Former Financial Intelligence Analysis Unit chief Manfred Galdes testified on Monday, as a public inquiry into the murder of journalist Daphne Caruana Galizia continues.
He was followed on the witness stand by his successor at the FIAU, Kenneth Farrugia, who however was given permission to answer the inquiry board's questions behind closed doors.
As it happened
End of today's session
5.01pm The board tells journalists that they can leave. It appears none of Mr Farrugia’s testimony will be held in public.
The next scheduled inquiry hearing is on Wednesday afternoon, when Malta Security Services chief Joseph Bugeja is expected to testify.
Thank you for joining us during this live blog. We will have a summary of the day's key events up shortly.
Behind closed doors
4.57pm Judge Said Pullicino offers to continue behind closed doors, and Mr Farrugia snaps up the offer.
And that’s that. The media is asked to leave, and Mr Farrugia will continue testifying in private.
A cagey reaction
4.55pm Mr Farrugia notes that some reports – “some sent before my time” – have been leaked to the media. He’s asked if they concerned Keith Schembri, Konrad Mizzi, Adrian Hillman and other such names who have been repeatedly cited in media reports.
The FIAU chief wavers – he appears reluctant to answer – and draws a reprimand from Madam Justice Lofaro.
“You must answer our questions,” she tells him.
Judge Said Pullicino joins in.
"If you say that you [FIAU] passed on info to the police, we have to see if and why matters were not followed up," he tells Mr Farrugia.
15 Panama Papers reports
4.53pm Investigations into Politically Exposed Persons (PEPs) have continued under his watch, Mr Farrugia tells the inquiry.
“In cases of suspicion, they were sent to the police”.
15 cases linked to the Panama Papers were sent to the police, he adds. [Not all of these concern PEPs].
4.47pm Mr Farrugia tells the inquiry he became FIAU director in February 2017. Before that, he worked with a private auditing firm and then with Heritage Malta.
He received a handover from the interim manager running the unit after Dr Galdes. [There was a six-month gap between Dr Galdes resigning and Mr Farrugia being hired].
A closed door request
4.44pm Mr Farrugia appears keen to testify, but says that he would rather do it behind closed doors.
The board tells him that questions about matters of public interest will be asked openly, with the questioning continuing behind closed doors later.
A legal waiver
4.41pm The law precludes FIAU officials from testifying. Mindful of that, the inquiry board issues an "order" for Mr Farrugia to testify, effectively waiving that legal preclusion.
"I'd rather this article wasn't there, because we would have testified a long time ago," Mr Farrugia tells the board.
4.38pm Manfred Galdes is done testifying. The inquiry will now hear testimony of another witness - Dr Galdes' successor at the FIAU, Kenneth Farrugia.
What we've learnt so far
4.25pm Dr Galdes is testifying behind closed doors. As we wait, here's a roundup of what we've heard from him so far today:
• Galdes took information about potential financial crime involving Keith Schembri directly to police commissioner Michael Cassar, feeling there was enough for the police to investigate. He gave it to Cassar directly because he didn’t trust anyone and because he had heard complaints that information passed to the police was being held up.
• The FIAU was still investigating that information at the time but nothing precluded the FIAU and police from investigating the same allegations at the same time, Dr Galdes said.
• Galdes had long been complaining about under-resourcing at the FIAU and repeatedly mentioned it to the Finance Minister [Edward Scicluna] and permanent secretary.
• Work to increase the FIAU’s resources was stopped without warning or explanation. The FIAU was investigating the Schembri information at the time. When Dr Galdes followed up, he was told by an official at the MPO [Management and Personnel Office] that an order had come through to “stop everything”.
• Galdes gave the inquiry board a copy of his letter of resignation, telling them “I kept it to myself until the right time came along. I felt there would be an inquiry at some point.”
• Galdes never heard any word of the FIAU reports into Politically Exposed Persons (PEPs) like Schembri being investigated.
• Pilatus Bank could not provide key documentation needed for due diligence checks and its chairman objected to the FIAU’s findings.
4.05pm The board want to know about any undue pressure Galdes sensed.
Dr Galdes recalls one occasion when a parliamentary secretary rang him up to
inquire about a candidate who had a job interview.
He also cites two other occasions when he felt uncomfortable.
But we won’t know what those are, because the inquiry has ordered that this part of Dr Galdes’ testimony will continue behind closed doors. The press is asked to leave the room.
Why the halt to improving FIAU resources?
4.02pm Judge Mallia asks Dr Galdes about the sudden halt in progress to improve FIAU resourcing.
“I cannot say why,” Dr Galdes tells him. “I cannot join the dots but it was rather suspicious. The timing was at the same time we were investigating these cases”.
A police visit
3.59pm Dr Galdes says he did not receive any feedback about the information he handed commissioner Cassar until he quit but that was to be expected, as investigations usually took longer than three months.
He wasn’t told that investigations were under way, either, though he received a visit from Ian Abdilla [and police officers] Antonovitch Muscat and Ray Aquilina, for further information.
Could Pilatus have been clean?
