The Malta Mafia Black Hole in the Sea

The Malta Mafia Black Hole in the Sea

Sadly, Man has proven throughout history that given the opportunity, he will find the lowest common denominator.  Sociologically speaking we are in a time of “Peak Freedom” man has never been so free.  But this comes at a cost, and as we will see in this article, a cost so great entire civilizations can rise and fall because of it.  If you give a naughty teenager a million dollars and tell him ‘do whatever you want’ probably he will not build a business empire or cure cancer.  Likewise, supported by the European Union, Malta was given a pack of matches and using simple household chemicals made it into an IED but as powerful as a Nuclear Bomb; which is about to explode in their face.

Malta created a wormhole allowing black criminal elements a ‘shortcut’ to legitimize themselves with an EU Passport; but it was the EU which allowed them to do this, and thus it will be the EU that first faces Malta about this issue.  Before digging deeper let’s go through a little background about Malta this little ‘hole in the sea’ near Italy.  Malta is a culture with ancient roots dating back to Phoenicians.  Throughout history Malta has served as neutral territory for negotiations and even ‘staging grounds’ for the crusades, Knights of Malta (Knights Templar) and other groups.  So, Malta has a history of selling their soul to the highest bidder.  As there are no natural resources on Malta, they rely on tourism and financial services like many islands in similar situations.  But you can only sell so much sun; more than 1 Million Tourists visit Malta each year[1], and their current infrastructure can’t even support that.  The real-estate construction boom (which is fitting for Malta as they have a natural obsession with Cranes) is expanding more than most developed countries, but it still can’t keep up.  There are even internet problems as experienced by companies like Bet Fair who have had to limit the amount of on-shore staff in Malta due to connectivity issues[2].

Malta joined the European Union (EU) in 2004, and for a period of about 10 years promoted Malta as a place to do financial business and gambling; ending in 2013 with the election of Joseph Muscat (note that, this is a Maltese name and not related to the rodent Muskrat[3]).  During this 10-year period Malta was promoted in the Forex community, among others, and saw a boom in retail and institutional Forex operation moving to the island and had barely a single fraud.  Compared to similar jurisdictions like Cyprus especially, Malta was white.

Muscat changed all this with an aggressive Passport selling program that netted Malta substantial profits both in actual fees and in capital flowing to the island.  It was the sort of thing that was common in Cyprus, and one reason why many avoided Cyprus in favor of Malta and other white places.  But what rules were in place, to check the participants in this program, their backgrounds, and other important information?  Or did the Maltese simply take the money and look the other way, which is so easy to do when you have the strong EU behind you.  Malta seems to believe that it can have its cake and eat it too; getting quick money from the black market without the risks and liabilities associated with it.  Unfortunately, the world doesn’t work that way, and Malta is in for a big wake up call.

Prior to his sudden death, Gaddafi began to implement a plan to create and sustain a Gold backed Dinar for black Africa – a real threat to USD and EU global hegemony.  Wikileaks emails have revealed explicitly that this was the reason for the Libya intervention and subsequent toppling and killing of Gaddafi[4].  This story is really an algorithm that has been replayed hundreds of times since World War 2 which is the sole and exclusive reason the US Dollar remains the supreme and only settlement currency for global business.  It is also the reason why countries like the United Kingdom, Germany, Japan, and many others – freely accept US Dollars and do not attempt to start their own competitive versions of the US Dollar.

This more obvious, practical, economic policy motif is not on the surface, but it is real.  As a matter of policy enforcement, the US takes an aggressive stance on terrorist financing on the financial level (if terrorists cannot be financed, they don’t exist.)  This policy was enforced globally well before the Patriot Act and other post 9/11 measures.  Financial tools were even used in the Cold War – ‘spending them to death’.

