This FATF business makes me think of Kafka

The last fortnight’s newspapers have been full of news, articles and comments about the decision by the inter-governmental Financial Action Task Force (FATF) to put Malta on its grey list. Along with 21 other countries out of some 200, we have been found to have strategic deficiencies in our regime to counter money laundering, terrorist financing, and proliferation financing. Being in the company of Myanmar, Nicaragua, Haiti and Yemen is not so nice, is it? For the next year at least, we will be subject to enhanced monitoring. Getting off the so-called grey list is a challenge.

The decision to put Malta on the grey list has been long in coming. Contrary to the propaganda of the Opposition, Malta was no saint in the fight against money-laundering. Before 2013, we were lethargically adopting most of the legislation and rules promulgated by the European Commission and MONEYVAL, the Council of Europe’s monitoring mechanism. But the seeds of the problem were also being sown. Enforcement was lax, bordering on outright non-existent. Quite a few financial services practitioners, now crying crocodile tears, were too busy milking the cow to bother a fig about proper due diligence.

The regulatory authorities were ill-prepared, ill-equipped, and too caught up in the frenzy to develop the financial services industry. The Police’s anti-fraud and financial crime units were a joke. The FIAU was not so intelligent. Now, the Opposition claims that the Labour Government squandered the legacy bequeathed by the PN governments. Nothing could be further from the truth. The whole edifice was built on sand and could collapse at any moment. There were plenty of storm clouds on the horizon.

Contrary to the propaganda of the Opposition, Malta was no saint in the fight against money-laundering.

But did the Labour Government of 2013-2017 improve matters? Hardly. On the contrary, the plain unvarnished truth is that, whilst formal efforts were being made to address the problems, these were compounded by lack of governance and by big scandals which overshadowed the little good work being undertaken. Transparency and governance, which attracted a full chapter in the PL’s electoral manifesto, were unceremoniously dumped by the wayside. 

By 2017, after the Panama Papers, the Paradise Papers, the EU’s only minister to have a Panama account, the revelations about the Prime Minister’s Chief of Staff’s involvement in shady deals, the assassination of Daphne Caruana Galizia, and other suspicious going-on, the die was cast. A new administration led by Prime Minister Robert Abela had to take on the mammoth challenge. Despite strenuous efforts and various practical results, it was too late. Now, his job has become even harder, though most wish him well and think we can do it.

PM Abela has said the FATF decision is not fair. Indeed. Especially when in August of last year, Germany’s FIU admitted that suspected cases of money laundering and terrorist financing jumped by 50% (or a record 114,914 transactions) to a total of 355,000 suspect transactions in 2019. The FIU’s head Christof Schulte told the Tagesspiegel that “one problem for us is that the prosecution of money laundering in Germany isn’t traditionally well-established”. Astonishing. Would Bernard Grech please note that Germany was not put on the grey list?

I do not intend to delve into the issues deeply, but am more concerned about the intellectual failure and lack of honesty highlighted by these happenings. It is clear that values, rules and institutions have been denuded of their meaning. Rules, norms, objectivity, factuality, and rationality have been found to be alien to the minds and practices of many in whose hands governance has been laid, whether they be in government, government agencies, non-public institutes, political circles, and society. Jonathan Rauch has called them The Constitution of Knowledge.

This Constitution of Knowledge, though not formally written down, should really be the basis of a new Constitution of Malta. The latter too was a promise of the 2013 Electoral Manifesto, but it has fallen into a limbo almost verging on a coma. Again, one cannot deny that a certain amount of progress has been made, but the commitment to a real overhaul is questionable. The two main parties may fight to the death on certain issues, such as whether a politician can give a couple of oranges to the elderly or whether a former aide of the ex-Nationalist Minister George Pullicino should sit on the ERA board, but when it comes to giving up their current or hoped-for power, they are united within an umbilical cord.

Just as in most of the Western democracies, democracy in Malta is being debased through a replacement of the marketplace of persuasion by an epistemic tribalism, which has always been especially present in Malta but is now overwhelmingly dominant. Many politicians on both sides of the fence feel no accountability to truth, depriving the public of its already-limited capacity to objective knowledge. Negative stories are the order of the day. Indeed, negative stories have become a weapon to make sure, in a pervert way, that, when negative stories are propagated by one party about the other, those negative stories are not believed. The echo chambers of the social media ensure that lies become the truth.

Sinan Aral, a professor at the MIT Sloan School of Management and co-author of a paper published by the MIT Media Laboratory for Social Machines (“The Spread of True and False News Online”) found that false news stories are 70% more likely to be retweeted than true stories are. It also takes true stories about six times as long to reach 1,500 people as it does for false stories to reach the same number of people. When it comes to Twitter’s cascades, or unbroken retweet chains, falsehoods reach a cascade depth of 10 about 20 times faster than facts. And falsehoods are retweeted by unique users more broadly than true statements at every depth of cascade.

Nobel Peace Prize winner Alexander Solzhenitsyn once said that “one word of truth outweighs the world”, but even the Gulag Archipelago was not as horrible as the powerful algorithms that today can overwhelm the public. It is truly amazing how the Bible, said by many people to be a collection of fairy-tales, has been replaced by Facebook and Twitter with their platforms of rumours and false news. Both sides of the political spectrum have fallen victim to enforcing conformity, paralyzing the democratic discourse necessary for epistemic engagement and compromise. Both sides in this war over knowledge are culpable.

How it will all end is anybody’s guess. I am not optimistic, fearing that I will spend my last days on this earth in a surreal Kafkaesque world. Could it be that we are already in “The Trial”, with its trappings based on misinformation? Could it be that we have achieved the mythic symbolism of a world gone berserk? If we are, then I may be destined to be in hot pursuit of the truth, and yet be executed for an unnamed crime.   

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