With the stakes at an all-time high for Malta’s money laundering regime, a hairdresser and her driving instructor partner have found themselves at the centre of it all.
Clint Vella and Sylvana Fenech were charged with money laundering after police noticed discrepancies between their declared income and their lifestyles. A raid on their Mosta home revealed notes of cash stashed around the house.
Police confirmed in court, following questions by the couple’s lawyers Franco Debono, Marion Camilleri and Francesca Zarb, that Vella and Fenech aren’t believed to have profited off trading in arms, drugs, prostitution or any other black market activity.
It seems like a textbook case of tax evasion and yet they were also charged with money laundering.
Police were well within their legal rights to charge the couple with money laundering. After all, the legal definition of money laundering incorporates the use of money and assets despite knowing they had directly or indirectly originated from crime.
Tax evasion is a crime, so the use of money that hasn’t been taxed could technically classify as money laundering. This seems to be the legal logic the police applied here and it could set a worrying precedent for several citizens moving forward.
From self-employed workers under-declaring their income to people not declaring their part-time work, tax evasion is quite rampant in Malta but it’s usually settled administratively. The evader strikes a deal with the taxman and pays their dues to the state over an agreed period without the case ever reaching court.
Recent high-profile cases include Opposition leader Bernard Grech, who settled some €30,000 in tax dues, and construction magnate Charles Polidano (Iċ-Ċaqnu), who was ordered to settle over €40 million in tax dues or face potential legal action.
Even when these cases do reach court, they’re not charged with money laundering, which carries with it a maximum 18-year imprisonment term or a €2.5 million fine. Now out on bail, Vella and Fenech have been left wondering whether their lives will be destroyed for good.
However, the game has now changed. If Vella and Fenech can be charged with money laundering for living beyond their declared means, it could open the floodgates for so many other cases. Malta’s courts could quite literally be hit with a surge of money laundering cases.
Next year will be an important one for Malta, with the Council of Europe’s body Moneyval set to reevaluate the nation. Malta’s lack of money laundering prosecutions and convictions was flagged a major problem in Moneyval’s initial report in September 2019.
Failing to pass their test on the second time of asking for it could see the island grey-listed, a move that many experts have warned will seriously damage Malta’s international reputation as a financial centre.
“The report considers that money laundering is mainly investigated together with the predicate offence on which the investigation is centred. Limited resources, both human and financial, weigh negatively on Malta’s capability to effectively pursue this offence. Investigations and prosecutions do not appear to be in line with the country’s risk profile.”
A lot has changed since then. Angelo Gafa has replaced Lawrence Cutajar as Police Commissioner while Alessandra Mamo has replaced Ian Abdilla as head of the Economic Crimes Unit. Both Cutajar and Abdilla had faced harsh international criticism for their failure to prosecute high-profile cases of alleged corruption and money laundering, particularly in relation to the Panama Papers.
Meanwhile, the Financial Crimes Investigation Department itself has become much more professional, increasing its human resources threefold to 95 people and moving out of the Floriana depot into a new specialised office block in Santa Venera.
“It’s an uphill struggle,” Mamo told Lovin Malta in a recent interview. “It feels as though I’m steering a ship through a tsunami. I can see the land ahead, and I want us to get there.”
Malta has a notorious problem when it comes to taking action on crimes committed by powerful people, but this new hardline strategy comes with its own problems too. From a nation where everything goes, Malta could end up a nation of de facto money launderers, and extremism is rarely the right approach.
What do you make of Malta’s new approach to money laundering?