Former FIAU chief Manfred Galdes expressed initial reservations about testifying in court since the law expressly forbids FIAU from discussing any cases handled by the Unit. The Court released Galdes from this injunction and ordered he gives details on matters related to the inquiry.
Galdes said that he resigned in July 2016 after a period of 8 years as Director of the anti-money-laundering unit. He said that the FIAU chairman, Dr Peter Grech (Attorney General) had expressed the opinion that he needed the Permanent Secretary’s take on the matter and that there had been some attempts at trying to make Galdes change his mind. Galdes said that he felt that it had become too difficult for the FIAU to carry out all its legal obligations, both at a national level and at an international level. The FIAU was also facing capacity issues exacerbated by poor salary structure.
Effectiveness effectively removed
Galdes said that it became clear to him that Malta could not adhere to certain obligations imposed by MONEYVAL and the failure to meet these standards was going to cause serious repercussions for Malta. Galdes said that he drew the attention of several institutions for action to be taken but what needed to be done was not done. “I did not want to continue working if I was not going to be effective,” said Galdes.
Manfred Galdes said that in the trade, once a professional entity has a whiff of any wrongdoing, it is obliged to report to FIAU immediately who would then examine the reports. The FIAU has wide jurisdiction for collecting information evan based on suspicion. It can go to banks, departments and individuals to gather the information as well as contacting FIAUs from around the world. “You get a case, you examine it. You gather information” was the pithy description given by Galdes in court.
Galdes said that the report is then sent to the police even if subsequently there were changes in the law. He added that the FIAU can only conclude that it has a ‘reasonable suspicion’ and can give no recommendations. The report cannot be used as evidence as the police would then need to carry out their own investigations. Galdes said that the FIAU reports go to the Police Liaison Officer, the last one being (former Commissioner ) Michael Cassar, at the time Galdes left his position. The reports were handed over in person for maximum confidentiality.
Galdes said that the Board gave the FIAU direction, went into the administrative functions and also gave strategic direction but did not go into the particulars of an investigation. Galdes said that when politically exposed persons were involved he had felt obliged to inform the board, stopping short of giving the details.
A high-profile case
Galdes said that during his 8 years in office there had been some very serious cases, some of which never made it to the public fora. The case relating to Pilatus Bank said Galdes was different in that it was related to a compliance visit by the FIAU. He added that while the Police are the investigators, the FIAU are the analysts. He said that the board had known that the FIAU had carried out an inspection at Pilatus Bank. Galdes added that while the Board had not been given the report, it had been privy to the on-site findings.
Galdes added that when the FIAU had investigative cases, the Board would not be informed. In giving details of the process, Galdes’ request to testify in camera was acceded to. He also recalled that when he was Director of the FIAU, in April 2016, he had received a collection of information which he had passed on to Police Commissioner Michael Cassar. The nature of the information had been so serious that he had gone personally and directly to the Commissioner with it. That same evening, Cassar had phoned Galdes asking him if this was a formal report. Galdes said that he had sent a five-page explanation about the case but could not recall if he had actually said that the FIAU had ‘reasonable suspicion’ on the case. He said that the matter had been passed on to the police for investigation and that the normal procedure had been by-passed due to the persons involved in the case. Galdes said that the FIAU had felt that if the normal procedure had been followed, time would have been lost unnecessarily.
There was enough information for police action – Galdes
Galdes said that the documents passed on to the police were self-explanatory and that he had explained the context of the documents. He said that the FIAU felt that the information was correct and that there were bank statements which were dated. He said that there was enough information for the police to take action.
Dr Therese Commodini Cachia, for the Caruana Galizia Family, showed Manfred Galdes documents which had been leaked and had been made public. Galdes said that there was a report which seemed similar to what was being shown in court but could not confirm if it was the report he had compiled himself. He said that stylistically, the report was different and could not recognise the style. On further inspection, he said that the style of writing seems familiar and said that it could be a report which had been given to the police shortly before he had left the FIAU. The report is about Keith Schembri (former PM Muscat’s chief aide and close friend).
Nexia BT under a microscope
Galdes pored over a report about Keith Schembri and former Managing Director of Allied Group Adrian Hillman. He said that while he did not recognise the report, the case had indeed been investigated. He also inspected the copy of a report allegedly regarding an on-site visit to Pilatus Bank. Galdes said that there were bank statements linked to the first case (Willerby) and print-outs of information which were subsequently leaked in the Panama Papers. He said that there were also documents which showed who the ultimate beneficiary owner of certain companies was and this was not simply in one case but a collection of information. (Willerby Inc was set up by Nexia BT accountant Brian Tonna). Galdes said that there were cases which the FIAU were coordinating with the police simultaneously. He added that co-operation makes for good practice.
