Is Malta destined to be Europe’s next economic graveyard?

Grappling with the side effects of Brexit and facing accusations of “dirty” Russian money circulating in the city, as well as the impending cost of the pandemic, London’s economy is taking a hit. Always considered the financial capital of the world, London acts as a hub through which many of the world’s most respected financial institutions choose to do business. For all London’s troubles, it could be worse. Much worse.

A three-hour flight south of Heathrow is the idyllic island of Malta. As well as being rather pleasing to the eye, the smallest state in the European Union is quickly becoming a cesspool of financial degradation that leaves a stain on the entire European project.

Malta’s problems run deep. Corruption eating away at the top of the country’s political system has become so blatant that the Financial Action Task Force (FATF), the G7’s anti-money laundering unit, has placed Malta on its gray list of reputable countries. have “strategic deficiencies” in their financial systems. Malta shares this list with nations such as Zimbabwe, Syria, the Cayman Islands and Uganda – an unsavory company.

The negligence and immorality of the Maltese government has fostered an environment in which tax evasion and money laundering are rampant. Criminals and hostile foreign powers have taken full advantage of this, making hay while the sun shines – as is so often the case on Maltese shores. As recently as last November, seven suspects were arrested by Europol on suspicion of laundering €20million through the island nation.

Global sanctions were seen as a last resort, but quite necessary.

One of the biggest financial scandals in recent memory, which saw German fintech giant Wirecard knocked down by a Financial Times investigation into billions of funds missing from its balance sheet, had roots in Malta.

At the heart of the scandal was the Ndrangheta crime family, a branch of the Italian mafia that filtered funds through a Maltese online casino called CenturionBet. The mafia group has used many of Malta’s biggest casinos to wipe out their ill-gotten gains by diverting EU money, meant to help migrants arriving from Africa, into their own pockets.

For all the damage caused by Wirecard’s failures, it has also served to remove a false layer of legitimacy to expose an industry wallowing in corruption.

Where sunlight is the best disinfectant, Malta’s current administration is doing its best to keep the country shrouded in darkness for cover. Government officials and cabinet ministers have been repeatedly found to be involved in money laundering rackets. There is no better example than the case discovered by Daphne Caruana Galiziajournalist tragically killed by a car bomb attack in 2017.

Galizia was on the trail of Yorgen Fenech, a businessman and member of one of Malta’s wealthiest casino-owning families, who was laundering money through his company 17 Black – a Dubai-based secret society. He is now on trial for ordering his assassination.

The fallout from Galizia’s murder and the corruption scandal surrounding it led to Fenech’s prosecution with Keith Schembri, the prime minister’s chief of staff, Konrad Mizzi, a government minister, and the subsequent resignation of Joseph Muscat, the prime minister. Minister.

Light regulations ripe for operation are not limited to Malta’s traditional industries. In 2020, it was reported that over $70 billion worth of cryptocurrency had flowed through the country in recent years due to lax financial restrictions.

Despite its growing popularity, cryptos continue to receive a lot of criticism from experts such as Andrew Bailey, the Governor of the Bank of England, who warned that Bitcoin has “no intrinsic value” and should not be bought only if “you are ready to lose all your money. Billions of crypto funneled across the Mediterranean have earned Malta the unenviable nickname of “Blockchain Island”. This reputation continues to attract criminal organizations looking to gamble with the system, including migrant smuggling gangs and terrorist group financiers.

The instability of cryptocurrencies as a form of investment highlights how unstable Malta’s entire financial system is.

A land where corruption can thrive, the Maltese government has done little to discourage the emergence and spread of nefarious financial activities. Blackmarked by global institutions, companies and individual investors are now at huge risk when investing in Malta – their money is simply not safe.

The tumor of corruption in Malta has grown too large for the government to operate on its own, especially as the ruling elite have played a major role in the descent into squalor. As foreign companies continue to plan their exit strategies from the island, EU officials will rely on FATF sanctions to stem the crime tide or Malta’s EU membership could be postponed in question.

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Mary I. Bruner