The US Dollar is backed by bombs, vis a vis the US Military[5].  The alliance between Washington, Wall St. has been very close since World War 2, because after World War 2 USA was the only country that wasn’t bombed into oblivion and was tasked to literally ‘rebuild the world’ which included structuring of a new global monetary system agreed upon at Breton Woods[6].  Although the world has changed much in 60 years, the unipolar power system of global management, using the US Dollar as the funding currency, has not.  Despite rhetoric from socialists, libertarians, and anarchist commentators – emerging markets such as BRICS pose a limited or non-existent threat to this system of global management.

The way that this system survives and has survived for 60 years, is by eliminating any threat to its existence.  There are a few types of threats; the most obvious and pulpable being that of a currency alternative to the US Dollar which is not controlled by the Fed, such as proposed by Gaddafi.  Another threat that is subtler is a means by which unsavory actors like criminals can completely avoid the US Dollar system, such as proposed by some Crypto Currency alt-coins.  Malta has created these means with their no questions asked passport program, and thus has opened the gates of hell into a previously impervious barrier of entry into the EU-US system.  Having an EU passport is nearly just as good as having a US passport not only for travel but for banking reasons.  An example from our Forex business; Russian nationals are subject to several layers of additional checks when opening a new investment account, which can be so complicated they are impossible even for the legitimate Russian investor to complete.  They can ask for notarized documents from previous addresses you lived, which is not possible to collect in Russia.  Or they can ask for multiple forms of ID, which may not be easily accessible.  Russia is considered a ‘red flag’ country and thus additional scrutiny and AML checks are required in most compliance systems.  As they should be – the amount of crime and corruption in Russia is widespread, so much so that it is considered to be endemic (part of the system).  In this example by having the Malta issued EU passport the Russian criminal could completely circumvent AML rules designed stop terrorist financing, money laundering, and other criminal activities.

These topics are not abstract issues for academic discussion they are serious issues that can have devastating effects.  Bloomberg broke the ice on this topic very politely in Bloomberg style:

For critics of Muscat, one powerful symbol of cronyism is Ali Sadr Hasheminejad, head of Pilatus Bank, the institution allegedly in the middle of the suspicious transactions involving the Panamanian shell companies linked to government officials. Sadr is an Iranian national, but when establishing and registering the bank in Malta he used a passport he’d purchased from St. Kitts. While Sadr was enmeshed in controversy in Malta, a parallel investigation into him and his bank culminated in his arrest by U.S. authorities, who charged him this spring with setting up a network of shell companies and bank accounts to hide money being funneled from Venezuela to Iran—transactions that allegedly violated economic sanctions against Iran. Prosecutors also alleged that Sadr established Pilatus Bank using illegal funds. Sadr pleaded not guilty and has been released on bail in the U.S.; his lawyer didn’t respond to requests for comment.

Ali Sadr Hasheminejad is a character which deserves his own article so in order not to get distracted we will just say that he’s been charged in New York with setting up a “Sanctions evasion scheme” to the tune of $115 Million USD – using his bank in Malta as the go between[7].  This is unrelated to the passport scheme mentioned earlier, which is why we needed to allow the reader to connect the dots for yourself to see what’s going on here.  A client of Pilatus bank could, in theory (we haven’t seen the client lists yet) could buy an EU passport and as an account holder of Pilatus bank, launder money to any country in the US-EU sphere, which is 90% of the Western world.  What this means is a figure from organized crime for example, could ‘wash’ himself both his money and his identity, through Malta.

This dual fake ID money laundering scheme is the first of its kind in the modern world.  What’s sad is that Malta was previously mostly a white country (meaning not criminal) 95% catholic, with a strong tradition of ‘trading’ as merchants.  Cyprus has been polluted with criminal elements for a long time, but people know it, and many avoid it.  But even in the twisted world of Cyprus black mafia, something like this never existed.  What the Maltese have done is in one-way criminal genius, and in another way extremely stupid.  We can say that ‘studies show crime doesn’t pay’ but that’s not necessary here.  Just look at the political fallout from Malta’s handling of the Pilatus situation (car bombing reporters who won’t shut up).  The Global Perception of Malta has done a complete 180, but the war against Malta is only beginning.  They violated untold and unagreed rules of the game, by exploiting the fairness of the EU system for their own profit and passing the liability to their EU owners. 

