A top US Treasury official has highlighted “pressing issues” that need to be addressed in Malta’s fight against financial crime.

In an interview with The Sunday Times of Malta, US assistant secretary for terrorism financing and financial crime Marshall Billingslea speaks of the need to send a “very strong signal” that corruption and financial crime will not be tolerated.

Mr Billingslea said the US was willing to offer the full range of support to help the government’s efforts to fight these crimes.

His visit to Malta comes amid growing concerns about the government’s ability and will to crackdown on financial crimes, with pressure growing following a dismal assessment of these efforts by Moneyval, the anti-money laundering body of the Council of Europe.


Interview with Marshall Billingslea

[Given your stated mission], is Malta viewed as a haven for financial crime?

No, I wouldn’t say that. There are perceptions, right or wrong, about the facility by which individuals can gain access to the Maltese financial system and we are working together to make sure this is no longer the case.

What are the pressing issues that have been identified?

Without getting into too much detail, there is an urgent need for us to collaborate closely on the corporate formation process and the way that corporate service providers in Malta enable the establishment of companies, and the way those companies are vetted.

There is a need for us to work together on real estate-related issues. There is a need for us to work together on successful prosecutions of money-laundering and tax evasion crimes, to name just a few areas of focus for the United States working with the Maltese authorities.

I’m sure FinCen [The US treasury’s anti-financial crime body] must share a lot of intelligence with the local authorities. Are you seeing the results of that intelligence being shared, are you seeing enough prosecutions?

It is certainly an area where more can always be done. For us, of particularly urgency is the need to see effective prosecution of money-laundering and tax evasion crimes.

How do you see our sanctioning regime? We know a number of [Maltese] individuals have been sanctioned by the US and one of them runs a restaurant through third parties, by way of one example [Former Malta football international Darren Debono says he sold the shares in Valletta restaurant Scoglitti to his step-daughter who has since been forced to transfer them to third parties under pressure of US sanctions]. Are you happy with the way sanctions are being applied?

The foreign ministry’s creation of the sanctions board and the initiative taken at the UN security council by Malta is truly fantastic and something we strongly support [Malta recently attempted to get UN sanctions on the suspected fuel smugglers Darren and Gordon Debono]. The Russian decision to put a technical hold on the Maltese nomination is regrettable to say the least. We hope that Russia will remove that hold and allow Malta to proceed.

It would of course be unacceptable in our view for the Debonos to operate restaurants here in Malta. They are under United States sanctions, and we do expect all Maltese financial institutions to sever all ties with those individuals for their violation of the UN oil embargo related to Libya.

So great credit is due to the Maltese government for taking that initiative, but we are certainly keen to work together to ensure that those criminals are not allowed access to the international financial system. For us that is a fundamental concern that we are working together on.

Very often we see action being taken locally only when an issue is flagged by foreign authorities. For example with the Debonos, most of the action taken locally stems from an Italian investigation. These guys have been operating pretty openly for years. Why is it that the local authorities are not willing to get their hands dirty?

I think it is important to be fair with the Maltese authorities. Many of these syndicates operate on a global basis, or at least on a pan-regional basis. They do operate very sophisticated and complex networks. So cooperation between jurisdictions is vital.

I would say very unequivocally that Malta is highly regarded in the international community for the way it cooperates internationally with other jurisdictions.

They do deserve credit for that. However, you make a good point. Maltese authorities on their own initiative do need to identify and bring forward prosecutions of these matters in domestic jurisdictions as well.

That is one of the reasons why I am here, to work on how to support and bolster that capability.

Malta’s finance minister recently announced the setting up of a financial crimes agency. Has advice from the US been sought about this?

I had a chance to talk with the finance minister yesterday [last Monday]. This seems like an excellent initiative and something we are definitely going to support. I am pleased there was such a strong level of support from the UK as well.

Malta is highly regarded in the international community for the way it cooperates with other jurisdictions

When you were president of the Financial Action Task Force [FATF, an intergovernmental body geared towards fighting financial crime] one of your priorities was tightening up regulation of virtual currencies. Virtual currencies have been regulated in Malta. Are you happy with the oversight and the capacity to deal with this billion-euro industry?

It is not my role to be happy or not happy. The reason I focused so heavily on virtual assets is that we do see globally the risk that’s posed – from an anti-money laundering and countering of terrorism financing standpoint – by unregulated virtual assets.

We are in a situation where a number of service providers can jurisdiction shop, without having to maintain standards or programmes on anti-money laundering or combating of terrorist financing.

It is important that Malta, together with a number of other jurisdictions, implements the new FATF standards. We are discussing that here. The Maltese government has taken a number of steps already. We expect all countries to rapidly adopt the new FATF standards.

What do you identify as being the key areas for improvement in Malta’s anti-money laundering efforts?

I think there are a number of parts of the Maltese government that are very effectively discharging the roles and responsibilities they have under Maltese law.

Where we want to collaborate closely is to ensure that all of this good work results in a successful prosecution and successful conviction and confiscation of illicit assets, to make it very clear to the underworld that Malta is not a place open for criminal business.

Are you aware of how our asset confiscation regime works, or perhaps does not work?

Well… we think the trend is in the right direction.

Well it can’t get any worse… One of the more controversial schemes the government has implemented recently is the sale of citizenship, which is viewed as a money laundering risk. Does the US have any concerns about that?

