LONDON — Western governments are being urged to clamp down on cryptocurrency as new research suggests $350 billion has been laundered by criminals and hostile states using the technology in the past two decades. A new report for the Henry Jackson Society think tank, shared with POLITICO, finds that worldwide money laundering has shifted dramatically towards cryptocurrency in recent years — with the United States, Russia and Britain seeing the highest number of confirmed cases. The report draws on a database of 164 publicly identified and documented money laundering cases between 2005 and 2025. It was compiled by Alexander Browder, son of American-British financier and anti-corruption campaigner Bill Browder. Alexander Browder said that the true figure could even be “many multiples” higher than the hundreds of billions that have been identified. The study also sheds light on lax enforcement of money laundering powered by crypto. It finds that 79 percent of cases have resulted in no convictions, while only 29 percent of funds have been recovered by authorities. The researchers, based in the U.K., call on the British government to set up a new Cryptocurrency Asset Recovery Office. This would hold recovered funds to transfer back to their rightful owners. Chris Coghlan, a member of the House of Commons Treasury Select Committee told POLITICO: “The sophistication and speed of crypto currency money launderers is much higher and faster than our government’s ability to react.  “As a result, our sanctions and law enforcement are in an increasingly weak position to stop it. This report highlights the need for a robust policy response to this pressing issue.” POLITICAL ISSUE Cryptocurrency is increasingly becoming a regulatory battleground in both the U.K. and the U.S. In America, President Donald Trump has come under fire for his ties to the industry. In April last year the U.S. disbanded a Department for Justice unit tasked with investigating crypto-related fraud. In Britain, Nigel Farage’s right-wing Reform UK became the first major British political party to accept crypto donations. The British government is considering a ban on political donations through crypto. But cryptocurrency exchanges will not be regulated by the country’s Financial Conduct Authority until 2027. Much of Britain’s concern about crypto comes from Russia’s recent embrace of the currency as an alternate means of financing its war economy following the invasion of Ukraine. Browder said Russia is now successfully evading sanctions using cryptocurrency — and that it is becoming a global epicenter for its illicit use. “Half of the illicit exchanges identified in the database have been based in Russia. Four out of five major ransomware groups in the database have been based in Russia.  “It is the home to crypto darknet marketplaces such as Hydra — one of the largest in the world, which had processed over $5 billion in illicit funds through the sale of harmful drugs and other illegal services,” he warned. Browder added that British, American and EU policymakers have so far been unable to tackle the problem: “Criminals and rogue regimes are basically running circles around U.K., U.S. and EU prosecutors.” “Criminals are able to escape without legal consequences, and victims are left without redress and adequate compensation.”

KYIV — Ukraine’s state anti-corruption agencies on Monday charged former Energy Minister German Galushchenko with money laundering and taking part in a criminal organization, a day after he was arrested at the Ukrainian border during an attempt to flee the country. The crackdown is part of the ongoing Operation Midas, which is investigating the $100 million corruption plot in Ukraine’s state nuclear energy sector that rocked the inner circle of President Volodymyr Zelenskyy last year. According to the National Anti-Сorruption Bureau of Ukraine (NABU), Galushchenko and his family members became investors in a fictitious investment fund, created to launder the $100 million siphoned out of Ukrainian state nuclear energy company Energoatom. “To conceal his involvement, two companies were created in the Marshall Islands, integrated into the structure of a trust registered in Saint Kitts and Nevis. The high-ranking official’s ex-wife and four children were registered as beneficiaries of the companies,” NABU said in a statement Monday. NABU did not name Galushchenko directly, but described him as Ukraine’s energy minister in 2021-2025 in its official communication about the case. Galushchenko was the only energy minister serving from 2021 until July 2025. Detectives, with the help of anti-corruption authorities from 13 countries, established that money was transferred out of the fund to accounts in Swiss banks.  “Over $7.4 million was transferred to the accounts of the fund, which was managed by the suspect’s family. Another over 1.3 million Swiss francs and 2.4 million euros were issued in cash and transferred directly to the family in Switzerland,” NABU said. “Some of these funds were spent on paying for the children’s education in prestigious institutions in Switzerland and were placed in the accounts of his ex-wife. The rest was placed on a deposit, from which the family of the high-ranking official received additional income and spent it on their own needs,” the detectives added. Galushchenko was not available for comment, but he earlier denied wrongdoing during the special investigation commission meeting in the Ukrainian parliament in January. Parliament dismissed Galushchenko from his recent post as justice minister in November as the corruption probe snowballed.

LONDON — A British police force investigating bribery and money laundering will be expanded amid fears corruption is threatening U.K. national security. The U.K. government on Monday pledged £15 million to expand its “Domestic Corruption Unit” — a body which investigates corruption in local authorities and banks. The announcement came as ministers published a new U.K. anti-corruption strategy setting out more than 100 measures to tackle bribery, money laundering and intimidation. “Corruption threatens our national security, undermines legitimate business and steals money from working people’s pockets,” Security Minister Dan Jarvis said in a press statement issued alongside the anti-corruption document. “Our landmark strategy will take on the rogue actors and insiders who often exploit their positions of power and manipulate the public purse for personal gain,” he added.   The U.K. government wants to crackdown on what it calls “professional enablers” of corruption and crime, which it claims are sometimes working for the benefit of hostile states, such as Russia, or criminal gangs overseas. A plan to strengthen sanctions against bad actors in banking, accountancy and the law were also set out Monday. There will also be increased vetting for new police, prison officer and border security recruits, and staff moving between organizations to stop organized crime groups infiltrating Britain’s frontline services. Ministers are also considering payments for whistleblowers. The U.K. government will host an illicit finance summit next year to tackle the flow of dirty money. It will examine tools such cryptocurrency, which are being used by criminals, those evading sanctions and hostile states. Margaret Hodge, the government’s anti-corruption champion, will also lead a review into asset ownership in Britain, which will aim to track the flow of dirty money into the country. Transparency campaigners and MPs have tentatively supported the strategy, but some have warned that there are glaring omissions. Andrew Mitchell, the former Tory minister who chairs the APPG on Anti-Corruption and Responsible Tax, said that without “full and proper financial transparency” in Britain’s overseas tax havens, “[the] U.K.’s credibility as a global leader on anti-corruption and economic crime will continue to be undermined.”

