Representatives of financial services firm Zenith (formerly MFSP) face money laundering charges

Lorraine Falzon and Matthew Pace from Zenith (formerly MFSP), a company that offers “investment business to its clients”, were  brought in the courtroom today to face charges related to financial crimes following their arrest last Saturday.

They are both charged with money laundering, criminal conspiracy, making false declarations to a public authority and accountancy law breaches. The hearing follows that of Nexia BT representatives, Brian Tonna, Karl Cini, Katrin Bondin Carter and Manuel Castagna.

They are among the 11 arrested last Saturday, with the exception of the former Managing Director of Allied Newspapers Adrian Hillman who was abroad. It is not yet clear whether Hillman has returned to the country to face charges. Questions sent to the police by The Shift have not yet been answered.

Former chief of staff Keith Schembri, his father Alfio Schembri, Kasco Group CEO Malcolm Scerri and Robert Zammit are also among the accused, as well as Vince Buhagiar, another former director of Allied Newspapers.

Inspector Ian Camilleri from the police’s money laundering squad is the first to testify in the compilation of evidence against Zenith’s Pace and Falzon. He says that ‘Operation MH’ discovered that €650,000 was transferred between Schembri and Hillman through MFSP, which later rebranded to Zenith.

The money was deposited in client accounts at MFSP and reinvested. The money, related to machinery bought by Progress Press Ltd, was transferred to Schembri’s account in America and then distributed to other accounts.

Inspector Camilleri said servers and laptops were seized from MFSP and investigations were held on Keith Schembri, Malcolm Scerri, Adrian Hillman and Vince Buhagiar.  In his first interrogation in March 2021, Inspector Camilleri showed Pace some documents examined by experts, including emails from Pace to Brian Tonna.

In some of the documents, Pace would write an amount and Tonna would send the document back signed and with Nexia BT’s letterhead. Nexia BT was the auditing company of Kasco as well as MFSP, Camilleri reminded the Magistrate Donatella Frendo Dimech.

Keith Schembri opened an account with MFSP in May 2010 and Adrian Hillman did so a month later and given US$170,000 from Schembri’s Swiss account. Vince Buhagiar opened an account in February 2011  and received US$134,000 from Schembri. Malcom Scerri, Kasco Group CEO, became a client in July 2010.

Camilleri said Matthew Pace avoided compliance like “a professional money launderer”. Pace worked with Tonna to create documents (covering six transactions) that made the funds appear legitimate.

Pace did not confirm to the police whether he was the one who prepared the documents. He was also shown an invoice between Hillman and Schembri, but he he did not reply to questions. “It’s possible Matthew Pace created the invoice,” Inspector Camilleri told the court. Pace’s lawyers chimed in, arguing that the inspector should not argue points that weren’t certain.

The police inspector then spoke about the interrogation of Lorraine Falzon on 19 March. She told him that in addition to being a director of Zenith she also worked as a money laundering reporting officer. She said she did not see any conflict of interest in holding both positions.

Under cross-examination by lawyer Mark Vassallo, Camilleri said that although some money laundering requirements were put into practice, compliance requirements were not followed. The transactions were not scrutinised by Falzon “as she should have,” he said. The police inspector insisted she knew what was happening and did nothing about it.

Inspector Leanne Bonello testifies

Inspector Leanne Bonnello takes the stand and says she was present when the police took the statement from Lorraine Falzon.

She said that although Keith Schembri became a PEP in 2013, there was no change in ‘risk status’ following his appointment as chief of staff, even after Schembri was mentioned in the Panama Papers. There was no further due diligence, and the form used did not include FIAU risk factors.

Inspector Bonello says Lorraine Falzon was receiving a net salary of €5,500 a month.

Lawyer Edward Gatt requested bail for the accused. He said Camilleri’s testimony showed “enormous difficulty to justify the charges”. He said the crime happened in 2010 and questioned whether the fear of abscondment was good enough reason to refuse bail.

Elaine Mercieca Rizzo from the Attorney General’s Office said these are serious crimes and although they occurred in 2010, they had not stopped then. She also argued that the police are in ongoing investigations of third persons.

Magistrate Donatella Frendo Dimech asks whether there is anything beyond the six transactions of which they are accused and whether the related documents are preserved.

Mercieca Rizzo argued again that there are third persons being investigated in relation to the same case. At such a stage, they would want the least possible interference. Gatt insisted that ongoing investigations should not be a reason to deny bail.

The magistrate says bail will be decided tomorrow morning.