3.54pm Judge Said Pullicino wants to know whether Dr Galdes thinks it possible that his successor at the FIAU was able to give the bank a clean bill of health.
[In September 2016, a few months after Dr Galdes resigned, the FIAU sent Pilatus Bank a letter saying shortcomings it had initially identified “no longer subsist”.]
“Perhaps the requested documents were provided or the information was elsewhere and then found,” Dr Galdes ventures.
“When I was in charge Pilatus could not be fined because the process had not been concluded”.
Pilatus play difficult
3.50pm Dr Galdes thinks back to the Pilatus Bank inspections.
“I had met Ali Sadr [Hasheminejad, Pilatus Bank’s chairman] before I stepped down. He was the first person to challenge our findings. He kept blaming his employees for having allegedly not supplied the right information.
“Inspectors told me that they were not being given the information they needed to conduct due diligence checks [by Pilatus Bank officials]. The person in charge at Pilatus kept saying that they did not have the requested information."
No fines for Pilatus
3.47pm Dr Azzopardi is asking about the FIAU’s inspection of Pilatus Bank.
Dr Galdes says that in such cases, if a warning is not very serious the entity is given a warning or reprimand. More serious cases can end up with fines.
“Pilatus was not fined,” Dr Azzopardi notes.
“Not in my time, no. And as far as I know, not even afterwards,” Dr Galdes replies.
'I didn't trust anyone'
3.43pm Dr Galdes returns to that 2016 occasion when he handed information directly to commissioner Cassar.
He says he did that because he feared leaks and didn’t trust anyone, “not even a messenger”.
3.38pm Answering a question from lawyer Jason Azzopardi, who is also representing the Caruana Galizia family, Dr Galdes says that he found backing from the Finance Minister, but that the perennial understaffing problems remained.
The FIAU would attract new employees but they would then move on to better-paying jobs, including ones at the MFSA.
Dr Galdes says that the permanent secretary agreed with him that salaries had to be improved, and had spoken to the minister.
But then the process stalled. Dr Galdes tells the inquiry that he had called the MPO [a government department within the Office of the Prime Minister] and been told that an order had come through to “stop everything”.
3.33pm Galdes says he cannot be certain that the reports were not investigated because of the people named in them, “though I felt there would be freezing orders and so on as soon as we forwarded the reports”.
Instead, years passed and nothing happened.
Dr Azzopardi asks Dr Galdes about freezing orders. The former FIAU boss says attorney general Peter Grech did not file any such orders concerning FIAU reports.
Galdes on his resignation letter
3.30pm Judge Said Pullicino wants to know if these cases influenced his decision to quit.
Dr Galdes says he’s happy to hand them a copy of his resignation letter, behind closed doors.
“I kept it to myself until the right time came along. I felt there would be an inquiry at some point.”
The FIAU had never published the letter, despite all the speculation surrounding it, he notes.
He returns to his understaffing concerns.
The police had just three officers working on financial crime, he says to make his point.
“I felt I could not continue to work in a scenario where the FIAU was ineffective. Malta was non-compliant. I witnessed what MoneyVal said.”
Galdes contradicts former commissioner
3.27pm The board wants to know if the FIAU and police had to be careful to not overlap and work on the same investigation.
“No,” replies Galdes. “There were cases when we worked in tandem. It’s very good practice for entities to work and help each other out”.
“So it’s not correct to say that the two would have stepped on each other’s toes?” asks Madam Justice Lofaro.
“No,” Galdes replies.
Last week, the inquiry was told by former commissioner Cassar that "the police have to make sure not to overlap [with the FIAU] and do double work".
Information to commissioner
3.24pm Dr Galdes tells the board that in July 2016 he had taken information about the Schembri cases to police commissioner Michael Cassar.
He had a memo, articles of companies, transactions, details of UBOs (ultimate beneficial owners) and bank accounts.
3.20pm Dr Galdes says the first report concerned suspicious transactions concerning Keith Schembri and a company called Willerby. [Willerby is owned by Nexia BT’s Brian Tonna and allegedly sent €100,000 to Mr Schembri.
A second report concerned suspicions of financial crime involving Mr Schembri and Adrian Hillman. [Mr Hillman is a former managing director at Allied Newspapers].
“I had already left the FIAU when this was passed to the police,” Dr Galdes says.
A third report concerns an on-site inspection the FIAU carried out at Pilatus Bank’s offices.
'Is this the same report?'
3.15pm Dr Galdes is asked about information leaked to the media. He’s shown a document and leafs through it.
“The format appears to be different and not my style,” he says, “but I would need to read it in peace to confirm whether it’s the same report”.
Judge Lofaro has time. She asks him to go over it and try confirm.
High-priority information in April 2016
3.07pm Dr Galdes recalls one occasion when he handed information directly to the police commissioner – at the time, Michael Cassar – rather than to the police liaison officer.
He did so because he felt the information inside it was especially serious, he says. This was in April 2016.
[Read more about the report Dr Galdes is most likely referring to].
Galdes felt that the information had to be brought immediately to the attention of the commissioner, even if the FIAU investigation had not been completed at that stage.
He did that because he had received feedback from other officials that their reports were taking a long time to reach the police.
