Schembri’s deliberately tangled mess
Compiling the evidence in Keith Schembri’s case reveals how complicated money laundering is and how ill-equipped Maltese authorities are to deal with it.
Even attentive readers should be taken aback by the testimonies heard so far. There are so many business names to keep, registered in small countries on the fringes of the map.
Keith Schembri single-handedly controlled Colson Services Ltd in the British Virgin Islands, Malmos Ltd in Gibraltar, Kasco Engineering in Malta, etc. The initial freeze of its assets lists 91 people and companies. His bank accounts were all over, also, from Switzerland and Dubai to BOV and Pilatus in Malta.
And to make matters more confusing, the monetary amounts of suspicious transactions may not necessarily match the amounts of the alleged bribes. It would be easier to trace those € 100,000 if the same number moved from place to place in the global financial system.
It is intentional. This is how money laundering works.
The goal is to cover up the source of the illicit funds and get those funds into the legitimate financial system so that the person can use them. What is the use of the hidden money that you cannot spend?
For the sake of simplicity, you can divide money laundering into a three-step process: placement, layering, and integration.
Placement happens when you put dirty money into the financial system. You have to have it in a bank account before you can move it, but you can’t just go to a bank with wads of money wrapped in rubber bands. The bank will want to know the source of these funds and will expect you to prove it.
It’s much easier to deposit dirty money when you have banks and compliance officers willing to look the other way – or willing to tamper with. backdated documents to make these funds appear legitimate.
The second step is Overlay. You may think that this muddies the waters. This is where the launderer tries to put some distance between the source of these funds and their final destination.
It wouldn’t look good if the money you spend could be traced back to 17 Black, for example. Especially not if you were involved in the approval of a massive government project that benefited the owner of 17 Black’s secret.
The overlay consists of dispersing this money in several accounts held by several banks. Bank transfers are an obvious way to do this, but more creative methods include, for example, passing on ownership of stocks or bonds or even valuable works of art.
Professional intermediaries like Nexia BT and companies or trusts with appointed directors are used to hide the ultimate beneficial owner of these funds as they move.
You can imagine how many wire transfers go around the globe every day. Thresholds are set that require banks to report transfers over a certain amount – typically $ 10,000 – and document the source of funds, but even the world’s largest financial institutions have limited resources. The Dodgers are trying to fly under the radar by breaking up deals into smaller threads. Doing this to avoid the threshold is illegal. This is called “structuring”.
Layering is the most complicated part of the money laundering game, as you can see if you follow along. compilation of evidence against Keith Schembri.
And then we come to the last step.
This freshly laundered money has been “cleaned up” by a storm of moves and companies designed to sidetrack prosecutors – or to make them give up in frustration. You will remember the old one Head of FIAU Manfred Galdes told the public inquiry that his unit was critically under-resourced. I think you know why.
The integration This is the stage where laundered funds are reintroduced into the normal economy by pretending that they come from legitimate sources. Two popular methods for this are the use of forged invoices and real estate transactions – especially properties purchased through shell companies.
Brian Tonna drew on the fake billing trick when he issued double invoices to three Russian clients of the Maltese money-for-passport program. The invoices were sent by the authorized passport agent BT International and by a company in the British Virgin Islands called Willerby Trade – the name is misleading as Willerby did not trade. The funds were then transferred from Willerby to Keith Schembri’s account at Pilatus Bank.
It appears that Schembri received bribes from these passport sales, but it is difficult for prosecutors to prove this decisively. This is how money laundering works.
You will become much more familiar with these terms in the years to come. The courts have only scratched the surface. Electrogas, Vitals Global Health, the American University, and many more are still on the horizon.
But the problem is bigger than Keith Schembri, Brian Tonna and their many associates. Malta’s lax financial regulations have long attracted people living above their apparent means.
A new strategy used to smoke them is called an Unexplained Wealth Order (UWO) – they force the target of an investigation to reveal their source of funds. If they can’t or won’t, then the authorities have the option to seize those assets.
The Degiorgio brothers’ car bomb attack could have been stopped years ago if Maltese prosecutors had access to UWOs. Hired killers and suspected career criminals led ostentatious lifestyles far beyond their means. Registered unemployed and receiving social benefits, they owned luxury cars and boats, spent their vacations in Monte-Carlo and sent their children to expensive private schools.
Despite the obvious red flags, they were only charged with money laundering when stories about their lifestyle began to circulate a year after their arrest for the murder of Daphne Caruana Galizia.
A UWO has also reportedly reported Edward Caruana. The former canvasser of Evarist Bartolo was happily skimming Foundation schools funds for tomorrow, hand-delivering checks to Gozo while building a building that no one thought they could afford.
It’s a powerful tool, but it’s no wonder Edward Zammit Lewis declined to include it in the new Maltese Proceeds of Crime Act. We would have asked for explanations from a lot of politicians in place, starting with Joseph Muscat.
The disgraced former prime minister has lived above his stated means for years.
Muscat is magic bank balance unchanged was a financial cornucopia who spat out cash to support his family’s lavish lifestyle without ever drying up. First-class flights, expensive vacations, private tuition and frantic 70-hour trips to Dubai. It is difficult to explain on a prime minister’s salary of € 55,978 per year plus € 6,769 in compensation.
Konrad Mizzi was also reportedly reported when his Panamanian company and New Zealand trust came to light – and not just because hiding secret funds abroad is shady behavior for a government minister. Businesses, onshore or offshore, charge annual licensing and maintenance fees, and trusts are even more expensive.
According to a financial planner I spoke to, a trust only makes sense for a person whose wealth exceeds $ 500,000 to preserve. Mizzi’s officially declared assets weren’t coming close, so why would he need them?
And what about Prime Minister Robert Abela? How did he accumulate three properties and a bank balance of € 500,000, with no loans, mortgages or liabilities declared? How did he pay for the boat he likes to sit on in Sicily?
There are a lot of questions about money in Malta that no one is eager to answer.
Extending the law to include UWOs probably wouldn’t have smoked Schembri or Tonna. They were much more cunning when it came to hiding illicit funds. But that would go a long way in helping to reign in the current of corruption that has raged in the country since the coming to power of Joseph Muscat.
Unfortunately, Malta will not pass such a law because those linked to the government have too much to lose.