Ex-Maltese PM’s chief of staff arrested in fraud probe

File photo. Maltese Prime Minister's chief of staff Keith Schembri in Valletta, Malta, 22 July 2019. [Domenic Aquilina/EPA/EFE]

Maltese police arrested former prime minister Joseph Muscat’s chief of staff Keith Schembri Tuesday (22 September), as part of a probe into alleged kickbacks connected to the sale of so-called golden passports.

Schembri was arrested in the early hours after a court issued an order for all his assets and companies to be frozen, police told journalists. The order also applied to the assets of most of his family.

The former top advisor had been accused by murdered investigative reporter Daphne Caruana Galizia of corruption.

Malta PM to resign amid journalist murder probe protests

Malta’s Prime Minister Joseph Muscat, under fire over his handling of the murder of journalist Daphne Caruana Galizia, said Sunday (1 December) he would step down after his replacement is chosen in January.

Malta started selling passports to wealthy foreigners in 2014 and Caruana Galizia had published several investigations into the scheme on her blog.

Schembri resigned from his position in November, shortly before Muscat stepped down. Their exits followed the arrest of businessman and Schembri ally Yorgen Fenech, the alleged mastermind behind the journalist’s brutal 2017 murder.

The judge-issued order for Schembri’s assets to be seized said there was “reasonable suspicion” of money laundering.

That followed a magistrate’s inquiry into whether he had taken a €100,000 kickback on passport sales.

The results of the inquiry, launched in 2017, have not been published.

But it was based on a leaked Financial Intelligence Analysis Unit report that flagged two suspicious 50,000-euro transactions which Schembri was sent by his auditor Brian Tonna.

The money was moved via Pilatus Bank, which has since been shut down over anti-money laundering irregularities.

The pair claim it was repayment of an old loan. But the FIAU said it had found no trace of the original advance by Schembri to Tonna.

It instead alleged Tonna, whose firm helped sell passports to non-EU citizens, had taken payments from three Russians acquiring Maltese passports, and that the €100,000 had come from that sale.

EU sees crime risks from Malta, Cyprus, Bulgaria ‘golden passport’ schemes

The European Commission will warn that schemes in EU states to sell citizenship or residence to wealthy individuals could help foreign organised crime groups infiltrate the bloc and increase the risk of money laundering, corruption and tax evasion.

Corruption fight picks up

Tonna, who was arrested along with Schembri, helped set up a company in Panama for the former PM’s aide — a company which only came to light when the Panama Papers were released.

The freezing order covers more than 100 companies and individuals.

“Finally, something is moving in the fight against corruption in Malta,” MEP Sven Giegold said in a note.

But he cautioned that “far too little is still happening, and too slowly”.

“Above all, impunity for money laundering and corruption is systemic. Malta needs fundamental institutional reforms to strengthen the rule of law.”

Europe's 'golden visa' schemes open doors for criminals, report finds

With its cash-for-passport practices, Europe has opened its door to the criminal and corrupt, with some member states running a lucrative industry of trading citizenship for money, said a new report by Transparency International and Global Witness.

Caruana Galizia’s sister Corinne Vella said Tuesday that an open investigation into Schembri and the fraud allegations was long overdue.

Caruana Galizia first alleged Schembri was taking kickbacks on the passport sales in April 2017.

“For three and a half years, the Malta police force and the attorney general failed in their legal obligations to act,” said a statement from the Daphne Foundation, set up members of her family to continue her work.

“A magistrate’s inquest conducted in secret, whose findings remain secret, is no substitute for justice,” it added.

The arrests come just days after European Commission head Ursula von der Leyen said “golden passport” schemes, by which EU passports are sold, went against European values.

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