The EU is adding Russia to its blacklist of countries at high risk of money laundering and financing terrorism, according to two EU officials and a document seen by POLITICO. The global watchdog Financial Action Task Force (FATF) suspended Russia as a member after the full-scale invasion of Ukraine, but failed to blacklist it, despite evidence presented by the Ukrainian government, because of opposition from countries in the BRICS group of emerging economies, which includes Brazil, India, China, and South Africa. EU lawmakers called on the Commission many times to do what FATF was not able to. The Commission committed to complete a review by the end of 2025 to get their support to remove the United Arab Emirates and Gibraltar from the list earlier this year. POLITICO saw a draft of the Russia decision, which will be an annex to the list. In other internal documents, the Commission had said that the assessment was complicated by the lack of information-sharing with Moscow. The EU already has a wide range of sanctions heavily limiting access to EU financial services for Russian firms. The blacklisting is landing as the EU executive is trying to end Belgium’s resistance to using the revenues from Moscow’s frozen assets to fund Ukraine. The move will oblige financial institutions to strengthen due diligence on all transactions and force banks that have not already acted to further de-risk. The EU has usually aligned itself with FATF decisions, but from this year, it has its own Anti-Money Laundering Authority. AMLA will contribute to drafting the blacklist from July 2027. Dutch top official Hennie Verbeek-Kusters, a former chair of the financial intelligence cooperation body Egmont Group, is set to join the AMLA authority executive board after a positive hearing with lawmakers held behind closed doors, one of the EU officials said. A vote on the appointment is due on Dec. 15, said a third official.

LONDON — The British government is considering a ban on cryptocurrency donations to political parties — in a move that could set off alarm bells in Nigel Farage’s Reform UK. Farage’s populist party — surging ahead in U.K. opinion polls — opened the door to digital asset donations earlier this year as part of a promised “crypto revolution” in Britain, and has already accepted its first donations in the digital assets. A clampdown by the British government was absent from a policy paper outlining its upcoming Elections Bill, which is being billed as a plan to shore up British democracy. But officials are now considering measures to outlaw the use of crypto to fund U.K. politicians, according to three people familiar with recent discussions on the bill. The government did not deny that the move was under consideration, saying it would “set out further details in our Elections Bill.” Reform UK became the first British political party to accept crypto donations earlier this year. Farage told Reuters in October that his party had received “a couple” of donations in the form of crypto assets after the Electoral Commission — which regulates U.K. political donations — confirmed it had been notified of the first crypto donation in British politics. Reform has set up its own crypto donations portal and promised “enhanced” controls to avoid any misuse. Reform has set up its own crypto donations portal and promised “enhanced” controls to avoid any misuse. | Dan Kitwood/Getty Images Farage, who holds some long-term crypto assets, has told the sector he is the “only hope” for Britain’s crypto business as he seeks to emulate his long-term ally U.S. President Donald Trump’s wide embrace of digital currencies. Farage has stressed he was “way before Trump” in publicly backing cryptocurrencies. HARD TO TRACK Despite the absence of a clampdown from initial public plans for the government’s elections bill — which included measures ranging from lowering the voting age to 16 to strengthened powers for the electoral commission — the British government, which is trailing Reform in the polls, has been under pressure to adopt a ban on the practice. Among those who have floated a clampdown are then-Cabinet Office Minister Pat McFadden, Business Select Committee Chair Liam Byrne, and Phil Brickell, the Labour MP who chairs the All-Party Parliamentary Group (APPG) on Anti-Corruption and Fair Tax. Transparency experts have warned that the source of cryptocurrency donations can be difficult to track. That raises concerns that foreign donations to political parties and candidates — banned in almost all circumstances under British law — as well as the proceeds of crime and money laundering could slip through the net. Labour’s elections bill is also expected to place new requirements on political parties and their donors. It is set to include a clampdown on donations from shell companies and unincorporated associations, and could force parties to record and keep a risk assessment of donations that could pose a risk of foreign interference. Crypto is an emerging battleground of foreign interference, with Russia and its intelligence services increasingly embracing digital currencies to evade sanctions and finance destabilization — such as in Moldovan elections — after being cut off from the global banking system following Moscow’s full-scale invasion of Ukraine. Russian involvement in British politics has come under fresh scrutiny in recent months after Nathan Gill — the former head of Reform in Wales who was also an MEP in Farage’s Brexit Party — was jailed last month for over 10 years after being paid to make pro-Russian statements in the European Parliament. Farage has strongly distanced himself from Gill, describing the former MEP as a “bad apple” who had betrayed him. Nevertheless, Labour has since gone on the offensive, with Prime Minister Keir Starmer urging Farage to launch an internal investigation into Gill’s activities. According to a spokesperson for the Ministry of Housing, Communities and Local Government, which has responsibility for the bill, “The political finance system we inherited has left our democracy vulnerable to foreign interference.  “Our tough new rules on political donations, as set out in our Elections Strategy, will protect U.K. elections while making sure parties can continue to fund themselves.”

