Updated (2): ‘No indication of collusion’ between law firm, minister on IIP – Office of Regulator
updated 2 no indication of collusion between law firm minister on iip office of regulator - Updated (2): ‘No indication of collusion’ between law firm, minister on IIP – Office of Regulator

The Office of the Regulator of the Individual Investor Programme has found “no indication of collusion” between a law firm and a minister as alleged during a programme on a French TV station.

The government today published the full report of the Office of the Regulator of the Individual Investor Programme, following a request on 23 September 2019 for an investigation into the allegations reported by the programme Enquete Exclusive, aired on a French television station, regarding the Maltese Individual Investor Programme.

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The French programme allegedly reported an interview with a Maltese agent. Immediately after the airing of the programme, the licence of the Maltese agent, Chetcuti Cauchi Advisors, was suspended pending investigations.

The comments were made to a journalist from French TV channel M6, who was posing as a representative of African clients seeking a Maltese passport: “The [former] minister Owen Bonnici was a lawyer here. Julia Farrugia, the parliamentary secretary in charge of the programme, is a childhood friend of my wife. It’s good to have a wife with similar friends,” an agent was filmed saying. “It’s a small island… I was at school with the prime minister – my father drove us to school and we would be invited to each other’s parties. We understand each other.”

The report, dated 8 November, states: “There was no indication of collusion between the Agent and the responsible Minister (or with the Agency) or that the former, at any point, since the start of the programme, had ever received any preferential treatment. The allegation that the Agent enjoyed a hundred per cent success rate was incorrect since it was calculated that 16 per cent of his applications were not approved. There was also no evidence that the agent had attempted to find a way around the selection criteria. Nonetheless, if this were to be the case, the stringent checks and balances, which are in place, would have ensured that such attempts would be futile.”

The report points out that “in particular no applicants with a criminal background were ever included in an application presented by the Agent’ More specifically, in Observation number 8, the report explains ‘A thorough analysis of all applicants revealed that this was not the case and that none of the applicants (forming part of applications presented by CCA) ever had any criminal records. When considering all vetted applications (i.e. including those submitted by the other Agents), the Oriip is aware only of one incident, when the main applicant had a criminal record. The Agent in question was not CCA and the application was refused outrightly.”

In his report, the regulator – Carmel L. De Gabriele – states that a review of all IIP applications submitted by the firm after the allegations was carried out. It read that an analysis of the observations did not uncover any red flags which support, in all or in part, the purported allegations. “No records were found of applicants having a criminal record or of applications being presented for the minister’s consideration more than once.”

The regulator noted that by the time the investigation into the firm began, it had submitted a total of 164 applications, with 123 being approved. The regulator notes that in addition, “there had been 16 other cases in which the process, leading to an IIP application, had started but were discontinued at pre-IIP application stage. 13 of these were officially withdrawn by the Agent during this stage since initial verbal enquiries with the Malta Individual Investor Programme Agency revealed that the main applicant might be facing serious problems at due diligence stage if they were to proceed with the IIP application.” The remaining three, the regulator said, failed security checks carried out by the Malta Police at Residency Card application stage, and were consequently ipso facto rejected before an IIP application was filed.

Among other things, the regulator said that there was no evidence the firm engaged in any of the alleged activities mentioned in the recorded interview. “In particular, no applicant with a criminal background has ever been included in an application presented by the agent. There have also never been instances in which the agent put forward an application more than once, or that any pressure was put on the minister or agency for a favourable decision to be taken in cases which should have been refused.”

The regulator noted that it is not the competent authority to determine the authenticity, proper interpretation or otherwise of the allegations made during the recorded meeting. “Therefore if the allegations made by the TV presenter of the French programme in relation to the statements made by the firm are ultimately proven to be true, then the regulator can only conclude that Chetcuti Cauchi Advocates could be charged with disseminating totally misleading information for reasons best known to him, probably by way of an insensible sales promotion, as a result of which the IIP programme was unduly put in very bad light locally and abroad, and the persons referred to by the firm in the interview – i.e. the Prime Minister, Minister Owen Bonnici, and Parliamentary Secretary Julia Farrugia Portelli – were grossly slandered.”

In terms of recommendations, the IIP regulator said that notwithstanding that no issues were identified following the analysis of each application by the firm, there are recommendations that can be considered in order to improve the processes and pre-empt the possibility that doubts are cast on the credibility of related stakeholders, and of IIP processes.

The regulator noted that its recommendation that the Malta Individual Investor Programme Agency invests in a comprehensive IT system has been noted in past reports. This would improve security and accountability since any amendment by a user would be recorded without the possibility of being deleted, and would mean that one can keep track of an application and its varying statuses. Presently checks are done manually or through basic IT programmes.

The regulator also made clear that a revision of the relevant regulations are overdue, and notes that there is a loophole for persons with criminal records to become Maltese citizens through the IIP. The regulator argues that this serves for detractors of the programme to continue pushing the idea that criminals are buying Maltese passports. The regulator suggests that the relevant article be removed.

It also said that an international network is set yup between authorities of states that operate citizenship by investment applications, due to the possibility of applicants withdrawing from applying to one country and applying to another, so that information regarding refused or withdrawn applications can be shared.

Parliamentary Secretary Julia Farrugia Portelli welcomed the detailed analysis of the report and the resulting conclusions, a statement issued by the Department of Information said.

With immediate effect, Parliamentary Secretary Farrugia has ordered an analysis of the recommendations put forward in the report, the statement said.

Full report by Office of Regulator IIP

PN response

The PN, in a statement, said that the report does not deny what was revealed by the French journalists, that the legal firm was caught boasting that it has ties and influence over the Prime Minister and other ministers.

“This all amounts to trading in influence, about which a few days ago Magistrate Caroline Farrugia Frendo ordered the launch of an inquiry. The regulator’s report in no way rejects that the firm involved was given preferential treatment by the PL government, given the adverts that were filmed within the Office of the Prime Minister and the involvement of Parliamentary Secretary Farrugia Portelli.”

“It doesn’t even denythe large number of cases that were revealed regarding people who purchased Maltese citizenship and are facing serious accusations of crimes, among which are fraud, money laundering, and tax evasion, the PN said. These cases nullify this government’s boasting that persons who purchase citizenship are passing through the best due diligence process.”

The report also highlights that the law for citizenship makes it possible for persons with a criminal record to purchase citizenship, the PN added.

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