Two Years Later: Panama Papers in Malta and Beyond

The critique that anti-corruption activists like Roberta Metsola and David Casa directed towards Keith Schembri’s and Konrad Mizzi’s Panama companies was neither about legitimacy nor the compromised ethics of offshore finance.

by Raisa Galea

Image: BBC

 

[dropcap]O[/dropcap]n April 3, 2016, the International Consortium of Investigative Journalists (ICIJ) publicised the leak of offshore financial records—11.5 million documents, some dating back to the 1970s. The records, created by the Panamanian law firm Mossack Fonseca, were leaked in 2015 by an anonymous source to German journalist Bastian Obermayer from the newspaper Süddeutsche Zeitung. The volume of data was so large that it took a team of more than 370 journalists from 76 countries to investigate them, and more than a year of analysis before making them public.

The whistleblower behind the leak underlined that his motivation was to expose income inequality and “the scale of the injustices [the documents] described”. However, the coverage of Panama Papers in Malta has been misleading at best and dubious at worst: the global social and economic significance of the investigations was diminished and the focus was set exclusively on Konrad Mizzi and Keith Schembri, whose offshore companies the Panama Papers exposed. In other words, one of the most significant revelations of the crimes facilitated by offshore financial centres was destined to end as another twisted asset in an intricate partisan game.

 

What Do We Know About Offshore Finance and its Relation to Malta?

Here is a list of facts which, at first, appear disconnected or even contradictory. Yet, these elements form a comprehensive pattern.

 

1. The list of Mossack Fonseca’s clients greatly exceeds Mizzi and Schembri. The leaked files contain information on 214,488 offshore entities connected to people in more than 200 countries and territories. Among the clients of offshore wealth managers there are: politicians, celebrities, criminals and castle-owning members of European aristocracies. What do Lionel Messi, Vladimir Putin, Bashar Al-Assad and the former Prime Minister of Iceland have in common? According to Brooke Harrington, author of Capital without Borders: Wealth Managers and the One Percent, all of them belong to the .01 percent club, the uber-wealthy global elite, for whom setting up offshore accounts is a routine habit.

 

2. Recent findings “debunk the myth of tax shelters as exotic far-flung islands that are difficult, if not impossible, to regulate. Many offshore financial centres are highly developed countries with strong regulatory environments.” Offshore centres in Panama, Bermuda and the Cayman Islands are connected to those in the United Kingdom, the Netherlands, Luxembourg, and, among others, Malta, through a web of obscure transactions. The industry which continuously helps the global rich to avoid tax justice is a complex international network whose players rely on one another.

 

3. As Malta Files and independent research have exposed, Malta plays an important role in the global industry which facilitates tax avoidance, corruption and crime. Thus, by the EU’s own criteria, Malta should be included in the EU tax haven blacklist.

 

4. While the Labour Party officials do their best to maintain the illusion of paradise on Earth flourishing in Malta, the representatives of opposition sweat to prove the opposite. They paint a grim picture of Malta as a ‘Mafia State’—the state it cannot escape for as long as it’s governed by Labour. Yet, despite the passionate rhetoric pledging for transparency and against corruption, the anti-corruption warriors, namely PN MEPs Roberta Metsola, David Casa and Francis Zammit Dimech, do not practice what they preach. Not only are they not concerned by Malta’s unjust taxation system and the role its financial services play in the global offshore finance, but consistently whitewash its misdeeds and repeatedly vote against EU Parliament’s proposals aimed at improving transparency and fair taxation of digital corporations.

 

How Do These Facts Relate to Each Other?

Given the rationale of the Panama Papers—to expose income inequality and the scale of the injustices—it is only sensible to expect fervent critics of Konrad Mizzi and Keith Schembri to be true to their word and to extend the critique to the offshore finance industry at large. Alas this is not the case. The question is why. What could possibly motivate the anti-corruption warriors to regularly cast a vote against transparency?