THE BOOM THAT BROKE MALTA A sprawling fraud trial involving former premier Joseph Muscat lays bare the costs of 12 years of gangbuster growth. By BEN MUNSTER in Paceville, Malta Illustrations by Naama Benziman for POLITICO If you’re looking for a prime example of the profound ugliness and moral decay inflicted on this tiny island nation by a decade of misrule, you could do worse than a visit to the coastal party district of Paceville. Sickly, meaty smells permeate the air, house music booms behind high walls, and throngs of tourists frequent strip clubs in ungainly new builds that, like malign vines, are beginning to encroach on the district’s neighboring suburbs. “It’s grab, grab, grab,” griped local Mayor Noel Muscat, who was up in arms last year about plans for a gargantuan luxury hotel near his own quiet constituency of Swieqi. The structure, he said, was both widely unpopular and conceptually incoherent: a tower so large it would cast a shadow over the very sliver of beach developers hope rich clients will pay a hefty sum to access. Advertisement But despite all that, most residents are likely to support it, he said — being merely happy that the value of their own adjacent properties will go up. Since the once-dominant ex-premier Joseph Muscat (no relation to Noel) took power in 2013, this tiny Mediterranean island nation has witnessed an astonishing economic boom, fueled by a no-holds-barred drive to court the world’s wealthy. But the giddy growth spurt has led to serious deformities — most visibly in the country’s increasingly stunted living environment. In towns like Paceville and countless others, weary locals complain that powerful construction firms have been allowed to run roughshod over politicians and planning laws, erecting foreboding skylines over the tiny island’s once-pristine coast, while critical infrastructure rots. Politics has degraded in tandem, producing endless corruption scandals and a persistent feeling of impunity as major trials continued to produce zero high-level convictions. A Eurobarometer survey last year in Malta reported that some 95 percent of respondents believed corruption to be “widespread.” That all appeared to change in May 2024, when Joseph Muscat and 33 others were charged in connection with a sprawling, international fraud that seemed to epitomize this disregard for Malta’s towns and cities. Top officials, including the former premier, were accused of stealing thousands of euros in taxpayer money intended for the overhaul of three crumbling state-run hospitals. They deny the charges. To activists, the scale of the so-called Vitals case made it the first real shot to hold accountable a government they say has spent the past 10 years plundering the public purse with impunity. But as proceedings wear on inconclusively after a full year and a half, there is growing anxiety about the prospects for the trial, which has run aground amid an array of baffling procedural blunders and a ferocious political counteroffensive. An opaque and vulnerable justice system has left prosecutors floundering with a hole-ridden charge sheet, and the government, for all its critics, continues to trounce the weak opposition — enjoying ironclad support from swaths of the population that have grown rich off its policies. As change looks increasingly improbable, it’s raised an uncomfortable question: When corruption becomes so lucrative that it entrenches itself at the heart of politics, can it ever be rooted out? ORIGINAL SIN  Squeezed between Sicily and North Africa, Malta’s half-a-million citizens occupy a mass of urban sprawl barely a fifth the size of London — less a country than a city-state marooned in the Mediterranean, indelibly shaped by millennia of foreign rule.  From 40,000 feet above sea level, that history rolls into view as a near-unbroken series of parchment-yellow settlements stretching from coast to coast across three tiny islands, punctuated by patches of dry scrub and deep red earth from which little grows. Upon closer inspection, you’ll see the eclectic architectural legacy of a panoply of imperial invaders — the Phoenicians, Romans, Normans, Arabs, Spanish Habsburgs, Napoleon, and the British Empire — and their baroque palaces, Umayyad forts, and colonial-era barracks. Since the departure of the British in 1964, the island’s inhabitants have been in search of a homegrown national identity beyond textiles and piracy. The 20th century saw a bitter conflict over language, political violence and a long flirtation with Libya-style nonalignment. The country finally hitched its fortunes to Europe in 2004 with its entry into the EU — but its true transformation began in 2013 with the election of Joseph Muscat on a sweeping platform of renewal after years of economic hardship. Advertisement Muscat was the dynamic young leader of the Labour Party, which along with the Nationalist Party is one of two century-old factions that command fanatical bases of support in Malta. Muscat’s strategy was to exploit the tiny nation’s newfound access to the world’s largest trading bloc, catering to an increasingly footloose global elite. Under his watch, the government radically changed its business model, selling passports to wealthy foreigners and making it trivially easy to set up financial services, crypto and internet gaming firms that could then operate across the EU.  Malta quickly became a playground for international investors. Between 2013 and 2024, the stock of foreign direct investment — much of it in shell companies, trusts and holding companies — surged from €9.6 billion to a staggering €460 billion, 68 times faster than Malta’s equally breakneck domestic growth. At the same time, gross domestic product per capita leaped by almost 70 percent, over four times the European average, creating a class of newly prosperous citizens who were hard-pressed to quibble with the new order.  But prosperity also brought an increasing coziness between business and politics. The perception of corruption crept up steadily. Desmond Zammit Marmarà, a former Labour lawmaker-turned-critic, said he was routinely solicited for bribes (he assured POLITICO he turned them down), and observed a tendency in the public sector to fraudulently inflate budgets. Another former Labour lawmaker lamented that centuries of colonial domination had taught his countrymen that it was a virtue to rob the state.  