Exclusive: ‘Malta must do more against money laundering’ – Jourová

The Maltese government’s slow pace in the implementation of anti-money laundering measures has led the European Commission to open infringement procedures against Malta. European Commissioner for Justice Věra Jourová, said this in an exclusive interview with Newsbook.com.mt.

“Malta is asked to do more. We have launched the procedure along with 15 other states to improve the system of anti-money laundering checking. Malta will get the deadline for the answer [that has to be sent] and for the improvements [that have to be done], so there is space for further work.”

On the other hand, Commissioner Jourová:  described as a very positive step the decision of the Maltese government to be part of the European public prosecutor’s office.

A systemic problem

Jourová said that the investigations of the European Banking Authority into the operations of the Financial Intelligence Analysis Unit’s (FIAU) handling of Pilatus Bank showed that there is a systemic problem with the way the agency handles its investigations into possible money laundering suspicions and that the case of Pilatus Bank is not an isolated incident.

“We need the Maltese banks and financial institutions to be more careful about the transactions, to do the proper due diligence and in case of a suspicion, announce it to the financial intelligence unit.”

In July the European Banking Authority published a preliminary report which harshly criticised the FIAU.  The European Banking Authority concluded that the Government agency against money laundering, the FIAU, failed to supervise Pilatus Bank among a number of shortcomings including deficiencies in procedures and lack in supervision action by FIAU as Pilatus Bank case was closed without the Agency applying sanctions over the bank.

Having opened a formal investigation into the breach of EU law, the Board of Supervisors concluded that FIAU had infringed the Directive on the prevention of the use of the financial system for money laundering and terrorist financing.

The EBA also issued 8 recommendations to the FIAU, while urging the same agency to take the necessary steps to comply with the anti-money laundering and anti-terrorist financing.

Jourová told Newsbook.com.mt that the full report of the European Banking Authority will be published by the end of September. The managers of FIAU told the European Commissioner that they will give their full answer after the publication of the full report.

READ: On the poignancy of meeting Daphne’s family – Commissioner Jourová

New recommendation on citizenship

Newsbook.com.mt asked the Commissioner for Justice about the citizenship by investment scheme popularly known as the selling of passports.

Commissioner Jourová answered that the Commission will keep on pushing for a fair and safe system. She noted that her predecessor had insisted that people applying for citizenship must have genuine link with the country.

“It was the proper thing to do and it remains valid and I will of course ask and I keep asking what is the genuine link of the people who pay for citizenship. This is something which Europe has to insist on.”

Jourová noted that since the time Madame Reding issued her recommendation, the security situation in Europe worsened. She said that now the Commission wants to issue a new recommendation to the states to increase the due diligence and checking of the people who apply for the citizenship in order to have almost absolute certainty that they don’t want to launder the money in Europe to support or do some criminal activities in Iraq.

“This is what will be in our recommendation which we will issue in Autumn this year.”

The Commissioner noted that although citizenship is the exclusive competence of the member states “we have much to say about it, for the sake of ensuring security in the EU because once you get the citizenship you become a citizen of the whole Europe. So we have a lot to say genuine link will remain there as a tough condition.”

The Commissioner said that the Maltese authorities know that a new recommendation on the citizen schemes will be published soon. “I am constantly debating with all the ministers about the up and running matters, so it will not be any surprise and I do hope that will be a reasonable dialogue and improvement in the next year.”

Extracts from the interview

Newsbook: Three months ago we were in Malta, meeting members of Prim Minister Joseph Muscat’s government. What’s changed since then?

Commissioner Jourová: We had some consequent debate with some of the representatives of Malta. There was the start of the procedure which seeks to improve the system of anti-money laundering in Malta. We started the procedure in July, it is not a good news for Malta because this is the infringement procedure which the Commission has to do when we see of that there are some problems in the implementation of the EU legislation and we see the problem, some loopholes in the system which should serve to discover money laundering and the illicit financial transactions. So we are in dialogue was Malta. In the meantime, also Malta, as I said, entered the European public prosecutor’s office which is, on the contrary, a very positive step. And we will continue the discussion about the citizenship scheme.

Newsbook: Pilatus Bank. You were in Malta, you said that you were worried with the events surrounding this bank. You asked the Maltese authorities to cooperate with the European Banking Authority.

What has been done so far? Do you think there are still gaps in the system?

Commissioner Jourová: European Banking Authority upon our request did the investigation of this Pilatus Bank case.

I wanted to know if this is an isolated incident or if there is some systemic problem and the whole system, Malta is checking the suspicious transactions. And the Authority finalised the investigations. We know some preliminary results that it’s more systemic problem which needs solution and improvement. We will have the full report at the end of September.

So in the meantime, now we informed or the Banking Authority informed the Maltese authorities that this is the result and if I can say it in a simple way, we need the Maltese banks and financial institutions to be more careful about the transactions, to do the proper due diligence and in case of a suspicion, announce it to the financial intelligence unit which is…

This is what we want Malta to do as well as all the other member states.

