With financial scandal after financial scandal coming to light over recent weeks – from Mafia clans having used Maltese to launder untold millions in proceeds of crime, to false companies being set up for foreign nationals in order to be given Maltese residency permits and to yesterday’s news of US$25 million in securities fraud having been perpetrated by a Maltese financial services company – the image of the country’s coveted financial services sector is taking nothing less than a beating.

And if matters do not shape up in the near future, the serious businesses that have been domiciled in Malta, attracted as they were to the country because it is a reputable jurisdiction with a strong regulator, will quickly ship out.

The country’s financial services sector had been built up practically from scratch and today it employs thousands of highly qualified workers and accounts for a sizeable chunk of the country’s gross domestic product.  It is one of those areas in which size really does not matter and it is one of the country’s main areas of growth, which is why it needs to be protected at all costs.

But these three major scandals that have come to light in almost as many weeks threaten to leave a serious dent in the hard fought reputation that Malta has sought to build, particularly over the over the last decade or so.

All three cases that have been highlighted here, it should be pointed out are not exactly Malta-centric, they are not all entirely home grown as it were: all three have distinct foreign elements in that they have either been run by or run for the benefit of foreign nationals and yes, there are also Maltese nationals who have stood to make a euro or two out of their involvement.

In the first case, the mafia clans laundered millions of euros through remote gaming companies they set up in Malta, money that was the proceeds of crime.  These people were able to set up Maltese companies by the score and have their shareholders remain secret through the use of Malta’s fiduciary company legislation and as far as the Maltese companies offering such services are concerned, all was above board and in line with the law.  If that is truly the case, then there must be something wrong in the law itself and something clearly has to be done in this respect to shape up the system.

In the second case, one enterprising accountant who has had close ties to the Gaddafi family, and who was allegedly the family’s holder of its millions in Malta, has been busy setting up bogus companies in Malta for Libyan nationals, who are granted a Maltese residency permit in exchange for a €100,000 company investment.  Some 850 such companies have been set up in the recent past, against a fee of €7,500 for the accountant’s firm, our sister Sunday newspaper has reported.

In the third case that broke just yesterday, a seemingly otherwise perfectly respectable Maltese financial services company has been charged by the US Security and Exchange Commission of having been complicit in a US$100 million hacking ring that gave the company access to press releases detailing listed companies’ earnings before they were made public – allowing them to rake in nearly US$25 million in profits from illegal securities trading.  The company is run by a group of Russians and Latvians and the scam that was being run has sent shockwaves through international financial circles.  American investigators are calling the biggest case of its kind ever prosecuted.

There is a limit to the battering that a financial centre, such as that which Malta aspires to be, can handle before the proverbial well and truly hits the fan. 

To stave that off from happening, the government needs to seriously consider establishing as special task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  It could take the form of that set up by US President Barack Obama, President’s Financial Fraud Enforcement Task Force, or otherwise.  The important thing is that the rot is made to stop here and that can only be done by taking immediate and effective action.