Unease over this new dynamic figured most prominently in the construction sector. Upon taking office, Labour supercharged an anything-goes approach to development kicked off by the previous government. The dream was to transform Malta into a cosmopolis for the super rich — a Mediterranean Dubai of luxury hotels and towering office blocks. Malta’s urban landscape soon witnessed an extraordinary transformation. Cranes filled the heavens, sawdust choked the thoroughfares, and neat rows of 19th-century townhouses gave way to graceless slabs of glass and steel. The endless construction brought in waves of migrant workers, tourists and businessmen, all flocking to the new country being built piecemeal over the old one, dramatically swelling the population in summertime and causing an enduring housing crisis.  Critics said the whole system was broken and corrupt. A planning process spread across a tangle of local bodies, public institutions and ministerial portfolios was easily exploited by developers looking to ram through at times legally dicey projects, often with the tacit support of government and municipal officials. According to Emanuel Delia, the co-founder of the rule-of-law nongovernmental organization Repubblika, the policy changes featured a mix of genuine deregulation — for instance around building limits for real estate — and “selective enforcement” of existing rules that favored firms with close ties to government. Just this summer, Malta’s National Audit Office triggered a fresh round of public outrage when it alleged that Muscat’s powerful chief of staff, Keith Schembri, had helped Malta’s land authority conceal an evaluation report on behalf of a large developer in 2019, costing the taxpayer nearly €16 million. Schembri has denied any wrongdoing. In Delia’s view, Malta has fallen victim to a kind of “amoral familism” in which wealthy and well-connected clans put enriching themselves and their relatives above all else. Some locals, while acknowledging the blight of overdevelopment, privately defended it on those terms, arguing that those who exploited the flawed rules were blameless — victims of financial incentives too attractive to resist. THE VITALS SCANDAL On the face of it, the plans in 2015 to privatize three crumbling hospitals took the same logic that characterized Muscat’s boom — quick growth through private deals — and applied it to Malta’s failing public services.  As outlined by top officials, the idea was to hand over Karin Grech, Gozo General and St. Luke’s hospitals to a homegrown health care consortium, Vitals Global Healthcare, which would renovate the hospitals along the lines of a “health tourism” model that it could export across Europe. But despite the €456 million infusion from the government, Vitals failed to deliver on many of its commitments, according to a scathing report by the National Audit Office in 2021. In 2017, after dozens of deadlines were missed, the concession was handed over to a local subsidiary of the U.S.-based Steward Health Care, which then missed its own deadlines and declared bankruptcy amid a hail of lawsuits in 2024, prompting federal investigations in the U.S. The concession itself was ultimately annulled after a Maltese court deemed it “fraudulent.” According to the audit office and a 1,200-page magisterial inquiry, it was a ruse from the get-go. Advertisement In reality, Vitals was a thinly capitalized shell company conjured by a group led by Shaukat Ali, a prominent Pakistani businessman who was “involved at the highest levels of Colonel Gaddafi’s notoriously corrupt regime in Libya,” the inquiry concluded. Ali, it said, concealed the involvement of key Muscat allies — Schembri, the former chief of staff, and Konrad Mizzi, a former energy minister. The whole thing, in the NAO’s words, was “fraudulently contrived” ahead of time to rig the public tender for the hospital concessions, forgoing the usual due diligence process — and bypassing ministers who might have raised a stink. Through a series of holding companies registered in the names of his business associates (and his multiple wives), Ali also held beneficial ownership of the Steward subsidiary that would take over from Vitals, according to the inquiry. Kickbacks from the concession allegedly flowed through this opaque network into bank accounts held by Muscat, Schembri, Mizzi and a sprawling supporting cast of consultants and middlemen spanning several continents. Muscat, Schembri, Mizzi, Ali and all the other 31 co-defendants have pleaded not guilty.  Investigators allege the arrangement impoverished the three privatized hospitals. Today, Gozo General, which caters to Malta’s second-largest island, reportedly remains derelict and rife with hazards. Karin Grech Hospital, named after a young girl murdered in 1977 by a mailed explosive intended for her father, barely survives in a state of desolate, cobwebbed disrepair as a clinic for the elderly. St. Luke’s, a limestone colossus with serried square windows in the style of a Victorian orphanage, stands unused beside it on a bleak promontory.  Lawyers representing Muscat, Mizzi and Schembri did not respond to multiple requests for comment, nor did Steward Health Care. Ali, through a lawyer, declined to comment, citing a court gag order. He has previously told the Times of Malta that “I feel that we have become the victims of a political football and the subject of vile allegations made by mendacious people.”  FAILED STING The Vitals scandal first trickled into public view through a series of investigative articles and a court case launched as a Hail Mary by a beleaguered opposition leader. Outcry built over the mishandling of the hospitals contract, and in 2019, Repubblika, the anti-corruption NGO, pushed for a broader trial, using a rule allowing civilians to trigger magisterial inquiries.  But since then, the judicial process has continuously run aground under strange and suspicious circumstances.   One notable incident took place bright and early on Jan. 7, 2022, just as the investigation was mounting. In Burmarrad, in the north of the island, a Maltese police convoy blazed down a lonely stretch of rural road, past off-licenses, a 16th-century church and a used car showroom, before taking a swift turn into a narrow side street.  Advertisement As dawn trickled in, the convoy approached its target: Muscat’s family home. It was meant to be the first shot across the bow as the probe got underway — but when the officers arrived to begin their search, trailed by several court experts, Muscat was ready and waiting, having been tipped off after news leaked that the raid was imminent. Far from an explosive and telegenic confrontation, the ex-premier cordially welcomed the officers, led them to his dining room and presented them with a sheaf of preprepared documentary evidence — then, in the aftermath, took to Facebook to blast the raid as an intolerable affront to his privacy. According to Robert Aquilina, the other co-founder of Repubblika, as well as police and court officials familiar with the investigation, the origin of the leak was a covert war between the magistrate’s office and the politically appointed police commissioner.  