German MEP Sven Giegold has threatened to launch a campaign for HSBC to leave Malta unless the island ups its game to confront money laundering.
“If I don’t see a change in attitude, backed up by demonstrable action, I will launch a campaign calling for HSBC to quit the island,” the Greens MEP told The Sunday Telegraph.
Earlier this year, Bloomberg reported that HSBC was considering leaving Malta and other jurisdictions in which it has relatively small consumer operations as part of a wider restructuring plan to focus its business on Asia.
And now Giegold, who has described Malta as a tax haven because of its taxation regime for foreign companies, has ramped up the pressure on Malta’s second-largest bank.
Giegold was one of four MEPs who visited Malta last month as part of an investigation into the country’s rule of law and the way the Maltese authorities are dealing with the murder of journalist Daphne Caruana Galizia.
He told The Sunday Telegraph that his visit to Malta was “disappointing” and that MEPs were left deeply unsatisfied with the government’s willingness to improve the rule of law.
“We had ridiculous meetings last week with the MFSA, because despite all the supervisory failures of recent years they didn’t say they would change direction,” he said. “They were very much on the defensive and defended their approach, rather than announcing a stricter regulatory approach.”
Sven Giegold (left) has described Malta as a tax haven
Giegold also criticised the Maltese police force’s willingness to clamp down on money laundering, noting that despite a recent boost in staff levels at the Economic Crime Unit, only one of the Unit’s 16 police officers have a degree-level qualification in finance.
“Having staff doesn’t mean anything in the real world, the test is whether there will be more prosecutions and more economic crimes detected,” he said. “Will they clean up the sector by themselves and root out criminal money, or not?”
In July, the European Banking Authority (EBA) found “general and systematic shortcomings” in the Financial Intelligence Analysis Unit (FIAU)’s application of money laundering directives when dealing with Pilatus Bank. This was due to the FIAU not having kept sufficient records of the files and documents it had examined during its first on-site visit to the bank and of its own compliance monitoring meetings in which it had decided not to pursue action against the bank.
In September, the EBA closed an investigation into the MFSA’s supervision of Pilatus Bank’s license because it couldn’t conclude there had been “breaches of clear and unconditional obligations” according to EU law.
David Curmi, the managing director of investment management firm Curmi & Partners, said it is his “biggest fear” that HSBC would decide to quit Malta to avoid the taint of recent – and potential future – scandals.
“The danger is that the only international bank with a global name in Malta – which is HSBC – will not want to be part of the financial services industry in Malta, because it will decide that the risk of reputational damage outweighs any possible gain financially,” he said. “HSBC been a force for change in Malta, driving up operational standards for due diligence, forcing local banks to follow suit,” he added. “Their loss would be calamitous for Malta.”