(Guys, a country is a Currency, you gave up sovereignty in 2004 Brussels is not going to allow this.)

Furthermore, Malta has a convoluted understanding of law, but it is with reason.  Malta doesn’t have a unique legal system and history of precedent as exists in Great Britain, or Switzerland.  They have a ‘mixed system’ which is a little of this and little of that[8], and when you mix it together it becomes a big pile of crap.  It’s like keeping 3 sets of laws and using which one is convenient to you at the time.  Nice try, but the world doesn’t work like that, especially when you have allowed criminals to violate US sanctions.

We can assume that, Iranians avoiding sanctions are just part of the VIP client list at Pilatus bank.  Since 2013 the number of wealthy Russians in Malta has exploded, as they are preferring the passport program and ease of banking in Malta’s new program over their previous choice of Cyprus.  Russia is a growing economy and part of early stage capitalism is the growth of quasi illegal robber baron class as was in the United States during the late 19th century.  It’s unfair to call them ‘Mafia’ because they aren’t really ‘criminals’ any more than John Rockefeller was a criminal, but for the purposes of this article we can add “Russian Mafia” to the list.  And certainly many Russians who have bought passports are legitimate businessmen, but consider this.  US imposed sanctions on Russia over the 2014 Ukrainian dispute, and by having an EU passport from Malta, it circumvents those sanctions.

Actually as many as 40% of the new participants in the program are Russians, according to some sources:

Those who forked out for Maltese and - by default - EU citizenship last year included Arkady Volozh, the founder of Yandex, a Russian Uber-type firm, and his entire family.  They also included: Alexey Marey, the former CEO of Alfa Bank Russia, the country's largest private lender; Alexey De-Monderik, a co-founder of Russian cyber security firm Kaspersky Lab; and Alexander Mechatin, the CEO of Beluga Group, Russia's largest private spirits company.  The newly-minted Maltese nationals emerged in a list of more than 2,000 names published in the country's legal gazette at the end of last year.  The gazette does not say who bought passports in 2016 and who was naturalised for other reasons.  But the names of wealthy foreign nationals stand out as the most likely to have paid the €1.1 million in fees, Maltese bond, and Maltese real estate investments that it costs to get nationality.  The Russian roll-call for 2016 went on to name: Dmitry Semenikhin (a media millionaire); Alexander Rubanov (energy firm executive); Roman Trushev (oil and gas); Andrey Gomon (transport magnate); Alexey Kirienko (investment broker); Dmitry Lipyavko (petroleum products tycoon); Andrei Melnikov (cobalt and uranium magnate); and Anatoly Loginov (owner of an online payment systems firm).  It also named Russian real estate developers, retailers, and agricultural land owners.  It came out after the previous gazette showed that 40 percent of new passport buyers in 2015 were also Russians.  Owning a Maltese passport gives people the right to visa-free travel to 160 countries, including the US, and to live and move around their money anywhere in the EU.  The surge in Russian applications comes after the EU and US imposed economic sanctions and visa-bans and asset-freezes on Russia over its invasion of Ukraine in 2014.  It also comes amid US plans to create a new blacklist on 29 January 2018 of cronies of Russian president Vladimir Putin over his meddling in the 2016 US election.

Right now, the Department of Justice (DOJ) is embroiled in a scandal targeted at Trump using Russia as a scapegoat.  Forces inside the US Government, for the first time, are staging what can only be referred to (and has been) as a cold coup on the legitimately elected President.  These powerful deep-state actors are in agencies like FEMA, CIA, FBI, IRS, and others.  These are powerful agencies.  Now is not a good time to be hiding or laundering money for Russians! 

