Anger mounts as Satabank crisis persists

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The Ernest & Young auditing firm earlier this month was appointed by the MFSA as the competent body to advise and monitor Satabank in the proper conduct of business. This measure was taken after a joint inspection by MFSA and the Financial Intelligence Analysis Unit found a number of shortcomings in the bank’s anti-money laundering procedures.

iGaming clients who spoke to this newsroom said that after this incident they fear their businesses are on the verge of closing down since they can’t access or move their funds, or manage their own assets.

In a previous statement, Satabank said that the MFSA had “initiated a controlled process for the return of Satabank customer deposits over a period of time”, and that “there remains no access for customers to submit transactions, make withdrawals or close accounts”.

“Further details of the process will be made available as they are finalised by the authorities. Where customers have an account with a credit or payment institution in an EU/EEA jurisdiction Satabank would advise that they transfer their banking arrangements to this institution. Where customers do not have an account with such a jurisdiction the bank encourages them to open one in the same name as their existing account at Satabank.

“Satabank customers now have read only access to view their online account balances.”

But not all are satisfied by platitudes. Tim Diacono reported on Loving Malta that a Satabank client has opened up about the immediate impact the MFSA’s recent freezing of the bank’s assets had on his life.

“I keep all my private and business money in Satabank and I now have problems paying salaries to my crew, and in fact my business has collapsed,” Alex, a Ukrainian ship operator based in Malta, told the newly-launched Malta News.

“My private life has collapsed too. Everything changed on Sunday morning when my wife could no longer make credit card payments for her treatment at a German hospital or even for the hotel she was stayin at. Our friends in Germany helped us pay for the hotel and she returned to Malta on Wednesday evening.”

Satabank was for years renowned as the bank of choice for foreigners who encounter difficulties setting up accounts with one of the island’s major banks.

Although the MFSA has assured Satabank clients that their money is safe, it has also informed them it would likely take “several weeks” before they are able to access it.

It added that the release of funds will be subject to unspecified controls and checks and that Satabank customers will have to provide details of another bank account in an EU/EEA jurisdiction opened in the same name as their Satabank accounts.

Can you imagine how stressful life would become if you suddenly lost all access to your bank account?

This is the reality facing hundreds, if not thousands of people in Malta, particularly foreigners, after the Malta Financial Services Authority froze Satabank’s assets on Monday due to anti-money laundering concerns within the bank’s operations.

Four days down the line, and these accounts are still frozen. And while the MFSA has assured clients that it has appointed EY, the con- troller in charge of the bank, to initiate a controlled process for the return of these deposits, time is pressing and immediate answers are in short supply.

“The bank referred us to the MFSA, which then referred us to its public notice, which contains no details,” a frustrated client told Lovin Malta. “Since the day before yesterday we’ve been able to see our bank statements but we’re still unable to move money. People like myself whose money was all in Satabank are having to rely on the generosity of others to buy food and get by.”

Following this statement, Lovin Malta sent the MFSA a list of questions:

Who do Satabank clients have to approach if they want to withdraw their money?

What are the controls and checks that will be imposed on clients before their funds are released?

Around how long will clients have to wait before the transfer of funds is complete?

Will they be able to withdraw all their money at once or will there be any restrictions?

Will clients who don’t have another bank account in an EU/EEA jurisdiction be allowed to withdraw their money in cash?

However, a spokesperson for the MFSA said it had nothing to add to its latest public notice at this stage and EY didn’t respond to a request for comment as of the time of writing.

Although the case has echoes of the MFSA’s clampdown on Pilatus Bank earlier this year, its impact on depositors is way more severe. While Pilatus was an investment bank, Satabank is a retail bank, the regular daily bank for several residents of Malta.

It is unknown what exactly led the MFSA to take such drastic action against Satabank.

In June, the MFSA and the Financial Intelligence Analysis Unit launched a comprehensive investigation of Satabank’s compliance with anti-money laundering and terrorist financing laws. A month later, the MFSA fined the bank €60,500 after finding it in breach of risk management laws following a separate investigation.

Mr Diacono also reported that a British IT businessman has decided to move his business away from Malta after his bank deposits were frozen following the MFSA’s money laundering clampdown on Satabank.

David * told Lovin Malta he started banking with the St Julian’s based bank after his request to Bank of Valletta to reactivate an old account fell on deaf ears.

“I was originally a resident in Malta in the late 2000s and had a bank account with BOV. It was horrible to set up, trying to get bank references from existing banks is near impossible and the whole process took months,” he recounted. “I couldn’t get a response from the BOV when I asked to reactivate my account [after returning to Malta] so I went with Sata. The joining included a video call, passport and address verification, the exact same process every other bank uses. I found them easy to use, their app worked well.”

David only got to know of problems at the bank when he tried to log into the Sata app to pay his staff but was told he was blocked from the system.

“I contacted the MFSA, who sent me a condescending load of drivel basically telling me nothing,” he said. “I then saw a statement saying how it was mostly foreigners affected and local people will be fine. Having substantial connections to the island, I can say that could not be further from the truth. While the account may be held by a foreign person, the people employed in Malta are very much Maltese. While they do not bank there, they are paid from said accounts. In our case we had less than €10,000 in our account, and I’m mystified why accounts with smaller balances could not have been exempted [from the asset freeze].”

