CapitalOne, the ‘hot potato’ nobody wanted to handle

The board of inquiry tasked with investigating the way Maltese police handled the CapitalOne money laundering case, has declared it cannot exclude the possibility that the criminal investigation failed to gather steam when the name of Nationalist MP Beppe Fenech Adami cropped up in January 2013.

But it made a clear declaration that the CapitalOne investigation – for reasons unknown – was shorn of any guidance from police superiors when it merited a proper investigation by anti-money laundering inspectors.

“There was a serious shortcoming from police not to persist in the investigation,” said the board of three retired judges who said the facts of MaltaToday’s story had been in the main substantiated.

When it came to the fact that police investigators had flagged Fenech Adami’s name as the director of Baltimore Fiduciary, which owned CapitalOne as nominee, the judges said: “It cannot be said for certain that the investigation did not continue when the PEP’s name was revealed... equally, it cannot be excluded that this happened.”

At the time, Fenech Adami was a parliamentary assistant for home affairs, and the country had just entered a general election. The MP has always denied having any knowledge of the investigation at the time.

The board of inquiry presided by Judge Joseph D. Camilleri, launched after MaltaToday published its story in October 2016, found that information on banking transactions related to CapitalOne – obtained following a freezing request by Dutch investigators into an Amsterdam drugs bust – had not been passed on to the Dutch prosecutor only because they had not been specifically requested.

“This board believes the police was duty-bound to investigate CapitalOne on the serious suspicions of money laundering… the investigation that was started by anti-money laundering unit inspector Raymond Aquilina found itself in difficulty, stopped, then was practically forgotten.

“This investigation, borne indirectly out of a freezing request, merited its own formal file, and had to be given the right direction from Aquilina’s superiors, so that it could be carried out like other normal investigations.”

The board said that MaltaToday’s assertion that CapitalOne’s €5.3 million in banking transactions should have been passed on to Dutch prosecutors, had no basis, and that the Attorney General had even denied receiving this evidence.

But after analysing the transactions that passed through CapitalOne’s bank accounts – in a separate technical report that was not published – the board said that there was a “serious shortcoming” by the police not to persist in the investigation.

“In the board’s opinion, this investigation did not continue because there was a lack of strong and necessary will on the part of the police to allow the investigation to take its normal course…

“Indirectly the investigation started from what appeared as an innocuous request to the police for a freezing order, and it is hard to understand why the investigation was not pursued. The board met the usual excuses of ‘passing the buck’ from one official to the other, or to the bank which has a designated person to report suspicious transactions to the FIAU.”

It said that other police witnesses appeared satisfied that the Dutch did not pursue any more criminal action against suspects Robert Soogea and Henrique Cumberbatch after April 2013, when drug-related charges were dropped for lack of evidence.

“They argued that no money laundering investigation could take place without a court of law finding guilt on such a crime. Others said the Attorney General should have requested the Dutch whether it could start ‘another investigation in my country’.

“Nobody mentioned the fact that a PEP’s name, Beppe Fenech Adami’s, had cropped up in the investigation… his name turned the investigation into a hot potato that could have brought unpleasant consequences on whoever dared to handle it in January 2013. The saying goes that one does not bite the hand that feeds him (sic), but a person of integrity does not abide by this maxim. The responsibility of the role must be carried out even in the burdensome circumstances when personal interests might suggest otherwise.”

Baltimore Fiduciary’s owner Richard Abdilla Castillo (L) and Former police chief Michael Cassar, who at the time of the CapitalOne investigation was Assistant Commissioner

How serious investigation lost steam

In November 2012, following a raid on properties owned by poker player Robert Soogea, Dutch prosecutor Jeroen Hennekam requested a freezing order on a Bank of Valletta account in the name of CapitalOne Investment Group.

The request was based on suspicions of drug trafficking and laundering of the proceeds of crime, after documents found at different locations showed that Soogea had substantial interests in Cyprus and Malta. “Suspect Soogea is involved with residences where drugs were found and is aware of consignment notes that were kept in a hidden space. These consignment notes relate to containers with the goods that were shipped from Brazil to Rotterdam… There are serious suspicions that Soogea tried to hide his criminal assets by means of various companies and is possibly involved in international drugs transportation.”

In the course of executing the freezing request, inspector Raymond Aquilina started investigating CapitalOne’s operations in Malta, finding that it was owned nominally by Baltimore Fiduciary Services – a firm owned by Richard Abdilla Castillo and which had Beppe Fench Adami as non-executive director.

On 13 January, 2013, in his report to superiors, Aquilina stated that one of the Baltimore directors was a PEP – Beppe Fenech Adami – and requested that the information gathered be referred to Europol.

That information was passed on to his superior, Assistant Commissioner Michael Cassar, who told the board of inquiry that he referred the file to the Assistant Commissioner Special Branch, Andrew Seychell, and to the international relations unit on 17 January.

At this point, Inspector Mario Cuschieri noted the file with “B U in 3 months” – “bring up, in three months”.

Cuschieri told the board of inquiry his note did not refer to the police investigation itself, but only in terms of the freezing order. At this point, Aquilina’s investigation appears to have never branched off from what was the Dutch prosecutor’s request for a freezing order, into a proper money laundering investigation meriting its own file.

When the freezing order was no longer required, after 18 April, because the charges against Soogea were dropped due to a lack of evidence, the file was still in the Vice and Economic Crime superintendent’s in-tray.

