‘No longer fit and proper’: Zenith directors barred from financial services

Matthew Pace and Lorraine Falzon of Zenith Finance infamy have been prohibited from practicing in financial services by order of the Malta Financial Services Authority, which on Thursday announced they “can no longer be deemed as being fit and proper to hold any [MFSA] approved positions”.

The MFSA said it had taken the regulatory decision on 25 October, in which it banned both Pace and Falzon from “accepting any new positions including as shareholders in entities”.

It also prohibited them from engaging “in any activities licensed and/or otherwise supervised by the MFSA and which necessitate the approval and/or authorisation of the Authority”.

Pace and Falzon are currently facing money laundering charges and were two of the 11 people charged in March of last year – together with former Office of the Prime Minister chief of staff Keith Schembri and former Progress Press managing director Adrian Hillman.

Pace and Falzon have both pleaded not guilty to the charges of laundering money for Schembri and Hillman.

The MFSA’s prohibitions will remain in place for the duration of criminal proceedings against them, until judgement is delivered and all legal avenues have been exhausted, the authorty said on Thursday. It explained that once that happens, it will consider “whether to vary, alter, add to or withdraw the directive” in line with the court’s ruling.

Pace and Falzon will be able to appeal the MFSA’s decision before the Financial Services Tribunal.

Pace and Falzon have both pleaded not guilty to charges of money laundering and an array of financial crimes including the forgery of documents, breaches of accountancy laws and criminal conspiracy in connection with Zenith Finance, of which they were both directors. Pace was the managing director of Zenith Finance, formerly MSFP before it was rebranded to Zenith Finance, and Falzon was the company’s money laundering reporting officer (MLRO).

The charges were levelled after the conclusion of a magisterial inquiry sparked off by former Opposition Leader Simon Busuttil, who in 2017 accused the police of inaction and submitted to the courts the findings of a Financial Intelligence Analysis Unit investigation into the alleged illicit transfer of funds to Hillman from Schembri through the financial advisers.

Several arrests followed, including those of Pace and Falzon.

The charges had been partly based on another magisterial inquiry that investigated claims of kickbacks from passport sales involving Schembri and his financial advisors Nexia BT – namely Brian Tonna, as well as Karl Cini, Katrin Bondin Carter and Manuel Castagna. They have all also pleaded not guilty to money laundering charges.

Nexia BT had been exposed in the Panama Papers as having set up the financial structures in Panama and New Zealand for Schembri, former minister Konrad Mizzi and the mysterious company Egrant.

The particular transfers to which the MFSA reacted on Thursday are believed to have consisted of under-the-table payments made by Schembri to Hillman in relation to the purchasing of new printing machinery by Progress Press, of which Hillman was the managing director, from Schembri’s Kasco Group.   Former Progress Press chairman Vince Buhagiar was also been charged with having received payments from Schembri.

Pace and Falzon, meanwhile, stand accused of laundering the payments. All have denied any wrongdoing.

The MFSA says it is of the belief that “the naming of persons, including licence holders that have been sanctioned for breaching provisions of law, will lead to a greater awareness of the standards which should guide the activities and the conduct of operators in the financial services industry.”