“As for the future, I’m going up move all business away from Malta. It was once a friendly jurisdiction for legitimate tech companies but the regulator’s handling of this and other affairs has been clumsy and heavy-handed. With the additional competition from Eastern Europe for fintech I can’t see Malta realistically competing in the near term.”

A British financial services practitioner said that she was planning to move to Malta and that a leading Maltese corporate services firm had set up a Satabank account to act as her retirement fund.

“This was my retirement fund and I now cannot access my accounts,” she said. “To say I am worried is an understatement. This shambles has driven a stake through the heart of Malta’s reputation as a credible place to do business.”

“I am also awaiting my tax rebate, and waiting, and waiting. However, the bank details given for the tax rebate are Satabank’s and I am due to make my next tax payment at the end of this month. So not only will I be expected to pay more tax, while waiting a year or more for the last one, but I cannot access my funds to pay the tax bill. Nor do I have any confidence that Malta will actually pay me back the tax due - I have no trust left. Quite frankly, doing business would have to be easier and more trustworthy in Nigeria.”

The saga has also impacted customers of LeoPay, a London-based fintech company which provides International money transfers and is owned by Satabank’s co-owner Christo Giorgiev.

Following the MFSA’s clampdown on Satabank, a number of LeoPay customers found out that they could no longer make payments or that their accounts had been closed without warning.

“My client transferred a payment to my LeoPay account earlier this month but was told his money would be credited back to the sender’s account due to problems at Single Euro Payments Area and SWIFT transfers of Leopay,” a user told this website. “However, he never received his money back and [Leopay] unbelievably refuses to respond to my emails on this issue. The Maltese government must also be more serious and careful as they are ruining many people’s lives and businesses indirectly at the moment just to find some criminals. This should not be the way to do it.”

LeoPay confirmed that some of its clients’ deposits are held with Satabank but said this amounts to less than 1% of its customer base.

“We would like to apologise to those impacted customers and reassure them that we are working hard to rectify the situation. We would like to reiterate that there is no liquidity issue at LeoPay.”

*David’s surname has been left out at his request

It was also reported that customers of Leopay in Brazil also had their accounts closed on 22 October without warning, according to complaints on its Facebook page. It is not known at this stage if it is only Brazil-based customers who are affected.

It now appears that customers of Leopay were informed of the regulatory action, while Satabank customers who did not use the service were left in the dark. Both companies were founded by the same person, with Leopay reportedly using Satabank’s licence.

An e-wallet, sometimes known as a digital wallet, is a secure online system that enables users to make transactions and purchases, electronically.

Several customers of Satabank told the Times of Malta that the situation has resulted in financial losses due to their inability to pay and get paid by their clients.

They told the newspaper that Satabank is the only Maltese bank willing to let foreigners open an account on the island.

The move could mean that all clients, including EU and non-EU expats, will be unable to access their funds held by the bank for the foreseeable future.

The MFSA has appointed Ernst & Young to manage the bank’s assets in the best interest of the clients.

Customers complained to the Times of Malta about not being able to make any transactions and that Satabank did not warn any of them about the MFSA measure.

Julie Papadaki, who has been a client of Satabank for a year after moving to Malta from Greece two years ago, found out about her account while grocery shopping.

She told International Adviser: “I was in the supermarket and my card was not working! I had only €20 cash, and have to feed myself with this until I receive my next salary.

“I cannot explain the stress and psychological consequences. All my savings after two years of hard work in this country disappeared! [On 24 October] we were notified not to expect immediate access to our funds.”

However, according to the Facebook group ‘Victims of Sata bank’, some Satabank customers were sent an email informing them of the upcoming regulatory action and inviting them to provide a copy of their passport and Iban and Bic code in order to transfer their funds.

It appears that clients who received the email were also customers of Leopay (formerly Leupay).

Both Satabank and Leopay were co-founded by Christo Georgiev, a Bulgarian entrepreneur. According to industry website Fintech in Malta, Leopay’s cards and banking services were running on Satabank’s licence.

Prior to 24 October, Leopay’s website listed the ‘Legal Agreement for LeoPay’ and its ‘Account by Satabank’, which have now been removed.

International Adviser contacted the MFSA to verify that Leopay was using Satabank’s licence but did not receive a comment in time for publication.

On 22 October, Leopay suddenly closed all its Brazilian accounts, only allowing EU customers to use its services – even though the company operates in several other nonEU countries; such as Guadeloupe, Martinique, Saint Martin, French Guiana, Mayotte and Réunion, according to its website.

A spokesperson for Leopay said: “We can confirm a limited number of Leopay customers are affected by an issue which means they cannot transfer funds from their accounts. This is because the deposits in these accounts, which total less than 1% of Leopay’s customer base, are held with Satabank.

“The remaining 99% of customers are unaffected by this issue. We would like to apologise to those impacted customers and reassure them that we are working hard to rectify the situation.

“The customers affected can see their accurate account balances and will be able to access funds as normal as soon as possible. We are in ongoing dialogue with the Maltese regulator and are assisting them wherever possible.

“We would like to reiterate to these customers that there is no liquidity issue at Leopay and we will communicate with them when we have additional information.”

The MFSA announced on 24 October that deposits will be returned to Satabank’s customers.

E-wallet services have been under fire recently, with the Hong Kong Monetary Authority suspending these type of services following fraud reports of approximately HKD180,000 (€20,170) being stolen from customers.