Newsbook: Did you receive answers from the Financial Intelligence Unit?

Commissioner Jourová: I had a debate with the managers and I think that they will respond after they have the full report.

Newsbook: Shifting to the Golden Passport.

When the topic of ‘EU Citizenship for sale’ was discussed during a plenary session of the European Parliament, your predecessor Commissioner Reding said that “Member States should only award citizenship to persons where there is a “genuine link” or ‘genuine connection” to the country in question.

Commissioner Reding also spoke about the principle of sincere cooperation enshrined in the Treaties.If the names are not public how are you safeguarding these conditions? The names are not public, the registers are not public, how does commission safeguards these agreements?

Commissioner Jourová: The commission must keep pushing on the fair system and safe system. Madame Reding issued her recommendation that the people applying for citizenship, getting citizenship must have genuine link. It was the proper thing to do and it remains valid and I will of course ask and I keep asking what is the genuine link of the people who pay for citizenship. This is something which Europe has to insist on.

Since the time Madame Reding issued her recommendation, the security situation in Europe worsened. And now we want to issue a new recommendation to the states to increase the due diligence, the checking of the people who apply for the citizenship to have almost absolute certainty that they don’t want to launder the money in Europe that they do not want to support or do some criminal activities in Iraq. This is what will be in our recommendation which we will issue in Autumn this year and the situation is a complex one because the EU doesn’t half the legal competence to ban the Golden visa and the citizenship for sale. It’s the sole, it is the exclusive competence of the member state, but we have much to say to it, for the sake of ensuring security in the EU because once you get the citizenship you become a citizen of the whole Europe. So we have a lot to say genuine link will remain there as a tough condition.

And there will be some extra requirements for checking who the people are what are their intentions.

Newsbook: Earlier you mentioned the resources that Europol has, that Eurojust has, on a particular topic, the murder investigation. But now we are seeing it in a different context, the citizenship of the European Union as a whole.

Are you considering offering the resources, imposing the resources of the European Union to make the due diligence process on a European level.

Commissioner Jourová: These might be the channels of information for those who are checking the people applying. Yes, for sure and I think that already now they are cooperating on some of the cases.

Newsbook: So the member states are collaborating even…Do you feel that the member states would agree on this issue?

Commissioner Jourová: I think, it is not so difficult to understand that we have to be more careful in Europe about who we are inviting to come to go inside. Just imagine now Schengen area is it’s one thing.

Very intensively interconnected financial world, the world of financial transactions and once we invite somebody to get into the system he has the whole field for his activities free.

Newsbook: Of course, but will this be the real scenario before the end of your term?

Commissioner Jourová: We will issue the recommendation and we will launch intensive debates with the member states.

Newsbook: Do you have any timeframes which you can elaborate on?

Commissioner Jourová: Till the end of my mandate I will be doing that. At the same and here I have stronger legal competence it’s the framework of anti-money laundering activities. We have the legislation which obliges the member states, to check the transactions and to cooperate, for the banks there is the obligation to cooperate with the financial intelligence units to filter out the suspicious transactions on the possible cases of money laundering.

Here we are pushing the member states, to do the system properly, properly functioning system when they share the information and when they cooperate because, again, if you use one member state as the weak point while you can easily do these illegal activities it can affect the whole of Europe.

Newsbook: Okay and then are you aware of any complaints of this scheme being employed by Malta and Cyprus and any other member states who is selling the European citizenship?

Commissioner Jourová: Yes, these were complaints, there are some suspicious cases and I don’t want to deal with the individual cases, I want to deal with the system.

This is exactly what I will do.

Newsbook: So there are also complaints from within the European family, if I understood correctly.

Commissioner Jourová: Also the allegations coming from the media and from the system of anti-money laundering, checking so different channels which really give us a very strong conviction that we have to make the system better.

Newsbook: But do you confirm that governments have raised an eyebrow about these systems of citizenship schemes.

Commissioner Jourová: I think that the government worked with the recommendation from 2014

But also of course the Maltese government must see that the situation is changing. I spoke about the worsening security situation. So I do believe that we will be able to discuss with the Maltese government about the necessary changes and improvements of their system and that they will understand why we are doing that.

Newsbook: In fact, it was my last question. From what we have discussed today are you satisfied that the Maltese government is doing everything possible to eliminate money laundering and therefore Malta won’t be considered as a backdoor for money launderers to make use of the system.

Commissioner Jourová: Malta is asked to do more. We have launched the procedure along with 15 other states to improve the system of anti-money laundering of checking and Malta will get the deadline for the answer and for the improvements, so there is space for further work.

And in the citizenship schemes, we will see the reaction of the Maltese authorities they know that the new recommendation will come. I am constantly debating with all the ministers about the up and running matters, so it will not be any surprise and I do hope that that will be a reasonable dialogue and improvement in the next year.