The police had shown scant initial interest in examining the journalistic allegations around Vitals and offered support for the investigation only when directly ordered to by the court, the police and court officials said, speaking on condition of anonymity to avoid reprisals. That fostered an atmosphere of mutual distrust, prompting prolonged chaos, procedural stonewalling and repeated leaks of the investigative agenda. That’s how Muscat was able to get ahead of the raid; his phone was even wiped clean weeks in advance.  Jason Azzopardi, a prominent lawyer and former politician, testified in separate proceedings last year that he believed the leak came directly from Police Commissioner Angelo Gafà, based on a conversation he had with an unnamed person close to the commissioner. Gafà has in turn accused the inquiring magistrate of keeping him in the dark.  A spokesperson for the Malta Police Force said it “categorically rebuts the baseless allegations” regarding its relationship with the judiciary, which it said it cooperated with fully. The spokesperson added that Gafà was appointed following a public call and an independent selection process.  Advertisement To Aquilina, the co-founder of Repubblika, the affair provided an object lesson in state capture. The 47-year-old activist and notary has a taste for private nooks in public places, and on a morning last year he was sipping a dark coffee in the grand foyer of a hotel just off one of the main thoroughfares of the Maltese capital, Valletta. Sharply dressed, with browline glasses and the studied calm of a veteran conspirator, Aquilina likened the trial to the Italian “Maxi-Trial” of the 1980s, in which hundreds of Sicilian mobsters were rounded up and tried en masse in a specially built courtroom-bunker. But the difference, he said, is that “in Italy, the Mafia has infiltrated the state over many years — in our case, the Mafia has been elected.” CHILLING EFFECT Mafia-style violence, or the threat of it, has also pervaded the Vitals proceedings, which have been menaced by the memory of Daphne Caruana Galizia, a relentless investigative journalist who was among the first to uncover discrepancies in the Vitals concession, and was killed by a roadside bomb attached to the underside of her Peugeot 108 in 2017. After a concerted effort by her bereaved sons and a sprawling group of civil society activists, including Aquilina, the murder was connected to a businessman close to the Muscat government, and several low-level mobsters were recently convicted for carrying it out. Nevertheless, the events have left a conspicuous chilling effect on broader accountability efforts.  For instance, a number of independent court experts critical to the Vitals inquiry are refusing to testify locally. A Serbian court expert, Miroslava Milenović, declined to return to court after Muscat sued her following a dramatic hearing in which she admitted she wasn’t registered in Malta as a chartered accountant. Another, Jeremy Harbinson, has asked to testify from London, saying he would never return to Malta because he fears for his safety. Two people familiar with the matter said Harbinson has been nervous about visiting the country since 2022, when his hotel room was mysteriously broken into and his passport stolen during a trip to assist with the raid on Muscat’s residence. Schembri has since asked the police to investigate Harbinson, too. Neither he nor Milenović could be reached for comment. Aquilina himself told POLITICO that he requires constant police protection — which the police removed in July — and recently had to bat off domestic violence claims, which were ultimately dropped. The police said the removal of protection followed a threat-to-life assessment led by a multidisciplinary oversight committee.  Aggressive interventions by top politicians have also weighed heavily on the proceedings, with figures on both sides of the spectrum exploiting the intensely tribalistic nature of Maltese politics. Even the government has weighed in, seizing on the alleged unreliability of the court experts to dismiss the trial as a stitch-up. As it got underway last May, Prime Minister Robert Abela — Muscat’s successor — went so far as to blast the inquiry as a politically motivated attack by “establishment” forces. In a statement, Abela defended his comments, arguing that the former premier was entitled to the presumption of innocence — but then doubled down, urging POLITICO to “have a closer look at the happenings within the court process.” He also asserted, without offering evidence, that the court experts who refused to testify were hired by way of “opaque” processes and paid “millions of euros.”  Advertisement While some have condemned such comments as judicial interference, they also speak to genuine puzzlement at various aspects of the inquiry that have lent credence to the defendants’ claims of victimhood, including the apparent rift between the police and magistrates’ office, the absence of the court experts and seeming inconsistencies within the inquiry itself.  Consider the case of Central Bank of Malta Governor Edward Scicluna, who served as finance minister under Muscat and stands accused — in one of several parallel trials associated with a raft of lesser charges — of fraud and misappropriation, which he denies. In light of the institutional discord, Scicluna was never interrogated by the police and was notified of the charges against him via a leak to the media. The inquiry’s assessment of him is also contradictory and appears not to back up the fraud claims. Activists worry these sorts of discrepancies could bolster defense lawyers’ arguments that the body of evidence presented in the inquiry is inadmissible. Currently, the parallel proceedings are grinding through a preliminary information-gathering phase; an effective attack on the inquiry’s credibility could result in the evidence being thrown out before the prosecution gets to present it before a jury — killing the proceedings stone dead.  FINAL THROES  Indeed, some are nervous the whole thing will be a flop. Aquilina reckons it could go on until 2028 — and even then, he’s not optimistic much will come of it.  