Rendered ineffective on purpose? – not sure said Galdes
Uncertain if the FIAU had been ‘rendered’ ineffective, Galdes said that whatever the case, he could not work in an entity which was not reaching its aim. He said that he had expected the FIAU to publish his letter of resignation and that there would come a time when an inquiry would have to be held. Dr Jason Azzopardi also representing the Caruana Galizia Family asked if Galdes had found the Minister for finance co-operative. Galdes said that he had found co-operation. He added that the salaries at FIAU were much lower than those at MFSA. Galdes said that while over time, the resources had increased, these never really matched the need even if there was all-round agreement that such resources should increase. He later described the lack of help to FIAU as suspicious, given that the recalcitrant approach had started when certain cases had been initiated.
No information should ever be ignored – Galdes
Manfred Galdes said that in spite of the agreement for more resources across the board, in a follow-up call to a department in the OPM he had been told that he had been ordered not to help the FIAU. Galdes added that the reports he had written for the FIAU had not been written to be leaked. He said that the FIAU had already amassed considerable information before the Panama Papers exploded on the scene. He said that the ‘Running Commentary’ by Daphne Caruana Galizia had also been used as a source as “No information should ever be ignored”.
Galdes said that he always feared leaks and said that the PEPs who had been investigated were on the government side, not the Opposition. Galdes said that as far as he knew, the Attorney General, who is also the chairman of the FIAU, had not issued a call for attachment to the unit. Galdes said that according to the procedures of the FIAU an on-site inspection can be carried out in cases like those of Pilatus Bank and he seemed to recall that the visit had been done jointly with MFSA. He added that if the infringements were sufficiently serious, the FIAU would be justified in issuing a fine but, he recalled no such fine being issued against Pilatus Bank when he was director.
Where was the money at Pilatus coming from?
Galdes recalled that the inspection on Pilatus Bank had lasted about 10 days and the bank had been requested for information which it refused to give. The staff had said that such information as was being requested was not being compiled by the bank. His, said Galdes, was against the rules. Galdes said that he met the chairman of Pilatus Bank shortly before leaving. Having compiled the report, the chairman had disagreed with the conclusions. He said that he had been ready to conduct another investigation if, as the chairman of Pilatus Bank was saying, not all the information had been examined by the FIAU. Galdes said that Pilatus was not the only bank with serious deficiencies and that Pilatus was not gathering sufficient information about the provenance of the money.
Galdes says he had undue pressure
Galdes said that FIAU asked for information five times and the requested document still was not given. He said that investigations on financial crimes are normally lengthy. Replying to a question by Dr Azzopardi, Galdes said that he seemed to remember that there was a meeting with police from the Economic Crimes Unit and that that they had requested an explanation from FIAU. Dr Azzopardi said that the minutes of that meeting would be helpful to the inquiry. Galdes said that he had been subjected to undue pressure, once directly and twice indirectly. Galdes said that once a secretary to a Parliamentary Secretary had sent word that a person of her acquaintance was going to sit for an interview at FIAU. Galdes said that the person was not called in for a second interview. He said that there were also two instances of indirect undue pressure which he had felt very uncomfortable about but about which he did not divulge any details.
The last half hour of Manfred Galdes’ testimony was in camera.
Kenneth Farrugia takes the stand
FIAU chief Kenneth Farrugia took the stand. Citing the non-disclosure clause, Farrugia said that such a clause made him appear un-cooperative and its lifting would help explain several past occurrences. The court lifted the non-disclosure ban. Farrugia said that he joined the FIAU in February 2017 and said that he replaced his predecessor after seven months. Farrugia said that he had been given handing over by a Deputy Director and explained that the FIAU had a binary role: supervisory and regulatory. He said that in all reports there was continuity and that the investigations into the PEPs had continued. He said that with regards to issues arising from the Panama Papers, 15 cases had been reported to the police including reports on PEPs such as Keith Schembri and Konrad Mizzi.
Kenneth Farrugia also testified in camera and the session ended.
(Information compiled by Sarah Borg)
- Former acting Police Commissioner Ray Zammit who served between July – December 2014 testified, and said that he never understood why he was never appointed Police Commissioner
Zammit said that the Security Service never informed him of any risks to Daphne Caruana Galiza
MDA president Sandro Chetcuti told the Board of Inquiry that then-Opposition leader Joseph Muscat had asked to facilitate meetings with businessmen in the community. He said that he did this on a voluntary basis
He denied having an office at Partit Laburista Headquarters
He said he did not meet disgraced former OPM chief of staff Keith Schembri before his appointment
Chetcuti said that he had a good working relationship with disgraced former Tourism Minister Konrad Mizzi. He described him as a “friend”