‘The board must react to EBA report’ - Fearne

Deputy Prime Minister Chris Fearne has said it would be “inappropriate” for the government to intervene in the operations of the Financial Intelligence Analysis Unit (FIAU), when asked by The Malta Independent whether it was finally time for people to shoulder political responsibility in light of a damning report by the European Banking Authority (EBA) into the institution.

“I understand that the FIAU is an autonomous institution and has its own board. The FIAU has already given its reaction and said that it does not agree with the methodology used by the EBA,” he said.

Reminded that this was, in fact, an independent EU institution which published these findings and that the recommendations were simply not up for debate, Fearne said that “it would be wrong for the executive to intervene its operations.”

“I understand that the board has to react to this report, so we will wait and see,” he continued.

Followings its investigation which begun on 23 May, the EBA found “general and systematic shortcomings” in the FIAU’s application of anti-money laundering directives with regard to the infamous Pilatus Bank, which according to leaked FIAU reports, was used to launder kickbacks allegedly received by OPM chief of staff Keith Schembri from the sale of Maltese passports.

The report also says that the FIAU had breached anti-money laundering directives. State broadcaster PBS has since chosen to ignore the content of the EBA report, carrying only the FIAU’s reaction. Pilatus Bank was licensed by the Malta Financial Services Authority (MFSA) in 2014. Both the MFSA and the FIAU carried out on-site inspections, with the latter initially saying that there were serious breaches of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) requirements. After a follow-up inspection, the FIAU said that the issues raised previously had been resolved. The MFSA froze the assets of Pilatus Bank after its owner and chairman, Iranian Ali Sadr Hashemi Nejad, was indicted in New York on multiple charges, including conspiracy to defraud the United States and conspiracy to violate the International Emergency Economic Powers Act. He has since been released on bail on strict conditions.

In its findings, the EBA said that the FIAU did not have sufficient records of the specific files and documents examined during the first on-site visit to make it possible to identify which customer files had been examined or the due diligence documentation available at the time, contributing to the FIAU’s inability to defend itself against the institution’s challenges.

In her covering letter to MEPs, EBA chairperson Andrea Enria said the FIAU was required to inform the EBA within 10 working days of the steps it had taken or intended to take with regard to the report’s recommendations, which include fulfilling obligations under the Fourth Anti-Money Laundering Directive and ensuring that national law is in line with EU law.