Money Laundering States: Prophetic Laws, Passports For Sale, And Unqualified CEOs In Malta

7 min


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Malta has set out to become a hub for business and investment into cryptocurrency and blockchain development. But could its murky past and present spell disaster for adoption?

The small Mediterranean island of Malta has made quite a name for itself in the crypto community so far this year. Its pro-business government recently passed three new acts that are intended to provide much-needed clarity for regulations surrounding virtual currencies, blockchainsICOs, and related service providers. The Virtual Financial Assets Bill is particularly inviting to exchanges.

Shortly after the bills were announced earlier this year, several cryptocurrencyexchanges, including Binance, OKE-x, and BitBay, revealed plans to open offices in the tiny EU member state – a huge vote of confidence for both crypto and the Maltese government.

While many believe that the pro-crypto and pro-regulation stance taken by the Maltese government is a boost for the market, shady figures behind the scenes are working overtime to downplay the dark and disturbing secrets that plague the tiny European country.

For over a decade, Malta has been a leading jurisdiction for the iGaming, FinServ, and FinTech industries, but a recent scandal involving Prime Minister Joseph Muscat, his wife Michelle, a private Maltese bank, and dead journalist is causing waves locally and across the EU. These individuals stand accused of money laundering, bribery, and according to some, even murder. Despite the evidence piling up against them and multiple interventions from the EU, the PM, otherwise known as “The Artful Dodger of Europe,” remains defiant in his declaration of innocence.

The prime minister’s wife and the two senior members of government are accused of setting up complex offshore structures to receive large amounts of money from members of the ruling family of Azerbaijan shortly after a money-losing energy deal was struck with the Asian republic. Daphne Caruana Galizia, who was the first journalist to break the story, was the victim of a car bombing in October 2017 that took her life. Those that ordered her murder have yet to be identified.

Another grave concern for Malta’s credibility is the scandal surrounding the privately-owned Pilatus Bank, which also involved PM Muscat and Galizia. Iranian-born Seyed Ali Sadr Hasheminejad managed to open the bank in Malta despite being under investigation by the FBI, with little to no oversight by the Malta Financial Services Authority. However, Muscat’s chief of staff, Keith Schembri, apparently took a personal interest in the licensing process. The bank was host to accounts belonging to the Azerbaijani president’s family. Further entangling the web, it was expected that a former employee at Pilatus Bank leaked the documents to Galizia which connected Michelle Muscat to the Azerbaijani money laundering scandal.

Amid all of this, the Financial Intelligence Analysis Unit, the government’s anti-money laundering agency, gave the Pilatus Bank “clean bill of health.”

Sadr was arrested in the US in March 2018 on suspicion of evading US sanctions against Iran and funneling over $115 million from a Venezuelan company into the US financial system. If convicted, he faces up to 125 years in jail.

Member of European Parliament (MEP) David Casa, when presenting evidence of money laundering to the European Central Bank, stated:

“[Pilatus] bank appears to have been conceived from the very start as an organisation designed to launder money, with banking staff instructed to fabricate paper trails justifying suspicious transactions after they have been carried out.”

These incidents do not paint a pretty picture of this Mediterranean idyll, but one of the biggest concerns is around links to money laundering. The anonymous nature of some cryptocurrencies, such as Monero, Zcash, and other privacy coins, makes it an extremely interesting option for those looking to clean up dirty funds. Not only are the highest levels of the Maltese government embroiled in accusations of money laundering, kickbacks, and bribery on a multimillion-euro scale, but the authorities that are supposed to monitor these types of activities are clearly compromised.

The concern is whether an industry that so desperately needs a vote of confidence and reputability should be putting its trust in a country that is besieged with allegations of government corruption and money laundering. Should big players in the crypto world be risking their reputations by being regulated by governments with departments (Malta Financial Services Authority, Financial Intelligence Analysis Unit, and other law enforcement) that are the subjects of multiple corruption scandals? Should businesses be relocating to a jurisdiction under an anti-money laundering agency that is the subject of an EU probe? The answer is quite clearly, probably not.

While Malta’s PR machine may be going into overdrive to promote the country as the new “Blockchain Island” (and, of course, the country is full of many talented and forward-thinking individuals), unfortunately, its reputation does not do crypto any justice. At this crucial time in the maturity of the crypto market, ICOs, and blockchain technology, can stakeholders take the risk of placing their futures in the hands of a nation that is caught up in criminal scandals? With authoritarianism on the rise, multiple wrongdoings by senior government officials, and the integrity of Malta’s most important regulatory authorities called into question – should we be looking elsewhere?

As we speak, the island of Malta’s PR device remains in overdrive. Late last month, the Maltese Parliament all voted into law 3 cryptocurrency and blockchain costs, producing a detailed legal structure in assistance of the market.

3 New Acts

The three bills that were entered law in June are The Virtual Financial Assets Act (VFA), the Malta Digital Development Authority Act (MDIA), and the Ingenious Innovation Plans and Solutions Act (TAS).

The VFA Act will manage the well-known ICO market and need business meaning to raise funds in this method to release extensive whitepapers and make their monetary history public. The MDIA Act sets out rigid regulative treatments for the cryptocurrency and blockchain market. It likewise develops the Malta Digital Development Authority which will operate as a regulative authority for the market and will be headed by a board of guvs and a CEO. The TAS Act details the requirements for the registration and accreditation of entities that offer services to the market. With a specific concentrate on the registration of exchanges, it is clear that this costs, above the others, was developed to make Malta the most preferable jurisdiction for services running in these sectors.

