Herd immunity is a precursor to normality
Deputy prime minister Chris Fearne said people who are fully vaccinated will not have to wear a mask outdoors starting from 1 July. It was the cherry on the cake for islanders who this week drew a line in the sand reaching ‘herd immunity’ against COVID-19 – in simple terms, it means 70% of the adult population have been vaccinated.
We also have our own home-grown feel-good factor as positive leaks from the Moneyval final inspection report to the Council of Europe’s experts recognises that sufficient institutional reforms have been enacted during Robert Abela’s administration.
The financial services industry now faces a challenge to persuade potential investors that the reform was real and heads did roll at top regulator bodies in a root and branch reform. In an interview, the chairman of FinanceMaltasaid he was eager to get on the first available flight to spread the good news that Malta is open for financial services business as soon as the inconveniences caused by the pandemic are behind us. This may be an honest wish since, during the past year marking his appointment, there was nothing he could do to prime the pump.
Back on the subject of the damage impinged on the domicile mostly resulting from court testimonials by suspects in connection with the murder (three years ago) of an outspoken journalist – Daphne Caruana Galizia. This is palpable. As they say – it does not rain, it pours.
A scandal of international scale concerns the use of shell companies in Malta to shield dubious billionaires in their drive to avail themselves of the favourable tax regime. A particular case involves an African princess of the dos Santos dynasty in a scheme valued at $2.2 billion by Forbes.
More scandals reek in our cupboard and nobody can forget the forced closure of three local banks. These were private banks – Nemea, Satabank and an Iranian owned bank – Pilatus. And we cannot forget the reprimand on the Bank of Valetta by the ECB over AML and governance issues. These issues sent shock waves since BOV is a major bank with a majority shareholding held by the state. For many years, it was run by a chairman appointed by the major shareholder. One was the ex-managing director of RSM – the firm auditing Labour Party currently replaced by a well-connected economist in government circles.
The more sad news is the fine of €340,058 imposed on Lombard Bank by The Financial Intelligence Analysis Unit (FIAU). It proclaimed the bank breached five separate anti-money laundering provisions. It reported that in one case, the bank failed to properly ascertain the source of funds from a politically exposed client.
The inadequate information held on file about the origin of the wealth of three other clients convinced the FIAU that it needed to penalise Lombard on inadequate enforcement of anti-financial crime directives. Lombard informed its stakeholders that it has always been and remains committed to preventing financial crime contemplated by its clients and strongly appealed the fine.
The Malta Financial Services Authority (MFSA) launched enforcement proceedings against four licensed operators last year, levying fines of €15,000 each on two entities and stripping the other two of their licenses. The sudden resignation of the MFSA CEO appointed only 20 months ago – caused by a scandal of his accepting a free holiday to Las Vegas from Yorgen Fenech – seemed to break the camel’s back.
The police arrested Yorgen Fenech, owner of 17 Black and one of the richest individuals in Malta, accusing him of being the mastermind behind the murder of a journalist.
All these factors have taken their toll on public opinion while we are still feeling the cold blast of daily financial scandals. The floodgates were busted with negative publicity following the disclosure of two secret Panama companies in 2015 registered by audit firm Nexia BT (representing a disgraced Panamanian firm – Monaco Fonseca) commissioned for top members of the cabinet.
But it is not all doom and gloom. A contrite country with a passion to return to normality needs to look ahead; all stakeholders, including the government, national authorities and market operators must put good governance at the top of their agenda and continue enhancing internal controls to strengthen the fight against money laundering and terrorism funding. During the past years, the country has witnessed several protests sparked by damning revelations disclosed in the independent media.
Moving on, one notes how Abigail Mamo, CEO of Malta’s Chamber of Small and Medium Enterprises said that the chamber received calls from restaurants, retailers, grocers complaining of reduced business and urged the government to issue a second round of free cash vouchers to the public – these are targeted for the first week of June.
Back to the theme regarding the reputation of Malta’s financial services sector, this can only be regained through hard work and patience. Trust is a plant of slow growth. Thank our stars, that Moneyval’s dreaded grey-listing will never materialise.
Malta will have its work cut out to convince the international community that we do not only enact good laws to prevent financial crime but also actually implement these laws with a steely determination.
This possibly being an election year, the nation is being fed daily snippets of a feel-good factor and this coincides with the full opening of bars and restaurants this week – with bathers at beaches no longer needing to wear face masks. The floodgates for new travellers will open next month with an expectation of about one million visitors churned by crafty cash handouts on offer by MTA to exacerbate the flow of tourists.
In truth, businesses who applied for bridging finance from banks at preferential terms have somewhat been able to mitigate their dire situation. These are now making some profits, even if not so much.
The truth is, the pandemic – like the dodo – may disappear by this time next year with the help of booster vaccines and when it does, all industries that sharpened their knives during the slow-down will thrive. These can exploit fresh opportunities by reaping benefits generated out of pent-up demand from clients. Some of the zombies will perish and face bankruptcies.
Our redemption can triumph if we sustain a root and branch reform backed by checks and balances in a concerted drive to strengthen the three pillars of good governance, the rule of law and democracy.