Pilatus Bank did not give FIAU report to inquiring magistrate

Pilatus Bank, which stands in the centre of the Egrant revelations and the allegations of kickbacks received by the Prime Minister’s Chief of Staff Keith Schembri from the sale of citizenships by Brian Tonna of Nexia BT, refrained from submitting a damning Financial Intelligence Analysis Unit report which outlined the bank’s shortcomings when dealing with accounts held by Politically Exposed Persons, The Malta Independent on Sunday can reveal.

FIAU report revealed by TMI

The FIAU report which was revealed by a source who worked closely with Pilatus Bank to The Malta Independent in the wake of allegations that Egrant’s beneficiary owner is the Prime Minister’s wife Michelle Muscat, was sent to Pilatus Bank Chairman Seyed Ali Sadr Hasheminejad back in April 2016 following an investigation at the bank which took place in March of the same year.

Last Friday, The Malta Independent’s Director of Content Pierre Portelli testified before Magistrate Aaron Bugeja, giving evidence of the report seen by this newspaper, contents of which were published on the same day.

The FIAU investigation at Pilatus Bank found that in one particular bank account, the equivalent of approximately €1,000,000 was transferred into an account classified as high-risk from the bank account

of a third party. No documentary evidence was recorded on file on the origin of the funds. Furthermore, this third party made a number of other significant deposits to different bank accounts pertaining to companies owned by the same UBOs (PEPs in a high-risk jurisdiction) within a short period of time.

In another transaction, the equivalent of approximately €505,000 was deposited into the same client’s bank account from the bank account of a third party.

One finds it very strange that in a magisterial inquiry focusing on allegations revolving around Politically Exposed Persons (PEPs), the bank chooses to hide such a document from the inquiring magistrate. Equally, the bank needs to come clean on all documents it holds.

On the night when journalist Daphne Caruana Galizia revealed the whistleblower’s claims, a NET TV reporter filmed the chairman of the bank exiting from the back door of the bank’s building with two pieces of luggage. Speculation was rife, particularly because the Prime Minister ordered an inquiry only after the chairman of the bank exited the bank late in the night, while the Commissioner of Police was also caught on film enjoying dinner with some friends rather than sealing off the bank’s premises.

Whistle-blower’s story corroborates FIAU report

The whistle blower who testified before Magistrate Aaron Bugeja and who gave an exclusive interview to this newspaper and on INDEPTH said that documents to sustain her claim that Egrant belongs to Mrs Muscat exist, saved on the ‘cloud’.

According to FIAU, which investigated the bank, it has transpired that in most of the cases examined by the inspectors, the intended purpose indicated by the politically exposed applicant was to invest in and hold immovable property in specific parts of the world. However, a review of the bank statements revealed that in the majority of cases, the final purchase of property had not yet been carried out.

This sheds light on the controversy of whether PEPs who have been found to have accounts at Pilatus Bank actually purchased property abroad or if this was a scam through which to move funds under false pretexts knowing that the bank hardly ever checked if the purchase was actually made.

This is very significant because The Malta Independent is informed that FIAU officials noted that many transactions in the bank statements consisted of inter-company transfers. FIAU and MFSA officials also noted that the bank had given loan facilities to these same clients.

Anti money laundering procedures poor

FIAU also noted that even though the Money Laundering Reporting Officer is a director of the bank, it appears that the bank is lax in its adoption of anti money laundering measures and very little regard appears to be given to the bank’s money laundering risk exposure.

The FIAU report stated that a lot of attention is given to ensure that the banks’ high net worth clients, including those who are PEPs from high-risk jurisdictions are given assurances that their banking operations are treated with utmost secrecy.

Contact with certain clients is only possible through one bank official who is, according to the MLRO, a trusted acquaintance of the clients concerned. IT applications have been created for contact with such clients and knowledge of the identity of these clients is restricted to very few bank officials. The FIAU noted that it seems the veil of secrecy that has been created is in actual fact making it easier for banking transactions to be carried out by PEPs, their family members and their close associates without the level of scrutiny required by law.

According to the source who spoke with The Malta Independent, the way in which certain accounts opened for PEPs, their family members and close associates are being operated is particularly problematic. The lack of adequate scrutiny gives the impression that a blind eye is being turned for these individuals to be able to invest their funds without the appropriate questions being asked.

Quoting from the FIAU report, the source said, “Assessments as to the legitimacy of the funds are weak and particularly accommodating while ongoing monitoring is practically inexistent, a far cry from the enhanced monitoring required by law.”

Even more worrying is this extract from the report: “These failures highlight systematic issues of grave concern that also reveal that the business model of the Bank concentrates on accommodating clients who value their secrecy above everything else. Such concerning revelations also question the soundness of the governance structures of the institutions and whether the checks and balances that are necessary to ensure that the Bank does not lend itself to being misused by criminals conforms with internationally accepted standards. Furthermore, the serious deficiencies are compounded by the fact that the Bank’s profitability depends to a large extent on a few select clients who are PEPs.”

“These failures highlight systematic issues of grave concern that also reveal that the business model of the Bank concentrates on accommodating clients who value their secrecy above everything else. Such concerning revelations also question the soundness of the governance structures of the institutions and whether the checks and balances that are necessary to ensure that the Bank does not lend itself to being misused by criminals conforms with internationally accepted standards. Furthermore, the serious deficiencies are compounded by the fact that the Bank’s profitability depends to a large extent on a few select clients who are PEPs.”