The Malta Independent 24 October 2017, Tuesday

Major global bank no longer accepting ‘declarations issued by Maltese auditing firms’

Helena Grech Sunday, 14 May 2017, 12:00 Last update: about 6 months ago

A major global bank, and the second largest in Germany – Commerzbank AG, is no longer accepting declarations issued by Maltese auditing firms, according to client correspondence seen by The Malta Independent on Sunday.

An e-mail sent by Commerzbank to a German national residing in Malta makes it clear that the bank has changed its compliance unit policy and now requires German units of Maltese auditing firms to confirm facts, especially in relation to the application of money laundering regulations in Malta.

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There has been growing concern about the effect of recent scandals on Malta’s financial services sector, with both mainstream political parties taking aim at each other for causing possible disruptions to the sector.

A year after Minister Konrad Mizzi and the Prime Minister’s chief of staff Keith Schembri were each caught having a secret company in Panama, the Prime Minister’s wife has been accused of being the owner of the third Panama company acquired at the same time as that of Minister Mizzi and Mr Schembri.

Journalist Daphne Caruana Galizia also alleged that one of the daughters of the Azerbaijani President, Leyla Aliyeva, had transferred US$1.017 million through an offshore company with an account at Pilatus Bank, Malta, to Egrant Inc, the company which Mrs Michelle Muscat is being accused of owning.

The Prime Minister and the Labour Party (PL) have accused the Nationalist Party (PN) of repeating ‘fabrications’ in order to destabilise the country and undermine the sensitive financial services sector which both parties have historically protected and defended – and which also employs thousands of people while pumping millions of euros into Malta’s economy. They also accused Dr Busuttil of repeating the ‘fabrications’ in a ruthless bid to gain power, regardless of the effect on the financial services sector.

The PN and its leader, Simon Busuttil, have in turn accused the Prime Minister of being complicit in rampant corruption, of weakening Malta’s institutions, such as the police force and the Office of the Attorney General, so that they are unable or unwilling to tackle corruption at the highest level, consequently harming Malta’s sound reputation within the financial services sector.

The e-mail from Commerzbank, which is in the possession of this newsroom, states:

“I refer to your e-mail regarding the compliance-process for XXXXX holdings limited which you sent to my colleague XXXX XXXXX on Friday last week.

Please note the following information to keep the account open: 1. Due to recent changes, our compliance unit does NOT anymore accept the declarations issued by Maltese auditing firms.

2. Please arrange that the German unit of your Maltese auditing firm XXXX confirms the facts as stated in the Malta unit’s declaration, especially related to the application of money laundering regulations in Malta. 3. Please provide the confirmation within the next 60 days.

In case that we do receive the above confirmation until XX July (please note that the document has to be checked and approved by our compliance department before that date) we will reverse the termination of the account.”

The Malta Independent on Sunday reached out to Commerzbank in order to ascertain when this change in compliance policy was made, and for what purpose; however, the bank chose not to comment without seeing the original e-mail made available to this newsroom.

In view of the fact that this would only serve to identify the source of our information, and that this newsroom copied in points one to three from the e-mail without including dates and specific names, a decision was taken not to share the original e-mail in full.

It is therefore not known exactly when the change in policy was made, but this newsroom can confirm that the e-mail was sent by Commerzbank to their client soon after the allegations had peaked about the Prime Minister, his wife, Egrant Inc and Nexia BT owner Brian Tonna, who had set up Minister Mizzi and Mr Schembri’s Panama companies.

Whether this bank is more cautious than others or whether other institutions will follow suit remains to be seen. What can be said, however, is that regardless of whether the allegations hold true or not, such serious doubts raised about transparency and compliance procedures in Malta, particularly relating to money laundering regulations, which caused such action by a major banking player, will have a serious impact on the so-called ‘big four’ audit firms.

This newsroom had reported that a Financial Intelligence Analysis Unit (FIAU) report had flagged serious compliance and due diligence shortcomings by Pilatus Bank, the bank at the centre of the Egrant allegations, and such reports were seen by the Attorney General and the Police Commissioner but no action was taken.

Pilatus representatives have claimed no wrongdoing, and have threatened to sue Maltese journalists in the USA, as well as to file a criminal complaint about confidential documents that were leaked.

The Prime Minister’s chief of staff, Keith Schembri, as well as Brian Tonna, are also accused of receiving kickbacks through the controversial citizenship-by-investment scheme. While both have denied any wrongdoing, two separate magisterial inquiries have been launched to investigate the Egrant allegations together with the allegation of kickbacks.

Malta this week came under fire from German authorities due to 1,500-2,000 German nationals who are linked with companies registered in Malta. It is being reported that some 85 per cent have failed to register with their local German tax authorities and are being accused of using Malta to pay less tax.

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