What does FIAU chief’s resignation mean for the Panama Papers investigation?

When Manfred Galdes resigned from his role as the head of Malta’s Financial Intelligence and Analysis Unit (FIAU) to join the legal advisory firm Fenech Farrugia Fiott (FFF), questions were raised as to how ethical it is for Galdes to join a private firm that had been monitored by his unit.

But Galdes’s move to the private sector also raises questions over the continuing investigation by the FIAU into the Panama Papers leak, which named both energy minister Konrad Mizzi and the Prime Minister Joseph Muscat’s chief of staff Keith Schembri.

It was confirmed in April that the FIAU was investigating the pair as a result of the leak, but no findings of the investigation have so far been released.

Earlier this month Finance Minister Edward Scicluna said he was unaware of the progress of the investigation into the Panama Papers leak, and confirmed he had no authority to request an update from the FIAU.

But journalist Daphne Caruna Galizia said that Galdes met with then Police Commissioner Michael Cassar in April to reveal the findings of the FIAU’s investigation.

The Nationalist Party has since called on the government in an official statement to explain the reason for Galdes’s resignation, with its leader, Simon Busuttil, telling Malta Today: “Did Galdes resign while the investigation was ongoing? If the investigation is ongoing, what were its conclusions? Is it true that an investigation report had been handed to the police for further action, but just two days [later], the police commissioner resigned?”

The government has labelled the statement from the Nationalist Party as ‘irresponsible’, and said no reason was given for Galdes’s resignation and that it had no way interfered with the FIAU or the investigation.

“The chairman of the FIAU is the Attorney General. If the Leader of the Opposition has any doubts about him, he should make them public immediately,” the government said.

But despite the assertions from government, the saga has drawn the attention of the EU, with the European news and commentary website, politico.eu, reporting that “the alleged burying of a report into the saga has set alarm bells ringing among EU lawmakers worried about Malta’s ability to steer through new EU anti-money laundering legislation when it holds the rotating presidency of the EU’s Council of Ministers in the first half of next year”.

German MEP Sven Giegold told Politico that the matter would be raised with a special committee within the EU in due course.

“This is all very embarrassing,” he said. “We will raise this whole mess in the [European Parliament’s special] Panama Papers committee. Malta has to get serious.

“It has to tidy up in order for the whole European financial infrastructure to gain credibility.”

It is expected that both Schembri and Mizzi will be summoned to the Parliament’s special committee once the summer break has concluded.

The end of the break will also mark the start of an update to EU anti-money laundering regulations to improve transparency, with Malta overseeing the final stages of the changes once Slovakia’s presidency finishes at the end of the year.

But the controversy surrounding the resignations of Galdes and Cassar has raised questions about a possible conflict of interest.

Politico quoted Carl Doran of Transparency International as saying that Malta’s position at the head of the changes to the anti-money laundering changes “once again highlights that the Council has no formal procedures for dealing with any conflicts of interest that might arise”.

A spokesperson for Muscat told Politico he wasn’t concerned about any potential conflict of interest and a spokesperson for Malta’s permanent representation to the EU added: “The Mizzi and Schembri case … has absolutely no bearing, connection or impact whatsoever on Malta’s EU presidency or its role in steering through new [anti-money laundering] proposals and legislation.

“Malta will continue to show commitment in combating illicit practices through the [anti-money laundering] directives and other related directives.”

But Ana Gomes, a Portuguese MEP and vice chair of the Parliament’s Panama Papers committee, told Politico that the scandal had made Malta a ‘case for particular attention’ but added that Malta was ‘already on our radar’.

“Malta is one of the jurisdictions in the EU that has a very lax system of incorporation where it is very easy for anyone who wants to fool the anti-money laundering authorities, they can set up a company like a Russian doll and can make ultimate beneficial owners hidden,” she added. “I am going to propose that Malta will be high on our agenda … even more so with these developments.”