Muscat courts ‘Freeport King’ Yves Bouvier on precious goods vault in Malta

Former prime minister Joseph Muscat has pitched the lucrative idea for a freeport for precious goods in Malta to none other than the ‘freeport king’, Swiss businessman Yves Bouvier.

Within weeks of his resignation, prompted by his chief-of-staff’s implication in the Caruana Galizia assassination investigation, Muscat was firing off emails to people in power and business he met while serving as prime minister.

Signing off the emails as ‘former Prime Minister of Malta’, MaltaToday is informed that Muscat personally contacted Bouvier, informing him of his new life outside the corridors of power.

But Muscat also suggested to Bouvier the prospect of creating in Malta its first freeport for precious goods: a lucrative project for a maximum-security vault for works of art, gold and currency, potentially located near Malta’s airport.

Bouvier owns Le Freeport in Luxembourg and Singapore, the latter dubbed Asia’s ‘Fort Knox’ for being a multi-storey repository for fine art, precious gems and even JPMorgan Chase’s stash of gold.

According to the communication to Bouvier, Muscat suggested to the Swiss art dealer the existence of investors who would be ready to back the project.

READ MORE Yves Bouvier, his freeport empire, and the Rybolovlev lawsuitMaltaToday asked Muscat whether it was ethical for him as an MP to prospect on projects that had been mooted inside government during his time as Prime Minister.

“I did not demand any contract or payment to do so,” Muscat told MaltaToday, who also declared he met Bouvier twice in his tenure

“The said project has long been on government’s cards, and was also actively promoted from the Opposition side. I have been asked by a government entity whether I still have a contact in order to revive it,” he said.

Asia’s ‘Fort Knox’: Singapore’s Le Freeport

“I did not demand any contract or payment to do so,” Muscat told MaltaToday, who also declared he met Bouvier twice in his tenure.

Muscat was prime minister when the suggestion was made to the Maltese government to set up an underground maximum-security vault with direct access to the Malta International Airport runways, offering tax-free storage for precious goods.

Muscat also told MaltaToday, when asked, that he has not taken up any directorships in companies.

Muscat’s exchange with Bouvier illustrates not just the problems of Malta’s lack of revolving doors rules, where a former PM can potentially use contacts acquired during his time in government for private gain.

It also shines a light on why a partnership with Bouvier himself could be ill-advised for Malta’s reputational problems on money laundering.

‘Black hole’ for billions

Bouvier opened Le Freeport in 2010 at a cost of $100 million, turning the Singapore freeport into a regional hub for luxury collectibles such as Christie’s International stock, and bullion trading. It held JPMorgan’s precious metals, as well as gold for UBS Group, Deutsche Bank and Australia & New Zealand Banking Group.

Security checks and body scans are employed at Le Freeport, where tenants can have goods delivered to the site directly from planes without having to pay tax on the goods.

Bouvier planned to build a network of freeports in wealthy hotspots around the world. But a lawsuit from art collector Dmitry Rybolovlev, who accused him in 2015 of overcharging him $1 billion on the brokerage of canvasses by Gustav Klimt and Rene Magritte, cut short plans for a similar freeport in Shanghai. He remains the majority owner of his Luxembourg Freeport but his Singapore freeport is now said to be up for sale.

Bouvier consistently denies all charges, arguing that he was an independent seller free to sell Rybolovlev paintings at whatever price the art collector was willing to pay.

Secrecy over what was stored in the strong-rooms of Le Freeport led to concern about the possible use of the facility for illicit purposes. With pressure over anti-money laundering checks from the Financial Action Task Force (FATF), a 2016 report painted a damning picture of the facility. In its evaluation of Singapore’s money-laundering risk awareness, the FATF found that Singaporean authorities did not demonstrate a comprehensive understanding of what activities were being undertaken in the freeport, raising concerns about the prevalence on financial crime behind its doors.

By storing art and other valuable items tax-free in hyper-secure warehouses, freeports like Bouvier’s have also been accused of being a storage for looted artefacts.

European lawmakers consider freeports such as those in Luxembourg and Geneva a “new emerging threat” to the EU’s fight against money laundering and tax evasion. Earlier this year, 505 members of the European Parliament voted to make the “urgent” phasing out of freeports a top priority, and policymakers are taking concrete steps to eliminate the zones’ use as tax havens.

The disputes surrounding Bouvier soured policymakers on the idea of freeports. As the TAX3 report noted, the fact that Le Freeport Luxembourg’s founder is “entangled in an affair involving alleged fraud and insider trading” – and reports that two of Bouvier’s business partners at Le Freeport have ties to Corsican organised crime and stolen art – only emphasizes why the EU is keen to phase out the zones as quickly as possible.

Law for new freeport already in place

The Malta Free Zones Act XV of 2019, enacted in May 2019, enables the minister responsible for Customs to set up a Free Zone Authority vested with enough power to create and manage new Free Zone areas.

That means any such area as decided by the minister for the economy, can be designated as a free zone – ideal for such a precious goods store located near Malta International Airport.

The intention of the law is to attract investment into Malta’s manufacturing and logistics sectors. The Commissioner for Revenue will act as supervisor and controller and in some instances as a decision-making body.

EU rules allow member states to designate parts of the customs territory of the Union as ‘free zones’ where goods imported from outside the EU would not be subject to import duties, other charges such as VAT, and commercial policy measures, as long as they do not prohibit the entry or exit of goods into or from the EU’s customs territory.

The law enables authorised undertakings to carry on specific activities linked to the manufacturing and logistic sectors within a Free Zone area to benefit from these advantages.

Malta Customs director-general Joseph Chetcuti has gone on record saying the former Air Malta headquarters is the logical site for a free zone.

“It is not too different to the bonded warehouse concept – where taxes are suspended unless they are moved into the community. But goods in a bonded warehouse are covered by a bank guarantee, whereas there is no fiscal cover in a free zone,” Chetcuti had told The Times.

The Customs director supports the idea of a free zone at the former Air Malta headquarters. “Why not have a fine arts warehouse in a free zone, as some airports do? And you can have a tunnel linking the Freeport, the airport and the logistics hub planned for Hal Far.”