The former head of the Financial Intelligence Analysis Unit took potentially incriminating information about former top government official Keith Schembri directly to the police commissioner in April 2016, he told a public inquiry on Monday.

Manfred Galdes said he had decided to go straight to commissioner Michael Cassar with the “serious” information because he feared the information would be leaked or held up, as he had received reports that information was taking long to reach the police. 

The information was extensive and included details of bank transactions and companies, memos and bank accounts.

“We felt the information was sufficiently serious to be passed on to the police without delay,” Dr Galdes recalled.

Mr Cassar walked away from his job leading the police force the following day.
The police would subsequently say they had no reasonable suspicion for them to investigate Mr Schembri, who was exposed as having opened a secret offshore company while serving as chief of staff at the Office of the Prime Minister.

Dr Galdes was testifying as part of a public inquiry into the murder of journalist Daphne Caruana Galizia.

Mr Cassar, who testified in the inquiry last week, said under oath that the authorities had never interfered in investigations. 

"They wouldn't dare," he had said. 

Dr Galdes said that after he gave Mr Cassar the information, Economic Crimes Unit chief Ian Abdilla and two of his officers paid him a visit for more information.

That was the last he heard of the matter. 

“I felt there would be freezing orders and so on as soon as we forwarded the reports,” he said. Instead, nothing had happened.

Requests for freezing orders are filed by the Attorney General. When pressed about Attorney General Peter Grech’s responsibility in the matter, Dr Galdes told the inquiry he would rather testify about that matter behind closed doors.

Dr Galdes led the FIAU between 2008 and the summer of 2016, when he resigned.

On Monday, he gave the board of inquiry a copy of his resignation letter, saying he had been holding onto it until “the right time” arrived.

“I felt there would be an inquiry at some point,” he said.

'Stop everything'

Dr Galdes told the inquiry that he used to regularly warn that the FIAU was chronically under-resourced, to the point that it was unable to fulfil its mandate.

At one point he had appeared to make some progress in addressing the situation, with the Finance Ministry's permanent secretary agreeing with him and pledging to get the minister to act. 

But when he had called to check on progress of plans to increase FIAU resources he was told by an official at the Management and Personnel Office that an order had come through to “stop everything”.

“I cannot join the dots but it was rather suspicious,” Dr Galdes said, noting how the FIAU was investigating the sensitive reports concerning PEPs at the time.

Dr Galdes’s successor at the FIAU, Kenneth Farrugia, testified on Monday that the FIAU had passed 15 different reports into Panama Papers revelations onto the police for further investigation. Not all of those concerned PEPs, he said. 

The FIAU has since seen its budget increase tenfold, after a MoneyVal report exposed massive lacunae and said Malta risked being blacklisted. 

Mr Farrugia, who appeared reluctant to answer the inquiry board's questions in public, was given permission to conduct the bulk of his testimony behind closed doors. 

Parts of Dr Galdes' testimony were also conducted in private.  

Double work

Last week, former police commissioner Michael Cassar had told the inquiry that when allegations of a £100,000 loan from Mr Schembri to Nexia BT director Brian Tonna had first emerged, he was told that they were being investigated by the FIAU.

"The police have to make sure not to overlap and do double work," the former commissioner had said.

But on Monday Dr Galdes appeared to pour cold water on that explanation, saying it was good practice for the FIAU and police to work on the same cases concurrently and that they had done so in the past.

In a statement, Mr Tonna said that the transactions cited by Dr Galdes are currently subject to a separate magisterial inquiry led by Magistrate Natasha Galea Sciberras.
“Once again, I categorically deny any wrongdoing. I reiterate the legitimacy of those transactions and in view of the full faith in the judicial process of this ongoing inquiry I will refrain from making any further comments in connection with Dr Galdes's testimony,” Mr Tonna said.

Pilatus Bank

During his testimony, Dr Galdes also touched on concerns about Pilatus Bank.

The bank was being inspected by FIAU officials in the spring of 2016 and analysts were finding it hard to get information from bank officials, Dr Galdes recalled.

“Inspectors told me they were not being given the information they needed to conduct due diligence checks,” he said.

“The person in charge at Pilatus kept saying that they did not have the requested information."

Dr Galdes resigned from the FIAU before the unit had concluded its analysis of the bank. Some months after he quit, the FIAU sent Pilatus Bank a letter saying its shortcomings “no longer subsist”.

“Perhaps the requested documents were provided or the information was elsewhere and then found,” Dr Galdes said on Monday when asked about the clean bill of health.

Pilatus Bank was officially shut down by the European Central Bank in November 2018.

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