The grinding pace of the trial isn’t just an activist’s lament: It’s reflected in continued criticism from international organizations, including the Organization for Economic Cooperation and Development and the Council of Europe, which have accused Malta of being too slow in implementing anti-corruption reforms. The EU’s own annual rule-of-law report has consistently highlighted an absence of high-level convictions.  Prime Minister Abela rejected these institutional slights, arguing that he had strengthened Malta’s anti-corruption and anti-money-laundering authorities, bolstered the independence of the police and magistrates, and changed the rules around magisterial inquiries to prevent the system being “abused for partisan political aims.” (Critics say he made it harder for NGOs to trigger them.) He also pointed to recent praise from the Council of Europe and added that his administration had improved protections for journalists.  Advertisement “Our robust anti-corruption strategy has also served as a deterrent and the efficacy of such a strategy should not be measured by the volume of arraignments or convictions, but rather by the way such a strategy minimizes or eliminates corruption at the roots,” Abela said. He also emphasized that his government was pushing new legislation to support “sensible and responsible planning” and force “individuals who have erred in the past” to pay retroactive compensation.  But for those aching for a complete overhaul of Malta’s cozy culture of business, politics and corruption, there’s little cause for optimism. Despite the endless scandal, Labour maintains a consistent lead in the polls — a testament to the economic growth that took hold under its watch. The question is whether it can survive its links to Muscat. The former premier has been out of government since he resigned in 2020, after the investigation into the Caruana Galizia killing singled out a prominent tycoon with links to his ally, Schembri. (Both Muscat and Schembri have denied any involvement in the killing.) But he still looms large over the Labour Party, and many people made rich by his policies feel like they “owe” him, said one government official. On the flip side, recent polls suggest that the Nationalist Party is narrowing the gap under new leadership, with some arguing that Abela’s continued contact with Muscat-era officials — the premier said last month that he still talks to Schembri — could alienate moderates.  But a change in government might not matter much. Senior Labour and government officials, speaking on condition of anonymity, argued that Labour’s problems were not unique and that the courting of foreign investors began under the Nationalist government that secured EU accession. It’s true enough: The country’s most influential property tycoon, Joseph Portelli, who is unconnected to the hospitals scandal, makes a point of donating money to both parties. (Portelli says he expects nothing in return.) The status quo is indeed sustained by an irresistible economic logic. In the view of Alexander Demarco, the deputy governor of Malta’s central bank, supporting the vast numbers of foreigners who enter the country requires continuous development — and on such a tiny island, the only way for developers to build is up. Blocking builders of high-rises could be a “serious impediment to economic growth,” he said, while emphasizing that such development should be limited to special areas. The Vitals debacle, meanwhile, continues apace. Recently, an international arbitration court ruled against government efforts to recoup some $466 million from Steward. Abela, during a heated parliamentary debate, said the judgment proved no money was stolen. Opposition lawmakers argued that the ruling — which explicitly holds “no view” on whether collusion occurred — did no such thing. Advertisement Still, some dare to hope that the trial around the deal, whatever its outcome, will serve as a break from a culture of impunity that has thwarted efforts to strengthen Malta’s institutions. “When there’s a public inquiry, people realize that politicians are not gods, and that they can be held accountable,” said Matthew Caruana Galizia, an investigative journalist and one of the three sons of Daphne, the murdered journalist.  The bigger struggle will be to keep the momentum going. “While these people are being brought to trial, it’s also the system itself being brought to trial,” Caruana Galizia said. “Unless something is done about this impunity … there will be more of this kind of crime, more corruption, more contract killings.” ‘A COUNTRY HAS TO SURVIVE’ All of this, perhaps, is the inevitable fate of a tiny, resource-poor, services-heavy economy whose politicians have little to offer beyond privileged access to a market captured by private interests. Scicluna, the central bank governor, echoed that sentiment last year atop Valletta’s lush botanical gardens. A professorial 79-year-old who was summoned to serve under Muscat in 2013 after a long stint as a TV pollster, the former finance minister said he was proud of his tenure, during which he reduced Malta’s deficit and boosted financial stability. In his view, Malta’s woes are the result of bad actors exploiting loopholes created by otherwise legitimate government policy.  “If you bought a boat because you made a lot of profit from a government contract, then good luck to you — this is how people get rich,” he said. He took pains to add that he was referring to “legitimate” contracts. Advertisement But on the whole, Malta’s transformation has been to the good, he said. Under the cool evening sun, he turned to gaze over a low-rise wall giving way to a precipitous drop, and gestured below at a vista of seemingly boundless delights: sparkling Mediterranean waters dotted with colorful fishing boats, deep creeks giving way to soaring defensive ramparts, a small town of old limestone villas and pretty churches.  Right below, a little closer, he pointed out the wide bay and array of inlets that lie to Valletta’s east. These, he said, were the basis of a grand natural harbor that once made it such an attractive target for foreign fleets.  “A country has to survive,” he murmured, acknowledging that tiny nations have always had to find canny ways to win the protection of bigger powers. Now, of course, the Ottoman corsairs rot in the depths, and the bays are filled with gleaming superyachts and mountainous cruise ships. Perhaps such latter-day conquerors of Malta recognize that to get at the island today, there’s no need for a hard-fought siege. Instead, its leaders simply invite them in.

