Wednesday 06 December 2023

Due diligence and scrutiny… but only if you’re a nobody

This column first appeared in Malta today

Anyone who has ever tried to buy or sell a property knows that, these days, there is a lot of red tape and bureaucracy involved when it comes to the actual transfer of funds. Because Malta has been tarnished by so many money-laundering scandals, filling out the Know Your Client form has become obligatory before the actual transaction takes place in order to divulge one’s source of funds. If you have nothing to hide, this form is a mere formality, but it also means that ordinary citizens who have obtained their money in a way which is above board and completely transparent, are being made to feel like they are under a microscope. The default position seems to be that you are automatically being viewed with suspicion, basically like a potential criminal, unless you can prove otherwise.

Which is why when reading last Sunday’s report about the unexplained wealth of Christian Borg, the owner of No Deposit Cars Malta (who, among other things, is being charged with kidnapping and threatening a man), the average reader could not help but wonder how his transactions could go by unnoticed, without being flagged. Where was the due diligence and scrutiny when he bought properties such as a villa and a luxury penthouse with no paper trail to speak of? According to investigators, there were no bank loans nor was any money transferred from his account to explain the purchases valued at a couple of million Euros. In stark contrast, mere mortals are given the third degree and have to practically hand over a kidney to the bank in order to obtain a loan to buy a property.

According to a report in the Times: “The residential properties were all registered in Christian Borg’s name over the course of seven years, between 2013 and 2020. Documents (notarial deeds and other publicly registered documents) seen by Times of Malta show how Borg financed most of the investments without a bank loan, paying for large parts of the properties in exotic cars such as a Ferrari 458 and a top-of-the-line Range Rover SUV.” 

Granted, during the time period quoted above, the due diligence on those buying property was not as strict as it is today. In fact, a guidance paper issued by the FIAU for the property sector is dated February 2020 and was published in terms of the provisions of the money laundering and funding of terrorism regulations.

This paper clearly spells out the risk factors of those carrying out transactions using large amounts of cash: “Cash is a popular means of payment in the criminal world: cash payments are anonymous and do not leave a trace, allowing persons to disassociate themselves from financial transactions carried out in cash. Similarly, the cash used by the purchaser may have been provided by an unknown third person and a subject person might not be able to detect this and, moreover, will not be able to identify the third person and their potential links with suspicious activity.”

The paper also details in plain terms why divulging one’s source of wealth is crucial: Using one’s own funds without taking out a loan poses the possibility that a person is seeking to launder a large amount of illicitly obtained funds through a one-time transaction.

We all know why the screws were only tightened relatively recently, especially after Malta was put on the Financial Action Task Force Grey List in 2021. However, this still does not explain how no one batted an eyelid when a 19-year-old was able to start wheeling and dealing in cars at such a young age (170 cars were in his name while another 1,500 cars were registered under his various companies). If the business itself did not raise any eyebrows, his lavish lifestyle should have, not to mention the deposits of large amounts of cash in ATMs all across the country. How is it possible that no one noticed anything?

Vat fraud by Borg on a major scale, which has been happening since 2016, was only brought to the attention of the Police by the tax department a year ago and is still under investigation. But the lid should have been lifted on Borg’s entire operation years ago: the 26 people who have taken him to Court have spoken about illegal clauses in their hire purchase contracts, being made to pay for defective cars and finding out that the car they had bought had outstanding contraventions.

The dots, when connected, point to close ties with the Labour Party and people in power, which is a depressingly familiar, recurrent theme we have now become used to since 2013. In 2018, Borg was being audited by the Tax Compliance Unit and just two months later, the then Tax Commissioner HIMSELF Marvin Gaerty went on a trip to Las Vegas with Christian Borg to watch a fight. Just how many times can we resort to the same mantra of “you can’t make this stuff up?”

And even though Robert Abela was not Prime Minister at the time, the fact that he and his wife entered into a property deal in 2018 with someone like Borg does not look good at all. What is worse is that Abela was providing legal advice to both the Planning Authority and Borg at the same time.

All these circles within circles can be seen everywhere you look, with lawyer-politicians wearing too many hats, one minute representing shady clients and the next pounding the rostrum, talking about justice and rule of law. Make up your mind, you cannot please both masters, and you certainly cannot keep giving these mixed messages to an already jaded, already highly cynical public.

More recently, in another separate case which has similar undertones, five business people were arrested over money laundering, fraud and tax and VAT evasion to the tune of some €62 million. The crimes were carried out between 2012 and this year. That’s over ten years during which these people have been basically doing what they like, with everyone turning a blind eye and either accepting it or resigning themselves to the fact that “Malta has always been like this”.

Our senses have been blunted to such an extent by the frequency of these stories, that not everyone is capable of grasping the real implications and consequences to their own lives, preferring to avert their eyes and saying, “it has nothing to do with me”. When corruption becomes so rife that it is endemic to the culture there is also the probability that people stop caring or (more dangerously) they stop seeing anything intrinsically wrong with it: with everyone ripping everyone off, it becomes the survival of the fittest, and more fool you if you don’t join the club.

Some say that the Labour Government still manages to hold sway over its voters because it flashes a couple of hundred Euros in vouchers or announces some new freebie scheme and everything is forgiven. It could very well be that that is likely the reason that the stench of corruption has never really made a dent on the core diehard voters who are the backbone of Labour’s support – but let us not forget that Labour swept to power with a huge majority because many floating voters made the switch. It is this crucial segment of voters which will tilt the balance and will determine what happens next.

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