BOV confirms it has ‘terminated hundreds of banking relationships’ since due diligence review

Bank of Valletta this week confirmed that it has terminated hundreds of banking relationships over the last several months as part of an ongoing due diligence review that it is carrying out.

Last Sunday, this newsroom reported that the European Central Bank has applied considerable pressure on the bank to close down bank accounts opened by Libyan nationals since at least 2013 and which have been flagged as not having been subjected to legally-required due diligence procedures. Multiple due diligence issues had also been flagged by the Maltese authorities.

Yesterday, in a statement reacting to “recent media reports”, the bank said the accounts that have been terminated as a result of the due diligence review had been established over “the past decade and beyond”.

While the bank did not go so far as to say that the “terminated” bank accounts were those flagged as suspicious by the European and Maltese authorities, as reported by this newsroom, it did say that the political instability in North Africa, presumably since the Arab Spring of 2011, were a “game changer” for Maltese banks.

In its statement, BOV said: “The local and international financial landscape is changing rapidly. Political instability in neighbouring North African states, the wave of banking and financial regulation and the internationalisation of the Maltese economy are game-changers for the local banking sector.

“BOV is taking all the necessary measures to face these challenges by strengthening its anti-financial-crime defences in the shortest possible time.”

The bank added, “This exercise of continuous due diligence will continue in the coming months and more relationships may have to be terminated if and when there is evidence that they may not be meeting the bank’s expectations in terms of proper standards of conduct.”

This ongoing due diligence review, the bank said, has also included a review of financial intermediaries which do business with the bank and that the exercise has led to the termination of around 70 intermediary relationships over the past year.

In its statement, the bank refuted “in the strongest possible terms that it deliberately breached any law or regulation, and invites any person who has concerns regarding the bank's conduct to raise such concerns with the appropriate supervisory authorities. The bank takes all comments made by the regulators very seriously and responds, in as comprehensive a manner as possible, to explain its action in particular cases which may be raised from time to time by regulators. Our relationship with all regulators is a very professional one as we share the commitment to prevent people using our bank for illegitimate purposes.”

The bank said that other similar measures include the setting up of an Anti-Financial Crime (AFC) Department, with responsibilities which stretch much further than the traditional prevention of money laundering and funding of terrorism function; the recruitment of a considerable number of employees for its Risk, Compliance and AFC functions; and the tightening of its Customer Acceptance Policy which, ironically enough, has led to widespread complaints from practitioners that the bank is being excessively slow in onboarding new customers.

The bank added: “In taking these and other measures, the bank is being guided by expert external consultancies, including ‘Big Four’ audit firms and international firms specialised in gaming regulation. In the past three years the bank commissioned three in-depth independent expert reports on its anti-financial crime process and shared the findings of these reports with the local and EU regulators. The process of implementing the recommendations of these reports is now in progress. Anti-money laundering issues are also a regular item of discussion at board and management committee level.