Financial Intelligence Unit means also a loss of business to the one who reports,” the report says.

The report adds that enforcement of anti-money laundering laws is particularly lax in the south of Europe.