“We felt the information was sufficiently serious to be passed on to the police without delay,” Dr Galdes says.
Understanding the FIAU's roles
3.03pm Dr Comodini Cachia cites the Pilatus Bank case. Wouldn’t the board members know about that investigation, she wants to know?
Dr Galdes says that the Pilatus Bank case was different. The FIAU had inspected the bank as part of its supervisory role. The board would be informed of the findings of such inspections but it had no say in deciding what penalties or fines were due.
On the other hand, the board was not informed of investigations the FIAU was undertaking, unless, for example, a case was reported by the media or a lawyer objected to how their client was being handled.
'Need to know'
2.57pm Dr Galdes is asked who the police member on the FIAU board was.
“Pierre Calleja, who was then replaced by assistant commissioner Silvio Valletta,” Dr Galdes replies.
“Valletta was in the role when I resigned”.
Lawyer Therese Comodini Cachia – representing the Caruana Galizia family – wants to know if FIAU reports were also sent to the board.
Dr Galdes says no. Reports were sent to the liaison officer. The board did not enter into the merits of particular cases, including cases involving Politically Exposed Persons (PEPs).
“We informed the board on a ‘need to know’ basis, but that was all”.
From FIAU to the police
2.54pm The FIAU sends its reports to the police via a liaison officer.
“In my time, it was acting liaison officer Ian Abdilla,” Dr Galdes testifies. “Before, it was Michael Cassar.”
When the liaison post became vacant, the FIAU was told to pass on its reports to Economic Crimes Unit head Ian Abdilla.
Suspicious transaction report
2.51pm Dr Galdes explains the FIAU process. The starting point was a suspicious transaction report. All professionals are bound to report any such transactions to the FIAU.
From there, the FIAU does its digging and then passes the report to the police.
The FIAU can tell the police they have a reasonable suspicion of financial crime, but the police cannot use the data collected by the FIAU and have to do their own investigative work.
'Vacancies were not being filled'
2.48pm Galdes tells the inquiry he felt his requests for resources were not being adequately addressed.
Vacancies were not being filled. The FIAU was not managing to fulfil its supervisory role for gaming and financial services, mainly because the agency did not have the budget needed to pay competitive salaries.
“Even with those resources, Malta’s system would remain ineffective,” he adds.
The inquiry board ask Dr Galdes to elaborate on that.
Request for resources
2.42pm Galdes thinks back to the time when he first though of quitting the FIAU. He recalls how the chairman of the MFSA [Joe Bannister, at the time] and permanent secretary at the Finance Ministry had tried to get him to change his mind. But he stuck to his guns.
Galdes tells the inquiry that he had been calling for improved resources for the FIAU for a long time.
[In the ensuing years, authorities have increased the FIAU's budget tenfold, following intense pressure from EU regulatory authorities and damning reports about under-resourcing.]
Galdes asks to testify in private
2.39pm Mr Galdes has not just made that disclaimer - he's asked for permission to testify behind closed doors, because of the nature of the information he may be asked to provide.
Judge Said Pullicino tells the witness that they will take things step-by-step and decide on that as they go along.
Manfred Galdes takes the oath
2.35pm Mr Galdes is on the witness stand. He tells the inquiry he served as director of the FIAU between 2008 and 2016, when he resigned.
Mr Galdes immediately makes reference to anti-money laundering legislation, to explain what information he can disclose without breaking the law.
AML law is pretty strict about this and prohibits the disclosure of certain information, he says.
"I have no problem testifying, so long as I do not run into legal trouble," he explains.
Who is Manfred Galdes?
2.30pm Dr Galdes used to lead the Financial Intelligence Analysis Unit but quit in August 2016, a few months after the Panama Papers data leak exposed the secret offshore companies Konrad Mizzi and Keith Schembri had set up while in government.
The FIAU is the agency responsible for analysing suspicious financial transactions and potential money laundering breaches. The unit gathers information, assesses it and then makes a recommendation to the police if it feels that is necessary.
In February 2017 Dr Galdes had told an MEP committee that the FIAU had “thoroughly” investigated the Panama Papers revelations.
We now also know that the FIAU had been inspecting the now-defunct Pilatus Bank in the months before Dr Galdes resigned.
Dr Galdes now works in the private sector.
What have we learnt so far?
2.22pm The inquiry is made up three people – two retired judges and one active one.
They have so far heard from members of the Caruana Galizia family, four former police commissioners, former Labour deputy leader and current Speaker Anglu Farrugia and construction sector lobbyist Sandro Chetcuti.
The inquiry has also heard testimony – in private - from a mystery person “in the media” who approached the Caruana Galizia family and said they had information they wanted to pass on.
This is the first of three sessions the inquiry has scheduled this week. On Wednesday, Malta Security Services chief Joseph Bugeja will testify. The third session is scheduled to take place on Friday morning.
2.15pm Good afternoon and welcome to our live blog. We'll be bringing you minute-by-minute updates from the law courts in Valletta, where the three-person Caruana Galizia inquiry is convening.
Independent journalism costs money. Support Times of Malta for the price of a coffee.Support Us