From reputational risk to full-on reputational damage

One of the most extraordinary things about this government – other than the rampant, shocking corruption and cronyism, of course – is that its key members think, speak and behave as though Malta is locked up in some kind of impermeable bubble, through the

The Prime Minister and his henchmen behave as though their only audience is the Maltese electorate, or the people they meet and speak to at parties at the Montekristo Estate organised by the Malta Developers Association. They don’t seem to understand – and, if they do, they are completely indifferent to it – that others are watching, listening, and reporting back to base. The most obvious of these are diplomats, but then there are the agencies which report for potential investors, the due diligence firms who work for big clients in the capitals of Europe and beyond, the expats who live here, and who are even more disturbed than we are at what is going on, because they are used to something very different.

A year ago, when the Panama Papers scandal broke – and let us not forget that it was only the latest in a long series of scandals, the difference being that this one got international attention – we talked about reputational risk to Malta. And we were still talking about reputation risk months later, when the reality was that now it was already a matter of reputational damage. Still, the key members of the government continued to behave as though this was just a domestic dispute and if they didn’t wash their dirty laundry in public, then nobody would be any the wiser. How idiotic was that? It was the equivalent of clapping their hands over their eyes and saying “Nobody can see me.”

The lies and convolutions with which the Prime Minister has been sheltering Konrad Mizzi and Keith Schembri have been picked up and registered beyond Malta, as has his determination to keep them tacked to his side at all costs. How does that look to those who are dispassionate observers? Well, pretty much the same way it looks to the rest of us: that if he wasn’t shocked to find out that they have companies in Panama, then it’s because he knew what they were up to. And if he defends them and won’t boot them out, then it’s because he’s in league with them and can’t jettison either of them because they will round on him and say so. Or, more simply put, because they’re a business partnership and he can’t continue to operate without them.

All of this is read, heard and registered elsewhere. Those scenes outside Pilatus Bank, the failure of the Police Commissioner to act, the Financial Intelligence Analysis Unit reports that have been covered up by the police, the resignation of Police Commissioner Michael Cassar within hours of being presented with an FIAU request for action against Konrad Mizzi and Keith Schembri, the resignation of the FIAU boss in apparent despair that anything would ever get done – all this is noted by the people whose job it is to assess Malta as a suitable location to set up a reputable business. And it’s not going to happen, because the one thing a reputable investor looks for is reassurance of the rule of law.

The result of this unhappy mess is that Malta is now attracting a very different kind of customer: the shady types, the people who would rather pay €650,000 for one of our passports than travel on their own, the sort who seek licensing for banks in which they launder money for Azerbaijani politically exposed persons and corrupt Maltese politicians. And when we’ve reached that level of reputational damage, the inevitable happens, and the rest of Europe turns hostile and suspicious. If the Maltese regulatory and investigative authorities can’t stop their own government members from laundering money and setting up illicit companies in Panama while chasing round the weirder parts of the world for bank accounts, the reasoning goes, then how are they going to stop money-launderers from buying Maltese passports and using Maltese banks to process their funds? How are they going to conduct due diligence on those who buy passports that gain them full rights in other EU member states, when they can’t even conduct due diligence on the people they choose to run the country?

The Malta Files stories which broke across Europe yesterday are the natural consequence of our own choices – that we voted Muscat in and allow him to stay there – and the behaviour of Muscat and his men. Defying the European Parliament’s anti-money-laundering committee, and allowing his chief of staff to defy it even more outrageously, must have been the last straw for many people. Instead of blaming third parties who are “out to get us for our tax regime because they are jealous”, we should more properly contemplate our own behaviour. And we can only blame Muscat so far, because the reality is that we – as an electorate – chose him, and we – as the press and the public – have allowed him to stay on despite his outrageous and offensive behaviour and decisions.