And we’re only getting started!  Malta recently adopted the world’s first Crypto Currency legislation, right at a time when the public is learning that billions of dollars have been laundered through Bitcoin, and that hot money from Asia was a leading cause to the rapid rise of Bitcoin.  The point is that Crypto Currency is now the leading solution for money laundering.

So why are they being so flagrant?  Are they stupid, bold, or a little of both?

Non-Maltese foreigners in the island have reported that the regulators do not understand the underlying business.  There are other anecdotal accounts, such as from a tourist:

We were staying in a hotel that had a kitchen and living room it was like a hybrid half hotel half apartment, there was daily cleaning service, but we cooked our meals on the stove.  So early in the week we bought salt, oil, spices, and other basic kitchen elements.  Near the end of our stay, near the last day, the maid approached me and asked if she could have the salt.  It was almost empty.  It cost about $0.25 cents.  To which I said, “But we might use it we are still here for another day, but I will leave it here for you, ok?”  To which the maid replied, “But the other maid has a shift tomorrow and she will get it.”  Over a pinch of salt! 

Anyone who has been to Malta can attest to their peculiar behavior.  If you want to close a corporation, you have to appoint a special liquidator (similar to a bankruptcy judge) who must wear a special hat and sit on a special ‘throne’ in the town square, where he must by voice ask if there are any company debts.  These outdated traditions are more than antiquated, they are a problem if you are a serious professional company that wants to do business in Malta.

Malta is rated 84 out of 100 by the World Bank ‘ease of doing business[9]’ What it takes 1 man to do in New Zealand, it takes 8 men in Malta.  Must be all the heavy lifting from those big stones.

This can work for you because it protects your empire from new competition, but sadly, they are using this ‘bureaucratic fog’ for aiding and abetting international criminals.

Let’s take a look at Iran’s currency 10 year chart:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Here’s why we believe Malta is about to be pummeled into submission. 

  1. Malta is providing a way for those on the OFAC list to avoid / circumvent sanctions
  2. By providing an OFAC loophole, Malta is as a state, aiding and abetting criminals (who are criminals according to the United States)
  3. As a side business, it is easy for these participants to launder money directly (for themselves) or for their criminal network friends.  It is possible, and likely, that copy cats of Pilatus have setup laundry businesses using similar and less obvious loopholes.
  4. On the regulated front, Malta is providing a backdoor to the European Union (EU) with light regulation.  This isn’t necessarily, by itself, a bad thing – but combined with the other more serious problems, it becomes a matter of discussion.
  5. Malta’s financial system can survive Pilatus bank and Ali Sadr trial.  But what’s next?  What next scandal lies in the shadows, another fraud to be unraveled?  Could it involve a high-profile Russian diplomat on DOJ’s black list?  If Pilatus is isolated, Malta can survive.  As soon as the next mole pops up in the garden, it will be impossible for Malta to whack them all.

Some material facts:

  • Not only is the case about Ali Sadr Hasheminejad disturbing by itself, his bank, which was financed with his own illegal gains, was used to open a bank.  That bank, among other things, was a laundry for Iranian capital.  The bank was approved by MFSA, Malta’s regulator, who recently asked the ECB to rescind its bank license[10].
  • The creator of this passport program, Joseph Muscat, is accused of taking bribes from wealthy criminals from banned/blocked places due to his name appearing in the Panama Papers[11].  We need to note here that we have not seen the contents of these documents, so there is no smoking gun evidence.  But the timing is otherwise too coincidental for a forensic auditor.

The most significant financial whistleblower in US history, and perhaps in all history, said that it was the CIA behind the Panama Papers.  While this story has been featured on CNBC, the analysis of the implications has died on the vine:

Bradley Birkenfeld is the most significant financial whistleblower of all time, so you might think he'd be cheering on the disclosures in the new Panama Papers leaks. But today, Birkenfeld is raising questions about the source of the information that is shaking political regimes around the world.