The critique of Panama companies of the PL officials and the defense of Malta’s native tax haven, which narrowly escaped blacklisting, do not contradict one another. One of the key points here is that transparency and social justice are not the priority for the anti-corruption warriors such as Roberta Metsola, David Casa, Manuel Delia and their allies. The vehement condemnation they directed towards Schembri’s and Mizzi’s Panama companies was neither about legitimacy nor the compromised ethics of offshore finance. What matters most to these pseudo-activists is that the exposure of the government officials in Panama Papers cast a shadow over Malta’s own Panama—the financial services sector—by making it more vulnerable to the onslaught from the international anti-offshore finance lobby.

The exposure of Malta’s officials in Panama Papers has damaged the reputation of its financial sector, hence making it difficult for the tax-planning and wealth-managing law firms to operate with ease.

[beautifulquote align=”left” cite=””]The exposure of Malta’s officials in Panama Papers made it difficult for the Malta-based tax-planning and wealth-managing law firms to operate with ease.[/beautifulquote]

When Malta Files hit the headlines, Daphne Caruana Galizia, rather than inquiring into the shocking injustices revealed, regarded the investigations as a toll for Schembri’s and Mizzi’s Panama companies. In the comment’s section of one of the posts she wrote: “Malta was getting along swimmingly before the Prime Minister and his two henchmen decided to set up companies in Panama”.

Therefore, resignation of Mizzi and Schembri was meant to make the sky cloudless again for the financial sector.

The Shift, for example, spelled it out black on white: in order to defend the interests of the financial services industry, the Prime Minister needs to restore ‘good reputation’ of the jurisdiction by dismissing Konrad Mizzi and Keith Schembri. Their resignation is required to erase the precedent for criticism of Malta’s financial sector and its unjust taxation system. In other words, these demands are not meant to challenge the injustices perpetuated by tax havens, but to make the one in Malta immune to future criticism.

It is for this reason that the anti-corruption pseudo-activists do their best to downplay the participation of Malta’s financial services providers in the global cycle of tax avoidance and money-laundering. Despite the fact that the dealings of Azeri state oil companies, Russian and Turkish elites, shell companies of tax-dodging German corporations and Ndrangheta-run gambling companies were assisted by regular law firms, the latter are never the target of criticism. Instead, the anti-corruption campaigners target a select few entities—Pilatus Bank and Henley&Partners—which are singled out for particular reasons.

First, blaming these two companies as Malta’s only facilitators of corruption allows to isolate them as a few rotten apples in otherwise a pristine garden. Another reason for attributing money-laundering exclusively to Pilatus Bank and Henley&Partners is their affairs with non-EU nationals. Both companies deal with the much-vilified and feared non-EU nationals who either are the IIP investors or the customers of Pilatus Bank. Thus, pointing at these companies also serves to outsource responsibility for the state of affairs from the country’s unjust taxation system and the owners/associates of the Maltese law firms to the ‘sleazy’ non-Westerners.

[beautifulquote align=”left” cite=””]The ‘Mafia State’ narrative has a xenophobic undertone: in it, the PL is the importer of (a priori!) ‘shady’ non-Westerners and their ‘filthy money’ to Malta.[/beautifulquote]

The xenophobic undertone of anti-corruption ‘investigators’ like Shift and Manuel Delia is suggested by how they choose to stress the nationality, not the economic profile, of the investors (for instance, mentions of ‘ex-Soviet,’ ‘Kazakh‘, ‘Russian‘, ‘Azeri‘ are meant to cause panic). The Labour’s role in this ‘Mafia State’ narrative is that of importers of (a priori!) ‘shady’ non-Westerners and their ‘filthy money’ to Malta for the purpose of filling the pockets with kick-backs.

Unfortunately, the hypocrisy of the partisan games has succeeded to distract the general public from the key message of the Panama Papers. The insights into the world of wealth management, tax avoidance and crime should encourage us to support abolishing such structures, whether they are located in Panama or on the Maltese Islands. It seems clear that Malta’s politicians firmly side with the wealth managers and their clients. Thus, it is up to us, citizens, to challenge the income inequality, to rise up in favour of wealth redistribution and secure the common welfare. The advent of crypto-currencies could be a new obstacle to this, yet we ought to keep our battle for social justice alive.