We were all appalled when last week we landed at Luqa Airport from Munich, as we were left in the dark as to where to proceed after disembarkation. We could only find the passport control for the departing passengers, and there was no sign of the incoming ones. Everybody joined the departures queue, and it was only after a while that we were told to proceed through a side door and found ourselves going towards the baggage reclaim. To our surprise, all the passengers, EU and non-EU proceeded without passport control and without any indication to the incoming passengers.
I know about Schengen and I know that, on paper, once the passengers are coming from an EU Schengen state, Malta has to provide free access. But I also know that other Schengen countries take their country’s security more seriously than us and they still keep some form of control. In effect, such countries make it a point that their security is sacred and that it comes way before Schengen.
We also heard about the Egyptian who was allowed in with €250,000 – all the media was more concerned about the incident as such and little did it enquire if the quarter of a million euros were entered into Malta through the proper channels, or even about the source of that money. We still do not know if the passenger declared the money with the authorities.
In the rest of Europe and in the USA, there is a strong campaign going on about breach of exchange control regulations. UK signed a landmark deal with the UK aimed at making British clients comply with tax law. The accords mark what may be a blueprint of how Liechtenstein will deal with pressure to cooperate further on tax evasion from European Union Nations. Earlier on this month, UBS AG agreed to turn over the identities behind 4,450 secret accounts as part of a tax dispute with the US.
Italy has cash dogs, which are trained to sniff and spot cash in the luggage of the passengers and the detention of cars entering Italy from Switzerland with cash has become quite a common occurrence, thanks to these very canines.
Last year, the Liechtenstein’s biggest bank, LGT Group, owned by the royal family, lost some customer funds after German intelligence agents acquired a list of foreign customers who were suspected of large-scale tax evasion. The information on 1,400 LGT customers, 600 of them German, triggered tax raids and added to the pressure on offshore havens.
In Malta, we are still behind, and we fail to realise that we have a problem – that exchange control regulations need to be taken seriously and that all that glitters is not necessarily gold.
The African, Middle-East and Indian traditions still require the elder son of every family to take care of the upkeep of his parents and siblings, and we know that the workers in Malta who embrace these traditions send money to their families abroad. The situation is practically the same as the situation we were in more than 20 years ago, when people who knew that you were going abroad would come and knock on your door to help them take some cash out of the island.
We know that bank secrecy rules are getting progressively more diluted in the USA and in Europe, and it is a pity that we tend to believe that it is all happening in these two continents. Weaker secrecy rules hit Liechtenstein and Switzerland and these have constrained them to give to USA the list of a number of US clients.
History repeats itself, and every time a country finds itself in dire straits it starts taking exchange control regulations more seriously. Let us be honest: the enforcement of these regulations is a very lucrative and convenient source of income.
But as I said, it is unwise and foolish to concentrate on Switzerland or Liechtenstein only – exchange control abusers are now threading beyond the European shores and South East Asia is becoming the new Switzerland. The Maltese authorities have not yet seen any threat in this, and nothing is being done to tackle this export of money. The irony is that, sometimes, this is done through European banks who operate also in these countries, hiding behind the fact that the laws governing them in Europe do not apply for them in South East Asia.
It is also the responsibility of the European Union to tackle this new reality and just as it expects the EU citizens to abide by exchange control regulations, it must take the initiative and exert the same pressure beyong the EU shores.
That Maltese are investing elsewhere is a known fact: be it cash investments or others, the fact remains that the Maltese are looking another place where to place their money. Thailand, Philippines, Hong Kong, China, these have become very familiar to the Maltese who are finding ways and means to divert their money and investments to these countries. If the Maltese postman had to divulge what he delivers in our households I am sure that we will have another enquiry similar to that of the VAT department!
But it seems that the local authorities have not witnessed this phenomenon yet and we have so far seen no studies analyzing this new reality. They know or ought to know that bankers in Switzerland and Liechtenstein are worried whether they can attract and keep client funds if they are unable to offer customers those secrecy guarantees. These bankers worry because they know that in South East Asia there are banks who are able to keep their deposits a secret and the Maltese know what is going on in that part of the continent but are turning a blind eye to the situation.
Other banks in other countries have already spearheaded a costly push into newer markets, including Asia and the Middle East, to offset the pressure that they anticipated on offshore money havens. They are transferring their energies to countries where banking secrecy is still kept secret. In Malta the Maltese are not waiting for any bank to do that and many of them have taken the initiative and invested their monies in these money havens.
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To our surprise, all the passengers, EU and non-EU proceeded without passport control and without any indication to the incoming passengers.