Cassar was now heading the Security Service, while Aquilina referred the case to the money laundering unit superintendent, saying: “Since all action has been taken and the freezing order revoked, papers are being referred to not and for onward reference to Europol office through AC SB [Special Branch].”

The file was never pursued however, the board of inquiry said, and it lay gathering dust until the economic crimes superintendent sent the file to Mario Cuschieri on 25 December 2013, who two days later annotated it with “PA” or “put away”.

Cuschieri told the board that his unit was not an investigative unit, dealing only with international requests for assistance.

While the drug charges against Robert Soogea (a CapitalOne beneficiary) in Amsterdam were dropped due to lack of evidence, the Dutch prosecutor told the board of inquiry that it was “difficult to conclude whether the financial transactions could have [had] a significant impact on my investigation.”

The board of inquiry also found that Assistant Commissioner Michael Cassar ignored the original email for the freezing request sent by Dutch prosecutor Jeroen Hennekam. Cassar said he was unsure of the identity of the sender since such requests were made through Europol or letters-rogatory; and seeing that the request was copied to the Attorney General, the matter could be handled by the AG’s office instead.

But the board of inquiry said Cassar was obliged to reply to Hennekam, at the very least given the possibility that the freezing order could have led to a police investigation of a serious crime.

FIAU wanted MFSA audit of Baltimore

The inquiry said that Baltimore Fiduciary Services was placed under the scrutiny of the Malta Financial Services Authority in March 2013, first by the markets supervision unit and then by the conduct supervisory unit. The audit, requested by the Financial Intelligence Analysis Unit, is still ongoing.

The FIAU’s request was to review the extent to which the company was complying with requirements of the Trusts and Trustees Act and a review of the procedures in terms of the Prevention of Money Laundering Act.

Fenech Adami had already resigned the fiduciary’s directorship in January 2014.

In December 2014, the MFSA sent Baltimore a summary of findings. By October 2016, after MaltaToday had published its story, the MFSA was still warning Baltimore of grave shortcomings, warning that it would withdraw its licence. In November 2016, Baltimore gave notice that it would be starting a liquidation process.

The second audit requested by the FIAU started in May 2016 by the MFSA’s enforcement unit (anti-money laundering/counter-terrorism section), to ensure the company had enough background information on its clients.

The MFSA said the FIAU had identified “an element of carelessness… the FIAU knew that Baltimore had not sent an annual compliance report, gave them a warning, then a fine. We wanted to know whether this carelessness extended to them giving services to people whose records of identity they did not even have.”

Record of €5.3 million transactions missing from file

While the board of inquiry found that the Maltese Attorney General cooperated fully with the Dutch, it turns out that the FIAU was also informed that same month by then deputy AG Donatella Frendo Dimech of the freezing order on the CapitalOne bank accounts.

Dutch prosecutor Jeroen Hennekam told the board of inquiry that Frendo Dimech co-operated fully with him, and disputed MaltaToday’s assertions that investigators had been frustrated that a record of the financial transactions of CapitalOne were not passed on to them.

A series of emails dated 28 October, 2016 – after MaltaToday’s story was published – were also exhibited by the Attorney General’s office, in which the Netherlands Chief Prosecutor insists that there was “[no] indication of any frustration of this case [with] anyone in Malta.”

It turns out that this record of financial transactions, totalling some €5.3 million, went missing from the police file dealing with the freezing request. The AG’s office denied having received this information, as claimed by the police, which was supplied the information in the first place by Bank of Valletta.

The Dutch prosecutor said it was difficult to conclude whether the transactions could have had a significant impact on the investigation, given that the charges were dropped in early April for lack of evidence.

The board said such documents should have never gone missing from the police file.

“This investigation was abruptly stopped. While the disappearance of these documents could have complicated the investigation, certainly this was no reason for the investigation to stop… this investigation did not continue because of the lack of will from the police.”

The cash that flowed into CapitalOne was used to pay off Soogea’s credit cards before finally in 2016, Baltimore sold off CapitalOne’s entire shareholding to Greek businessman Ioannis Moustos, who had already been convicted of securities fraud in Greece in 2007.

It is unclear so far whether Bank of Valletta, which hosted CapitalOne’s accounts, had alerted the Financial Intelligence Analysis Unit as to the large transactions passing from Greek companies into CapitalOne

The transactions included:

• In February 2009, the company gave notice that it was raising authorised share capital from €50,000 to €200 million – possibly part of Moustos’s plans to open a bank in Malta.

• In August 2009, it received €489,000 from a Greek associate that was later paid out a week later to acquire €490,000 in the Greek firm Asbavel.

• In November and December 2009, it received €1 million in deposits from the firm Logistics SA in five payments. Over December 2009, €200,000 was paid out to acquire 70% of a Greek tourism company GATS, and thereafter another €250,000 to increase its share capital.

• In January 2010, it received €1 million in deposit from a fur coats merchant, Agar Srl, in Poggibonsi, Italy, which the next day was deposited into a Valletta Fund Management account.

• Over the course of 2010, €2.3 million was used to increase share capital in GATS, which was later absorbed by another Greek company.

• Payments of €610,000 also came to CapitalOne from Gillesa Shipping, a firm which Dutch police said also belonged to Robert Soogea; and €1 million from MNS Commercial Brokers of Dubai.