Malta, the EU’s smallest country and a member of the eurozone, became a money-laundering and financial crime hub. In 2017, the investigative journalist Daphne Caruana Galizia was killed with a car bomb after revealing high-level government corruption. The alleged mastermind Yorgen Fenech, close to the then-Prime Minister Joseph Muscat, was arrested. Muscat had to resign shortly after the arrest. Fenech was also close to Joseph Cuschieri, the former head of MGA and MFSA. Since then, the shares of Malta’s largest two banks, the Bank of Valletta and HSBC Bank Malta plc lost more than half the value.
Golden Passport Scheme
In the wake of the Russian invasion of Ukraine, Malta once again became the focus of international attention. Malta is pursuing an aggressive Golden Passport scheme along with Cyprus, inviting Russians to buy citizenship through investment. Russian Exante Co-Founder and CEO Alexey Kirienko bought his citizenship in 2016. Clients of Exante were involved in massive money laundering activities and securities manipulation. The US SEC filed a fraud complaint in 2016. (report here).
Under pressure from the US and EU, The Maltese government reluctantly had to suspend the Golden Passport scheme for citizens of Russia and Belarus last week.
Suffering bank shares
The entire financial sector in Malta is suffering from a miserable regulatory environment. Investors in Malta’s two largest banks have suffered unprecedented losses during the last five years as the country’s reputation among international financial service providers nosedived due to several factors, the latest being Malta’s greylisting by FATF in June 2021.
The Bank of Valletta (BOV) shares lost a staggering 65% of their value since 2017; HSBC shareholders didn’t fare much better. The bank’s shares trade on the Malta Stock Exchange and lost more than half of their value in the last five years. They regained some of the loss over the last few trading days due to the anticipation of the latest financial results for 2021.
Statistics show that while a BOV share in May 2017 had a market value of €2.24, the same share was last month worth only €0.80. Last month, HSBC announced a €27 million profit before tax for last year, the share price per share traded at just €0.99 per share when, in June 2017, it had a value of €2.08 per share. A few years ago, the global HSBC CEO was reported casually asking himself what his bank was doing in Malta. It is an open secret that HSBC has been seeking ways to exit the island for the past few years.
While bank shares have been performing poorly globally, there are additional national reasons for the lousy performance of Malta’s two leading banks. The FATF greylisting is for sure one of these other reasons.
A Regulator prone to corruption
The Malta Financial Services Authority (MFSA) supervises these two Maltese banks. The chairman of MFSA, John Mamo, has confirmed in Malta’s Parliament that the disgraced former CEO Joseph Cuschieri was being paid honoraria reserved for board members attending meetings; on top of his financial package as CEO. Mamo also revealed that Cuschieri was asked to return these extra payments. It is very telling that Mamo informed the Maltese Parliament that, in this case, he had sought and got the blessing for this extra pay from the then-Prime Minister Joseph Muscat (Cuschiri and Muscat pictured left).
Cuschieri has never been a fit and proper MFSA CEO but rather a political toyboy like many of the top managers in Malta’s regulatory authorities. Before he joined MFSA in 2018, Cuschieri was the CEO of the Malta Gaming Authority Malta (MGA) and was responsible for the casino ventures of his buddy Yorgen Fenech.
Joe Cuschieri resigned following the shocking news that he accompanied Fenech, the alleged mastermind of the assassination of a Maltese journalist, to Las Vegas on a business and leisure trip. They were accompanied by Edwina Licari, General Counsel of MFSA. At the time of the Las Vegas trip, Licari was legal counsel at MGA. Good friends altogether. Other employees of the authority of the greylisted jurisdiction are Michelle Mizzi Buontempo and Christopher Buttigieg.