ATHENS — Greek authorities made dozens of arrests on Wednesday related to Greece’s spiraling farm fraud case, in an investigation led by European prosecutors. Some 37 people suspected of being members of an organized criminal group involved in large-scale agricultural funding fraud and money laundering activities were arrested, and searches were carried out throughout the country, according to a statement by the European Public Prosecutor’s Office. In a snowballing scandal, the EPPO is pursuing dozens of cases in which Greeks allegedly received agricultural funds from the European Union for pastureland they did not own or lease, or for agricultural work they did not perform, depriving legitimate farmers of the funds they deserved. POLITICO first reported on the scheme in February. Several ministers and deputy ministers have resigned over their alleged involvement in the scandal. The EU has already fined Athens €400 million after finding evidence of systemic failings in the handling of farm subsidies from 2016 through to 2023. Greece also risks losing its EU farm subsidies unless it provides an improved action plan on how it will stop funds being siphoned off into corruption. The original deadline was Oct. 2, but this has now been pushed back to Nov. 4. “The Commission is awaiting the submission of the revised action plan and in the meantime, it continues to be in contact with the Greek authorities,” a European Commission spokesperson told POLITICO earlier this month. Wednesday’s operation centered on a criminal network accused of illegally obtaining EU farm subsidies through false declarations submitted to the organization in charge of distributing EU farm funds in Greece, OPEKEPE. According to the EPPO, in the course of the preliminary investigation, 324 individuals were identified as subsidy recipients, causing an estimated cost of more than €19.6 million to the EU budget. Of these, 42 are believed to be involved in this case and are considered current members of the criminal group, says the EPPO. Most of them appear to have no actual connection to farming or producing, according to the Greek and EU authorities. The EPPO said that, at least since 2018, the group “allegedly exploited procedural gaps” in the submission of applications using falsified or misleading documents to claim agricultural subsidies from OPEKEPE. They are suspected of fraudulently declaring pastureland that did not belong to them or did not meet eligibility criteria. They allegedly inflated livestock numbers to increase their subsidy entitlements. To conceal the illicit origin of the proceeds, they are believed to have issued fictitious invoices, routed the funds through multiple bank accounts, and mixed them with legitimate income. Part of the misappropriated money was allegedly spent on luxury goods, travel and vehicles, to disguise the funds as lawful assets. Greece’s anti-money laundering authority is investigating Giorgos Xylouris, a farmer from Crete and until recently member of ruling New Democracy. Xylouris is one of the key characters mentioned in EPPO case files, under the nickname Frappé (“Iced Coffee”), regarding the OPEKEPE scandal. Some €2.5 million was discovered in his bank accounts during a random inspection, the Greek officials said. Authorities found that Xylouris had failed to submit the required financial documentation and could not justify the large sum. Eight vehicles were also identified in his possession, including a Jaguar luxury car. The case file has been sent to the prosecutors to examine possible violations of anti-bribery laws and an investigation is ongoing regarding whether money laundering has occurred.

The Vatican is facing allegations it used a “skeleton key for money laundering” by illegally manipulating bank transfers. The city state’s former top financial cop ― who was forced out in 2017 ― has claimed that its payroll agency was able to alter the names and account numbers on transactions after they were made, masking the identity of recipients and senders. The implication would be enormous because it would have made it possible for Vatican officials to wire funds to private clients without revealing who they were, possibly enabling unlimited money laundering and violating the most basic anti-fraud rules. The claims come at an awkward moment for new Pope Leo XIV as he seeks to boost the Catholic Church’s reputation after decades of rolling financial scandals and a looming budget shortfall. The Vatican denies all the allegations and people familiar with SWIFT, the organization that facilitates international bank transfers, say what the Vatican is being accused of is technically impossible. Yet, the allegations are being taken seriously because of the credibility of the people making them and because of the Vatican’s history of misconduct.   ACCUSED OF BEING A SPY What adds to the intrigue is how closely the allegations mesh with internal Vatican politics.   They come from Libero Milone, former auditor at Deloitte, a top accountancy firm, who was appointed by the late Pope Francis in 2015 to fix the Vatican’s finances after years of scandal and neglect.  Two years later, he was forced to resign after senior officials accused him of being a spy. He claims he was pushed out because he had identified financial wrongdoing connected to the city state’s former police chief and cardinal, Giovanni Angelo Becciu, who was convicted of embezzlement in 2023 after misusing Vatican funds. The Vatican is facing allegations it used a “skeleton key for money laundering” by illegally manipulating bank transfers. | Giuseppe Lami/EPA Milone first mentioned the apparent existence of tools that could edit international bank account numbers (IBANs) in transfers in the international SWIFT system last month, following the collapse of a case he brought against the Vatican for wrongful dismissal. The Pillar, a Catholic website, followed up with a series of articles signaling that Milone was sitting on a pile of potentially explosive material on practices uncovered during his time at the Vatican and was considering whether to deploy it to bolster his case. Describing the IBAN editing tool as a “skeleton key for money laundering,” The Pillar said that if proven, “the Vatican would likely end up on an international financial black list of the darkest kind, frozen out of the international banking system, meaning no money could come in or out of the city state except in literal, physical cash.” NO BLACKMAIL In a press conference last week, Milone himself corroborated the allegations. However, he refused to provide additional documentation or go beyond what The Pillar journalist Ed Condon reported. “I have a piece of paper which says that they can change the transactions — they can change the name — at any time,” Milone said in response to a question by POLITICO. He also intimated that he had further damaging evidence of malpractice in the city state but again refused to say what, insisting that he didn’t want to draw attention to himself. “I’m not trying to blackmail anyone,” he told reporters. Milone said he first learned of the tool when he was asked to look into it by Cardinal George Pell, an Australian cleric appointed under the same transparency drive. Pell was forced to return to his native country in 2017 to face child abuse allegations, for which he was later cleared. He died in 2023. In a letter addressed to Milone and dated 2016, a copy of which The Pillar shared with POLITICO, Pell said he had been “alerted” to a request from APSA, the Vatican’s payroll agency, “to amend the controls in the SWIFT system,” an action he described as “potentially … illegal.” Milone’s office investigated Pell’s claims, and the auditor flagged them to senior officials including Pope Francis and Secretary of State Pietro Parolin, as well as the Vatican’s chief justice official and the Vatican’s internal watchdog, ASIF. But he received no response from the latter two, which he said had a duty to investigate — part of a broader pattern of institutional resistance to Francis’ reform effort in which the late pontiff was routinely outmaneuvered, he said. ‘COMPLETELY UNFOUNDED’ The Vatican has vehemently denied the allegations. In a statement shared with POLITICO, spokesperson Matteo Bruni said the claims were “completely unfounded” and that APSA had not served private clients in 2016, when the letter was sent.  