Updated 5.30pm with Marlene Mizzi reaction

HSBC must close its business in Malta if the Maltese government does not take more concrete action to tighten up money-laundering regulations, a German MEP is warning.

German MEP Sven Giegold's threat to launch a potentially damaging publicity campaign against HSBC’s continued presence in Malta could raise fresh questions over the sincerity of the bank’s ongoing efforts to restore its reputation after a series of scandals and compliance failures, according to The Sunday Telegraph.

Mr Giegold, a member of the European Parliament’s committee of enquiry into money laundering and tax evasion, spoke to the newspaper after a visit to Malta that he described as “disappointing”.

The Greens MEP described a meeting with Malta's financial regulator, the MFSA, as "ridiculous". 

“They were very much on the defensive and defended their approach, rather than announcing a stricter regulatory approach," he told the UK newspaper. 

He was also sceptical about plans to bolster staff numbers at the economic crimes unit, saying the real test would be seeing whether more crimes were detected and prosecuted. 

“Will they clean up the sector by themselves and root out criminal money, or not?” 

An HSBC Malta spokesman declined to address Mr Giegold's threat directly. A spokesman told Times of Malta that the bank implemented the highest global standards of financial crime compliance, consistent with all parts of the HSBC Group.

"We firmly believe that our high standards give confidence to our customers‎, employees and shareholders," the spokesman said. 

Meanwhile, in an open letter to Mr Giegold, Labour MEP Marlene Mizzi accused him of “crossing the line of correctness and decency” and trying to damage Malta “hiding behind the pretence of fighting money laundering”.

“It seems irrelevant to you that this would endanger the jobs of hundreds of people working with this Bank, and jeopardise the prospects of investors and shareholders. This is not acceptable and, frankly, you should be ashamed of abusing your position as an MEP for this purpose,” she said.

In April, Mr Giegold had said MP Konrad Mizzi and Chief of Staff Keith Schembri had to step down or be dismissed and the sale of passports scheme must be suspended immediately.

Back then, the Daphne Project had revealed that Economy Minister Chris Cardona had met with one of the men accused of plating the bomb which killed Daphne Caruana Galizia. 

Mr Giegold has repeatedly clashed with Malta's government. Photo: Chris Sant Fournier

Leaked documents also showed a total of €1.3 million had been transferred to 17 Black, a Dubai company listed as one of the "target clients" which would pay in money to Mr Schembri's and Dr Mizzi's once-secret Panama companies.

In a statement reacting to that leak, the German MEP had said: "The situation in Malta is unbearable. The new revelations must lead to drastic changes to counter the general perception of corruption and a weakening of the rule of law."

This is the second time this year that HSBC's future prospects in Malta have made headlines. 

Earlier this year, Bloomberg reported that Malta was among the smaller HSBC operations that HSBC Holdings Plc chief executive officer John Flint and chairman Mark Tucker were considering pulling out of.

Read: Malta among countries HSBC might leave

The agency said that sources familiar with the discussions said Flint and Tucker were reviewing as many as a quarter of the 67 countries in which the bank operates. The options are to exit or sell "smaller consumer operations such as Bermuda, Malta and Uruguay.