ECB moves to re­voke li­cence of Malta’s Pi­la­tus Bank

The Malta Business Weekly - - FRONT PAGE -

The Euro­pean Cen­tral Bank has reached a pre­lim­i­nary de­ci­sion to re­voke the li­cence of Malta's Pi­la­tus Bank af­ter its chair­man was charged with money laun­der­ing, two ECB of­fi­cials told Reuters, though le­gal hur­dles re­main.

The bank was ac­cused of pro­cess­ing cor­rupt pay­ments for the Az­eri and Maltese lead­er­ship by in­ves­tiga­tive jour­nal­ist Daphne Caru­ana Gal­izia, who was killed a year ago by a car bomb in Malta.

The ECB's su­per­vi­sory board has al­ready agreed to with­draw the bank's li­cence, one ECB of­fi­cial told Reuters, but the de­ci­sion will be fi­nalised only af­ter some le­gal is­sues are re­solved.

A sec­ond ECB source con­firmed that the process of re­vok­ing the bank's li­cence is un­der way but was more cau­tious on its out­come un­til le­gal hur­dles are over­come.

Nei­ther source clar­i­fied what le­gal is­sues the ECB is fac­ing to with­draw Pi­la­tus Bank's li­cence, a move that many ob­servers had taken for granted af­ter the Malta Fi­nan­cial Ser­vices Author­ity rec­om­mended the with­drawal in June.

Reuters tried to con­tact Pi­la­tus Bank sev­eral times but was un­able to talk to a bank rep­re­sen­ta­tive. A spokes­woman for the ECB de­clined to com­ment.

Only af­ter the mur­der of Caru­ana Gal­izia in Oc­to­ber 2017, for which there is no proven link to the re­ports she wrote about the bank, did the EU be­gin in­ves­ti­gat­ing the Pi­la­tus case.

The Maltese took no ac­tion un­til the Ira­nian chair­man of the bank, Ali Sadr Hashemi Ne­jad, was ar­rested in the United States in March this year on charges of money laun­der­ing and sanc­tions vi­o­la­tion.

Af­ter that ar­rest, the MFSA Maltese bank­ing su­per­vi­sor froze the as­sets of the bank and rec­om­mended the with­drawal of its li­cence.

The Reuters re­port said that EU has be­come en­gulfed in re­cent months by a rash of bank­ing scan­dals over sus­pected money laun­der­ing, in­volv­ing Den­mark's Danske Bank and Latvia's ABLV among oth­ers.

Other cases have re­ceived less me­dia cover­age, such as a Span­ish in­ves­ti­ga­tion into the Lux­em­bourg-head­quar­tered In­dus­trial and Com­mer­cial Bank of China, which is ac­cused of hav­ing laun­dered hun­dreds of mil­lions of eu­ros through its branch in Madrid.

Lux­em­bourg fined the bank €8.9 mil­lion last year, le­gal sources told Reuters, but a loop­hole in EU an­ti­money laun­der­ing rules al­lowed the Duchy to avoid dis­clo­sure de­spite in­ter­na­tional guide­lines that rec­om­mend pub­li­ca­tion of sanc­tions as a key mea­sure to help pre­vent fi­nan­cial crime.

Other loop­holes in EU rules al­lowed the Maltese MFSA to grant Pi­la­tus Bank a bank­ing li­cence in Jan­uary 2014.

That trig­gered an in­ves­ti­ga­tion by the Euro­pean Bank­ing Author­ity last year, but the watch­dog was forced to halt in­quiries last month be­cause EU rules are too vague and "make it dif­fi­cult to con­clude that there have been breaches of clear and un­con­di­tional obli­ga­tions", the agency's chair­man, An­dria En­ria, told EU law­mak­ers in a let­ter seen by Reuters.

These rules are not ex­pected to change soon.

The Euro­pean Com­mis­sion, which is in charge of propos­ing EU leg­is­la­tion, has ruled out im­me­di­ate changes to money laun­der­ing rules af­ter sev­eral re­forms in re­cent years.

The EU ex­ec­u­tive has in­stead pro­posed a lim­ited over­haul of the bloc's bank­ing su­per­vi­sion, giv­ing the EBA more pow­ers to in­ves­ti­gate sus­pi­cious cases. How­ever, the mea­sures face op­po­si­tion from some EU states, led by Lux­em­bourg and the Nether­lands, ac­cord­ing to a con­fi­den­tial EU doc­u­ment seen by Reuters.

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