APSA did indeed shut down its personal accounts in order to exempt itself from oversight by Council of Europe anti-money-laundering agency Moneyval in 2015, but the financial tools might have been used before then, or else used to hide transactions involving private clients processed after that date, Condon argued in a blog post. Bruni also denied any continued malpractice, pointing to audits of APSA by watchdog ASIF and PricewaterhouseCoopers between 2020 and 2024 that found “no anomalies.”  Libero Milone said he didn’t know exactly how the tools would have bypassed these restrictions, but that he saw evidence that transactions were edited. | Fabio Frustaci/EPA A person familiar with how SWIFT operates, speaking on condition of anonymity, insisted to POLITICO that “it is not possible to alter the content of a payment message once it has been sent,” owing to the use of verifiable digital signatures and high-level encryption that applies also to SWIFT clients. Milone said he didn’t know exactly how the tools would have bypassed these restrictions, but that he saw evidence that transactions were edited. GOD’S BANKER Ahead of the May conclave that elected Leo, cardinals complained about a budget deficit that is said to have widened substantially in recent years, thanks to a downturn in donations that accelerated under Francis. The new pontiff was chosen in part because he was seen as somebody who could restore credibility among powerful donors, particularly in the U.S., insiders told POLITICO earlier this year. Recent developments have already restored some confidence. After bumper earnings reported earlier this year by the Institute of the Works of Religion (IOR), the Vatican’s long-troubled investment vehicle, APSA recently recorded €62.2 million in profit for 2024, up from €45.9 million. Milone’s allegations would undermine that progress, and resurface unhappy memories of financial scandals past that date back to the days of Pope Paul XI and John Paul II. In the 1980s and ’90s, Italian magistrates investigated allegations that the IOR had been used to launder Cosa Nostra profits to bankroll anti-communist movements in Latin America and Eastern Europe.  The investigations came after Vatican-connected Milanese banker Roberto Calvi, dubbed “God’s banker,” was found hanging under London’s Blackfriars bridge in 1982. Calvi was alleged to have aided the scheme in concert with an array of international interests spanning not only the IOR, but also far-right political and business figures, Italian Freemasonry and U.S. intelligence services.  The Vatican never acknowledged wrongdoing but did admit “moral involvement” for the collapse of Calvi’s bank, Banco Ambrosiano. More recently, in 2023, Cardinal Becciu, a once-powerful cardinal in the Vatican’s Secretariat of State, was convicted after being found to have siphoned Vatican funds to a Sardinian charity connected to his family. Becciu was also convicted for his role in a botched London real estate deal that cost the Vatican over €100 million.

The Czech justice ministry should not have accepted a gift that showed significant signs it could be tied to criminal activity, an external audit found. The €40 million bitcoin donation to the ministry from a convicted drug dealer rocked Czech politics in June and triggered the resignation of then-Justice Minister Pavel Blažek, who comes from Prime Minister Petr Fiala’s conservative Civic Democratic Party (ODS). The ministry auctioned off the gift in exchange for cash in a public sale, bringing in tens of millions of euros for the government. “Prior to accepting the donation, the Ministry of Justice was aware of relevant circumstances indicating a significant risk that the donation could originate from the proceeds of criminal activity,” reads the summary of the first part of the audit, conducted by global firm Grant Thornton, posted by the ministry on its X account Thursday. “Under these circumstances, we believe that the Ministry of Justice should not have accepted the donation without taking further follow-up steps to eliminate this risk,” the auditing firm concluded. Blažek, the former minister who claims he acted legally, said that the findings “do not indicate a violation of any specific legal obligation or regulation.” “There are no new findings, just a text designed for headlines, but with outdated content. Although, they say repetition is the mother of wisdom,” he added in a post on X. The police and the National Headquarters for Combating Organized Crime are investigating whether the donation came from laundered money. The new Justice Minister Eva Decroix promised to investigate the scandal ahead of the Czech parliamentary election that will take place in October.

The U.K. government’s anti-corruption champion, Margaret Hodge, will visit the British Virgin Islands (BVI) this summer after it missed a key deadline to implement a transparency register. Britain’s foreign minister, Stephen Doughty, said Tuesday he had asked Hodge, a Labour peer and former long-standing MP, to go to the overseas territory and assess progress with its implementation of registers of beneficial ownership, or RBOs. Doughty said Hodge will report back to him after the summer, after which he will “carefully consider” what further steps to take. The U.K.’s Foreign Office held an Illicit Finance Dialogue with the Overseas Territories last week, where RBOs — a database which shows who truly owns an asset — were discussed. The BVI recently missed a key deadline to implement RBOs by July 2025. It has also recently been placed on the “grey list” for the world’s money laundering watchdog, the Financial Action Task Force, which means a state has “deficiencies” in stopping money laundering and terrorist financing. The territory has put forward its own proposals for a register of “legitimate interest,” one which is not available to the public. Other proposals include notifying a beneficial owner if a journalist or civil society member is trying to access their information. They were deemed “woefully inadequate” by Transparency International.   Hodge was one of the driving forces behind legislation in 2018 which mandated RBOs for Overseas Territories. Despite this, many have not implemented them, using rulings by the European Court of Justice as justification, which said that registers can contravene a right to privacy.  Britain is able to force legislation upon Overseas Territories through a legal method called “orders in council,” but it has refrained from doing so except for particularly serious issues, including gay marriage and the death penalty.  The BVI appears to have been singled out by the government, as other Overseas Territories, such as the Cayman Islands, were commended by Doughty for their efforts to implement international standards in illicit finance.