Yes.

Can you elaborate?

Citizenship-by-investment programmes need careful scrutiny. Indeed, one might even question why it is necessary in a country like Malta with such an outperforming economy.

This government deserves enormous credit for the growth under its tenure of the Maltese economy. Fantastic GDP growth, maybe not as fast as in previous years, but still well ahead of many.

Likewise, the unemployment rate being so low here, one wonders why revenue is needed through such an investment scheme.

Do you think a lot of that growth is being driven by dirty money?

I do not think the numbers would support that conclusion. The revenue [from citizenship schemes] might be nice to have, but we certainly hope the government recognises the risks that this brings with it.

One only has to look at, for instance, the Pilatus case to see that citizenship-by-investment can be an enormously risky thing.

That’s nice that you have gone on to a specific case now…

Well I won’t be commenting at all on ongoing cases, but we are working very closely on a number of issues together with the Maltese authorities and we are pleased with the progress being made in these investigations.

In a case like that, where you had Ali Sadr, who was being investigated by the US, coming here and setting up a bank, would the US authorities have sent some intelligence to their Maltese colleagues [as a warning]?

I wouldn’t be able to comment on that.

Can you tell us why the island seems to be used by regimes in Venezuela and Iran to launder money?

When you look at the situation regarding Venezuela, it is important to recognise the kleptocracy that is operating in Venezuela is deeply institutionalised and has been at work for a decade or more. The sophistication that is used to steal the assets from the Venezuelan people and wash them through the international financial system has been under development for years.

Malta is by no means the only jurisdiction where Venezuelan corruption has tainted the financial system. We are dealing with this in the United States, we are dealing with it across the globe.

The Maltese government has been an excellent partner on Venezuela, they recognise President Guaido, the interim president, as the legitimate president in that country. Part of the discussions we have had here regard what more we can do to ensure the humanitarian disaster in Venezuela is brought to as quick an end as possible.

There was a big take-down of facilitators in the US for money that was being laundered out of Venezuela’s state oil company. People were prosecuted, yet once again, nothing happened in Malta, none of the facilitators have been prosecuted. [Two Maltese banks and an investment company were last year mentioned in relation to  a €511 million suspected scheme to siphon of funds from Venezuela’s state oil company, Petroleos de Venezuela].

Well these cases take time. In many circumstances even the development of the indictments take years in the US. I am certainly not here to level criticism at the government. The Maltese have been great partners on Venezuela.

The rubber hits the road on effective implementation

In instances where we see sanction or indicted individuals we will certainly bring that to the government’s attention without hesitation.

Do you have any intelligence that certain proxies for Iran are operating in Malta?

We are very vigilant about enforcing our sanctions on Iran. Malta as a neutral country has done a great job of ensuring that the Iranians are not able to use it as a permissive environment.

But the Iranians are very devious actors and they have shown their stripes in recent days with the seizure of the UK oil tanker and the other types of aggression they have shown.

So we will continue to emphasise to all of our EU partners that the Iranians must not be allowed to continue their destabilising activities in the region and more broadly. And that goes for the Lebanese Hezbollah as well.

After your trip here, what do you think your key takeaways are going to be? What is your report going to be like about what the government is doing to fight money-laundering and terrorism finance?

The key takeaway is that we have a partnership. Protecting the international financial system requires partnerships and close collaboration between countries.

We believe that this government is a partner of the US. We are going to work together and continue to work together. We are not in a situation where we feel the United States needs to engage in any type of unilateral actions.

At the same time, we are very concerned to help Malta tackle some of the systematic challenges that it faces. We feel that this is urgent to protect both the Maltese financial system and the correspondent banking ties that the islands need. We need to send a very strong signal together that corruption and criminal misuses of the financial system here will not be tolerated.

What sort of assistance can the US offer?

Really the full range of support is offered and is being accepted. We want to work together on everything from cyber-crime being perpetrated against the banks to the use of shell corporations to establish and utilise front companies here.

To support the Maltese government here, we will continue to work with them on a wide range of sensitive topics.

Can you understand why a US bank would be very hesitant and reluctant to offer correspondent banking services to local banks here?

I would not want to comment on that. Banks have to make their own individual calculations. We think that, working together, if the Maltese government can address a number of the topics I have laid out, they should send a very clear signal to the banking community. No jurisdiction is free of risk. The key is whether the risk is properly appreciated and mitigated by a series of actions.

I think the Maltese government is well on its way to both identify the risk areas and tackling them, but much more does need to be done.

Just recently we found out Malta failed its Moneyval assessment pretty badly. How can you see the island recovering from that?

The Moneyval assessment is not a public document, so I do not want to comment on the particulars. It will go to the FATF in the near term.

In essence, the issues that are being discussed in the press are widely understood, they are not new.

The key is that the FATF now not only expects that you have all the necessary laws and regulations on the books. The FATF and Moneyval expect that countries will demonstrate effectiveness in implementing those standards.

That is where the rubber hits the road, on effective implementation. That is why I am here and that is what we are going to work on together to achieve.

Highlights

▪ Need to send very strong signal that corruption, financial crime will not be tolerated.

▪ Government well on its way to identify and tackle risk areas but much more does need to be done.

▪ US willing to offer full range of support to help government’s efforts to fight these crimes.

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