Updated 2.05pm with Nexia BT reply

Nexia BT “withheld” information from the government’s anti-money-laundering agency during investigations involving Keith Schembri and Konrad Mizzi, a leaked report says.

The Financial Intelligence Analysis Unit has wide-ranging powers to demand information during its investigations.

It started investigating the two men after slain journalist Daphne Caruana Galizia outed them in February 2016 as having set up secret Panama companies sheltered by trusts in New Zealand.

In March 2016, the agency demanded copies of all correspondence between Nexia BT and the Panama law firm Mossack Fonseca, as well as correspondence between Nexia BT and Tourism Minister Konrad Mizzi and the Prime Minister’s chief of staff, Keith Schembri.

According to the leaked report, Nexia BT told investigators that “all instructions and discussions with the clients” were verbal.

The FIAU deemed this to be “suspicious”, arguing that Nexia BT, Mr Schembri and Dr Mizzi  would likely resort to e-mails, at least in parts of the process.

The fact that the two men had set up identical structures simultaneously was in itself suspicious

Of further suspicion to the FIAU was the fact that Nexia BT partner Karl Cini, who handled the offshore set-up for Mr Schembri and Dr Mizzi, “withheld” an e-mail from the agency showing his clients’ reluctance to inform local banks about their offshore structures, the report adds.

It shows the FIAU only learnt about this e-mail when it was published by Times of Malta, which, as a partner in the International Consortium of Investigative Journalists, had full access to the leaked correspondence through the Panama Papers.

Asked about the “withholding” of information, Nexia BT’s managing partner, Brian Tonna, declined to comment.

The report shows that investigators honed in on a particular e-mail in which Nexia BT raised the need for Mr Schembri and Dr Mizzi’s ownership of the companies to be hidden from public view.

Read: Nexia BT's declaration about Konrad Mizzi's 'source of funds'

The FIAU questioned in its report why there was the need for such secrecy when Nexia BT had acknowledged in the same e-mail that politicians in Malta were openly allowed shareholdings in companies.

Mr Schembri and Dr Mizzi said in the past their offshore structures were set up as a vehicle for their personal wealth.

The FIAU commented in the report that the fact that the two men had set up identical structures simultaneously was in itself suspicious, because such structures were typically tailored to an individual’s needs.

The report refers to a trip Dr Mizzi made to Dubai in August 2015. The trip, which had not been announced officially, coincided with e-mails sent by Mr Cini to Mossack Fonseca stating that Dr Mizzi needed to have all original documents about his Panama company for the purpose of setting up a Dubai account. Nexia BT would say in later e-mails that the shell company 17 Black would pay money to Dr Mizzi and Mr Schembri’s Panama companies.

The FIAU traced payments totalling $1.6 million to 17 Black.

Watch: Watch: $1.6m wired to Mizzi and Schembri's Panama 'target client'

Investigators said Nexia BT’s attempts to open bank accounts in various jurisdictions indicated that the companies planned to have more than one account. Attempts were made by Nexia BT to open accounts for their two clients in more than eight banks in Panama, Miami, US, and other jurisdictions.

An e-mail sent by Nexia BT on December 17, 2015, said that the two Panama companies would generate $2 million within a year, with monthly transactions of €150,000.

Read: Specific Panama data on both Schembri, Mizzi offered to Maltese authorities

The FIAU remarked that such large amounts of income did not tally with Dr Mizzi’s statement that the Panama company was set up to preserve his family assets and income derived from rent from his UK property.

During the course of investigations, the agency carried out a detailed analysis of Dr Mizzi’s assets. It estimated the potential rental value of the UK property at £20,000 (€23,000) each year. It also found bank deposits of just over €92,000 in a joint account, which was below the €389,440 in deposits declared to Parliament by Dr Mizzi in 2015.

“The apparent lack of these bank deposits, which would be one of the most significant assets Dr Mizzi holds, further begs the question as to why such a structure was required, given that the costs of setting up and maintaining such a structure would outweigh any financial benefit derived solely from the property in the UK [owned by the minister],” the FIAU said in its report.

The report was still being finalised when it was leaked.

Nexia denies any wrongdoing

In a statement, Brian Tonna of Nexia BT denied having withheld any information from the authorities.

"On the contrary, and as we have stated consistently, we have cooperated fully with them, and will continue to do so. In so far as concerns the remainder of your article, we are precluded from fully addressing the allegations due to client confidentiality and professional secrecy obligations at law, as well as in light of the ongoing magisterial inquiries.

"Nonetheless, we continue to categorically deny any wrongdoing, both from a legal and also from a conduct perspective."

These findings come as part of an investigation by more than 18 international media organisations, including Times of Malta.

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