PANAMA PAPERS

Maltese police arrest former prime minister’s chief of staff in money laundering probe

Keith Schembri and Brian Tonna’s assets were also frozen by court order in connection to an alleged passport kickbacks scheme.

Police in Malta have arrested the country’s former top government adviser, Keith Schembri, and his auditor, Brian Tonna, following an inquiry into alleged kickbacks from passport sales to wealthy Russians, according to local newspaper reports.

Their arrests in the early hours of Tuesday morning local time in Malta came after a court issued a comprehensive freeze on their personal and corporate assets the previous day – extending to their wider families and some associates – on the order of the country’s attorney general.

Schembri, the former prime minister’s chief of staff, was forced to resign last November after being implicated in the 2017 car-bomb murder of investigative journalist Daphne Caruana Galizia. He was arrested but was later released without charge. He denies any involvement.

Last month, the Times of Malta newspaper reported that a police inspector testified at a preliminary hearing into Caruana Galizia’s murder that Yorgen Fenech, the wealthy businessman accused of masterminding her killing, had told interrogators that his close friend Schembri wanted the journalist dead “because she caused a lot of trouble”.

According to the report, police said that Fenech also alleged that former Prime Minister Joseph Muscat was aware of the plan.

Fenech maintains his innocence. Muscat has always denied any involvement or wrongdoing.

In 2016, information contained in the Panama Papers confirmed a report published months before by Caruana Galizia that Tonna’s financial advisory company, Nexia BT, had opened secretive offshore companies for Schembri and a serving government minister, Konrad Mizzi, who, along with Muscat, had also resigned shortly after Schembri. Mizzi also denies any wrongdoing.

Another Nexia BT partner, Karl Cini, is also under arrest.

Following the publication of Panama Papers, the Times of Malta, which partnered with the International Consortium of Investigative Journalists on the project, reported that the then attorney general had refused a request by the country’s financial watchdog, the Financial Intelligence Analysis Unit, to seize Nexia BT’s servers, saying it would be ‘too intrusive’.

However, a subsequent leak from the FIAU triggered an official investigation into possible money laundering linked with payments for passports, which led to Monday’s wide-ranging asset freezes and Tuesday’s arrests.

The country’s attorney general, Victoria Buttigieg, had been widely criticised for her refusal to publish the findings of the inquiry, which police confirmed to the Times of Malta that they had received late last week.

The asset freeze is in place for 45 days but can be extended for another 45 days.

As a result of Panama Papers and Caruana Galizia’s reporting, Schembri is also under investigation over transactions involving the former managing director of Allied Newspapers, Adrian Hillman.

Update, Sept. 23:

Schembri was released from police custody on Tuesday evening local time, the Malta Times reported.

Sources told the newspaper he had been released on police bail.

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