Birkenfeld, an American citizen, was a banker working at UBS in Switzerland when he approached the U.S. government with information on massive amounts of tax evasion by Americans with secret accounts in Switzerland. By the end of his whistleblowing career, Birkenfeld had served more than two years in a U.S. federal prison, been awarded $104 million by the IRS for his information and shattered the foundations of more than a century of Swiss banking secrecy.

"The CIA I'm sure is behind this, in my opinion," Birkenfeld said.

Let’s run with that for the moment, especially since the CIA has such a deep history in Central and South America.  How is Malta connected to NATO, Ukraine, and the periphery of the EU?  Does Malta represent the opposite of what’s happening in Britain, Catalonia, and other potential breakaway states?  Is Malta leading the way to corporate national Fascism? Is this pleasing, or worrisome to their friends in Washington?  These are the types of questions we need to answer to really understand how this small country plays a big role in regional politics, with their bold cash for passports program.

What are the interests here, in the proxy jurisdictions like Malta?  Libya for one, not only due to Malta’s close presence to Africa, but both Libya and Malta gained independence within 13 years of each other[12].  Certainly, there was a lot of oil business run through Malta, for reasons of convenience if anything. 

Malta is not, the vortex of criminal activity in the Mediterranean, that is Cyprus.  In Cyprus, you can find drug trafficking, human trafficking, gambling, money laundering, and more – all in a country that can lose power for days on end.  Cyprus is the real black hole in the Sea.  There is no comparison in size, the criminal industry in Cyprus is 100x greater than Malta could ever grow to.  But 2 wrongs don’t make a right and being another criminal island in the sea doesn’t make the case here against Malta any less disturbing.  But there are some big differences we need to understand, such as:

  1. For Malta, this is a recent phenomenon, that started around 2013. 
  2. Cyprus isn’t flagrantly taunting violating US rules.  Russian Mafia has been in Cyprus for decades, but so are many other interests as well.  Malta’s passport program and the Panama Papers leaks made Malta stick out as a world leader in EU passport selling to those on a black list OFAC or other.
  3. There is Mafia in Italy, but Mafia doesn’t run the government (anymore).  What Muscat has done is created his own Maltese Mafia.

It seems like Malta has really lost their soul.  You know there’s a catch with America as the land of milk and honey.  It is possible to come to America with nothing and become a billionaire.  But there’s a catch – you must give up your soul.  Has Malta tried to Americanize themselves? 

Finally, Malta is now the number one jurisdiction in terms of Crypto volume (but not OTC, where Russia leads)[13].  This is really the reason for this in-depth analysis of the place.  If Malta is going to blow up, and we’ve outlined reasons well in this article – is this really a place you want to keep your Crypto?  As we’ve learned from past experiences, when dominoes fall – you don’t want to be one in the line (even if your exchange is the best one). 

Malta as a jurisdiction has become shaky.  If Pilatus can launder money using a bank which was approved by MFSA, how easy will it be to launder Crypto through exchanges when MFSA has a clear lack of understanding for financial markets, and when Crypto is by its nature completely opaque.

If Malta cannot provide protections from criminals like Ali Sadr Hasheminejad, then what remains for Crypto exchanges which are not only mostly unregulated – they are mostly opaque and anonymous.

The conclusion is that we expect massive capital outflows from Malta.  Some of that capital will flow to home – but others will look for alternative jurisdictions, like Bahamas. 

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Crediblock is a Bahamas Blockchain and FinTech consultancy that can assist in your Bahamas Blockchain enterprise setup such as Crypto Exchange, Hedge Fund, Insurance Company, Brokerage, or Bank[i].

Important Reference Articles to read on this topic

Bloomberg: Why the EU is furious with Malta (and will likely expel the country)

Pilatus Bank Website (including statement from MFSA)

Why the Worlds Wealthy are desperate for Maltese Passports

Malta slammed for cash for passport program