Finance Minister Edward Scicluna has sarcastically questioned whether the European Parliament's anti-money laundering committee (PANA) will be sending for the US president or the German Chancellor to grill them over the financial secrecy index rating.
Malta ranked in the top 20 of the Financial Secrecy Index, out of 112 jurisdictions, rising seven places from the last ranking, from 27th to the 20th spot.
The Financial Secrecy Index ranks jurisdictions according to their secrecy and the scale of their offshore financial activities. The Tax Justice Network, who run the index, describes it as: "A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight."
The 2018 Financial Secrecy Index (FSI) focuses on 112 jurisdictions, including several that are not traditionally considered to be tax havens, such as China, France, Germany and Japan.
The Tax Justice Network notes that "Switzerland, the United States and the Cayman Islands are the world's biggest contributors to financial secrecy."
Switzerland took the top spot, followed by the United States and the Cayman Islands. Germany ranked 7th, just after Luxembourg which came in at 6th place.
The financially secretive jurisdiction of Panama came in 12th.
In comments to this newsroom, Scicluna mused:
"Given the comments made by MEPs, what is surprising is that Malta was not put in the first place. Surprisingly, neither was Panama, with the US ranking in second place as the most secretive jurisdiction."
In 2016, slain journalist Daphne CaruanaGalizia uncovered how Minister Konrad Mizzi and the Prime Minister's chief of staff Keith Schembri had acquired Panama based companies registered by New Zealand Trusts. Many questioned the purpose of having such offshore structures while in top government positions, with speculation fueled due to the financially secretive rules in the Panamanian jurisdiction. Both deny wrongdoing.
Following the Panama Papers scandal, which implicated many high-profile individuals on the international scale, the European Parliament set up an anti-money laundering, tax avoidance and evasion committee (PANA) and a delegation came to Malta to grill politicians and the police.
German MEPs were quite vocal in their criticism of Malta tax imputation system which incentivizes multinational corporations to register and pay corporate tax in Malta due to the 6/7 tax rebate. The rebate allows multinationals to effectively pay five per cent corporate taxation.
While the EU accepted this system prior to Malta's accession, countries such as Germany criticize it, stressing that it syphons taxation revenue from company profits from countries where such companies earn the majority of their profits. Scandals such as the Panama Papers fueled criticism on the basis that the country's institutions are not functioning properly. Whether one believes this to be the case or not, Scicluna took the opportunity to highlight Germany's own internal weaknesses when implementing anti-money laundering legislation.
"Having been badgered by two German MEPs, Malta should be quite pleased that we have placed thirteen places better than Germany.
"Furthermore, the report remarks that Germany is attracting substantial money laundering activities. The German Federal Ministry of Finance estimated that more than €100 billion were laundered in Germany in 2014.
"Germany was also criticised on its supervision on anti-money laundering which is regarded as being highly fragmented having more than 100 different agencies. Consequently, it often lacks the necessary capabilities to enforce AML rules effectively.
"One cannot imagine the PANA committee or the future Paradise Papers committee sending for the US President or the German Chancellor to grill them on this dismal ranking."
Turning to the situation in Malta, Scicluna said that government is "pleased to note that Malta recorded the highest scores specifically on international standards and cooperation sub-index which include the Automatic Information Exchange, Bilateral Treaties, International Legal Cooperation and Anti-Money Laundering components.
"This is a far different picture than that depicted in the European Parliament by members of the PANA Committee.
Definitely, Malta wants to feature neither in the top 20, 30 or 40, once the necessary transposition of the EU directive is put in place."
Another MEP delegation has visited Malta investigating the rule of law after Caruana Galizia was brutally murdered in a car bomb. They were trying to ascertain if there is a culture of impunity in Malta and highlighted institutional shortcomings such as within the police when investigating financial crime and corruption.
Pressing on about what the government is doing to strengthen anti-money laundering legislation, Scicluna said:
"The Ministry for finance has just completed a comprehensive national risk assessment in the area of money laundering and will be presenting an action plan to be implemented by national coordinating committee.
It is worth noting that if one had to exclude the country scale weighting, then Malta would rank at 75th place in terms of the Secrecy Score. This places Malta amongst the least secretive of the 112 jurisdictions on the key financial secrecy indicators."