While these costs might appear fantastic on paper, there are some unanswered concerns. Why did so lots of market leaders such as Binance, BitBay, and OKEx reveal their moving to Malta prior to such a regulative structure was validated? We need to likewise think about that lots of blockchain-related services reportedly had an extremely tough time opening savings account in Malta yet Binance, which has a history of questionable organisation practices, did so successfully

Crypto, Criminal Activity, and Passports

In February, director of Europol Rob Wainwright estimated that of the more than $132 billion in illegal funds distributing in Europe, $5.5 billion has actually been washed utilizing cryptocurrencies like bitcoin.

You will remember from Part 1 of this series, that Malta enabled the setup, licensing, and running of a bank linked in an FBI examination into loan laundering. You will likewise remember the many ties that senior authorities in the federal government have with the Azerbaijani judgment household, claims of kickbacks to senior members of the federal government, and an Iranian lender dealing with 2 life times in prison. Couple this with the extensive failure of its suitable authorities to act upon reports of loan laundering, suspicious deals, and illegal habits, and you have a catastrophe waiting to take place.

Malta provides a “citizenship by financial investment” program that enables really rich people and households to get EU citizenship if they fulfill a set of legal, monetary, home, and health credentials. Nevertheless, there appears to be some wiggle space on the legal requirements.

Some recently authorized Maltese people may include the bulk investor of Azerbaijan’s biggest personal bank, an implicated celebration to an expert trading rip-off, the co-founder of a declared state– sponsored Russian cybersecurity company, Saudi financiers, Armenian wagering moguls, and a number of the world’s wealthiest individuals.

Sven Giegold, a member of the European Parliament, told Reuters:

” Malta has actually offered its sovereignty to filthy loan. The European Commission need to take a more active function in examining the condition of guideline of law in Malta.”

The passport plan has consistently been connected to loan laundering concerns and the nation has actually stopped working in regards to signing up reports of suspect deals. The nation likewise has a significantly low variety of reported “suspect deals,” regardless of having a disproportionately big monetary sector consisted of banks, gambling establishments, monetary providers, and now, cryptocurrency company.

” I was operating at a Maltese law practice when running a background check I saw that there were concerns with the person’s rap sheet. They had actually been accuseded of monetary criminal offenses and numerous other offenses. When I attempted to report the matter I was informed to drop it and not to make a hassle. This individual was looking for citizenship as well as opening an iGaming organisation.”

Dirty Regulatory Bodies Shrouded in Scandal

The brand-new laws assure to manage a market that is shrouded in doubt and proof of dubious activities, however can the Maltese federal government actually guarantee openness and sincerity?

In 2017, Italian authorities discovered a massive, e-gaming (likewise referred to as online betting, e-gambling, or iGaming) and loan laundering operation locateded in Malta. In the wake of the news, 5 other Italian video gaming operators rescinded their licenses. The concern is, how did they get licenses in the very first location? And how were they able to run with impunity for several years prior to being found?

It appears that Malta might be more worried with providing a lovely public image than making a track record by policing corrupt organisation practices.

Hopes are high that the MDIA and its newly appointed CEO Stephen McCarthy will have the ability to shake the image of corruption and incompetence, however is this most likely? Prior to his brand-new position, McCarthy was the CEO of the Malta Real Estate Authority, and “operated in accountancy and iGaming.” While he is a licensed accounting professional, he does not appear to have any verifiable experience in the sector amongst his qualifications

The truth of the matter is that Malta has actually long had outstanding monetary, financial, AML, KYC, and other regulative procedures on paper. The issue is that they are not in fact implemented and are rather utilized to satisfy the European Union and to tick boxes in the global arena. It appears, based upon the reports coming out of the island state, that the laws are just there if you can not pay for to pay or benefit the best individual– a mindset that would be dreadful for business aiming to develop reliability in the field.

Value of an Excellent Track Record

It’s crunch time for the respectability of cryptocurrencies. In the middle of hacks, growing varieties of rip-offs, suspect from leading monetary figures and organizations, and obviously Europol’s stunning figures, if the market does not clean up its act, it is set to stop working prior to it has actually even really started. While lots of think in the power of blockchain more than making use of cryptocurrencies, this innovation runs the risk of being tarred with the very same brush if the whole sector can not get itself on the straight and narrow.

At the minute, Malta appears to provide a number of options, consisting of regulative clearness, however the general reliability of the state and its regulative companies is seriously jeopardized. Some might hope that Malta is turning over a brand-new leaf which these efforts are an effort to get rid of its progressively bad track record in the middle of current scandals, however the concern is, should crypto services risk it? And exactly what takes place to the market if everything comes crashing down?

Money Laundering States

Article Title: Money Laundering States

Short Description: Malta has set out to become a hub for business and investment into cryptocurrency and blockchain development. But could its murky past and present spell disaster for adoption?

Author: Rebecca

Publisher - Orgnization: Bittale

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Rebecca

Rebecca has been actively following cryptocurrency since he was introduced to Bitcoin in August of 2013. Since then, she has spent much of his time participating in the community, trading altcoins, and freelance writing within the cryptocurrency field. She is currently an undergraduate student pursuing a double major in Economics and Computer Science, which he plans to use towards a career in the blockchain industry after graduation.

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