ECB with­draws li­cence of Mal­tese bank after scan­dal

Pi­la­tus at cen­tre of mur­dered jour­nal­ist’s re­ports of al­leged money laun­der­ing

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY CLAIRE JONES IN FRANK­FURT AND CYN­THIA O’MURCHU IN LON­DON

The Eu­ro­pean Cen­tral Bank has with­drawn the bank­ing li­cence for Pi­la­tus Bank, the Mal­tese lender caught up in a scan­dal that has raised con­cerns that the fi­nan­cial sys­tems of some EU mem­ber states have be­come gate­ways for money laun­der­ing

The Eu­ro­pean Cen­tral Bank has with­drawn the bank­ing li­cence for Pi­la­tus Bank, the Mal­tese lender caught up in a scan­dal that has raised con­cerns that the fi­nan­cial sys­tems of some EU mem­ber states have be­come gate­ways for money laun­der­ing.

The move comes sev­eral months after US au­thor­i­ties charged the bank’s Ira­ni­an­born owner and for­mer chair­man Seyed Ali Sadr Hashem­ine­jad with or­gan­is­ing a scheme to evade US sanc­tions against Iran by il­le­gally fun­nelling more than $115m from Venezuela to Ira­ni­an­con­trolled com­pa­nies. He has pleaded not guilty and been re­leased on bail.

Pi­la­tus was at the cen­tre of mur­dered jour­nal­ist Daphne Caru­ana Gal­izia’s re­port­ing on al­le­ga­tions of gov­ern­ment cor­rup­tion and money laun­der­ing in the months be­fore her death in a car bomb­ing in Oc­to­ber 2017.

Pi­la­tus and its owner had filed defama­tion pro­ceed­ings against the jour­nal­ist last year after a se­ries of sto­ries pub­lished on her web­site claimed the bank had laun­dered funds from al­legedly cor­rupt schemes on be­half of off­shore com­pa­nies and in­di­vid­u­als, in­clud­ing Keith Schem­bri, chief of staff to the Mal­tese prime min­is­ter, Joseph Mus­cat. Mr Schem­bri ve­he­mently de­nied the al­le­ga­tion.

The Malta Fi­nan­cial Ser­vices Author­ity said in a state­ment pub­lished on Mon­day: “Fur­ther to the author­ity’s pro­posal to the Eu­ro­pean Cen­tral Bank to with­draw the au­tho­ri­sa­tion of Pi­la­tus Bank as a credit in­sti­tu­tion, the ECB’s gov­ern­ing coun­cil has de­cided to with­draw the au­tho­ri­sa­tion of Pi­la­tus Bank with ef­fect from to­day.”

The ECB made the de­ci­sion last Fri­day. While the cen­tral bank does not have the le­gal pow­ers to su­per­vise and en­force anti-money laun­der­ing leg­is­la­tion, it can with­draw a bank­ing li­cence on the grounds of money laun­der­ing at the re­quest of the na­tional su­per­vi­sor.

EU au­thor­i­ties want new pow­ers to crack down on money laun­der­ing after a string of scan­dals in Es­to­nia, Latvia and Malta. In sev­eral cases, in­clud­ing that of Pi­la­tus, it was US au­thor­i­ties that played a big role in un­cov­er­ing al­leged il­licit bank­ing ac­tiv­i­ties.

The Eu­ro­pean Bank­ing Author­ity ac­cused Malta of “sys­tem­atic” fail­ings in its han­dling of the Pi­la­tus case after car­ry­ing out an in­ves­ti­ga­tion into the lender.

Pi­la­tus caters to wealthy in­di­vid­u­als and, ac­cord­ing to its an­nual re­port, has more than 300m Eu­ros in as­sets. It has been op­er­at­ing in Malta since 2014 and opened a branch in Lon­don’s May­fair last year after ob­tain­ing a UK bank­ing li­cence.

Though the in­dict­ment in the case against Mr Sadr did not men­tion Pi­la­tus orig­i­nally, US pros­e­cu­tors later claimed that he used nearly $9m of “crim­i­nal pro­ceeds di­rectly linked to the Venezuela project” to “es­tab­lish and cap­i­talise the bank” in 2013.

After Mr Sadr’s ar­rest, the Mal­tese fi­nan­cial reg­u­la­tor re­moved him from his roles at the bank and placed it un­der the su­per­vi­sion block­ing all trans­ac­tions.

One re­port by the Mal­tese anti-money laun­der­ing unit, penned in 2016 and later leaked to the me­dia, re­ferred to in­tel­li­gence that Mr Sadr was be­ing in­ves­ti­gated in a for­eign ju­ris­dic­tion on sus­pi­cion of money laun­der­ing.

It later emerged Mr Sadr was still in­volved in the al­leged sanc­tions eva­sion scheme — and was al­ready un­der in­ves­ti­ga­tion by US au­thor­i­ties — when he set out to es­tab­lish the bank and ob­tain a li­cence for it in 2012.

The with­drawal of Pi­la­tus’s li­cence will also draw at­ten­tion to the role of the Bank of Val­letta, an­other Mal­tese lender where Pi­la­tus’s ini­tial share cap­i­tal of 8m Eu­ros was de­posited, ac­cord­ing to pub­lic records.

“Bank of Val­letta has a strict pol­icy of due dili­gence which it ap­plies to all ac­counts opened by the bank,” a spokesman for the bank told the FT in re­sponse to an ear­lier re­quest re­gard­ing Mr Sadr’s funds held at the bank.

After a pre­lim­i­nary and highly crit­i­cal re­port by Malta’s anti-money laun­der­ing unit call­ing into ques­tion the bank’s abil­ity to pre­vent money laun­der­ing and its due dili­gence process in 2016, Pi­la­tus en­gaged KPMG and a lo­cal law firm to con­duct a re­view of its clients and pro­ce­dures. That re­view gave Pi­la­tus a clean bill of health.

EU au­thor­i­ties want new pow­ers to crack down on money laun­der­ing after a string of scan­dals in Es­to­nia, Latvia and Malta

© The Fi­nan­cial Times Lim­ited [2018]. All Rights Re­served. Not to be re­dis­tributed, copied or mod­i­fied in any­way. Star Pub­lish­ing Com­pany is solely re­spon­si­ble for pro­vid­ing this trans­lated con­tent and the Fi­nan­cial Times Lim­ited does not ac­cept any li­a­bil­ity for the ac­cu­racy or qual­ity of the trans­la­tion

For­mer Pi­la­tus Bank chair­man Ali Sadr Hashem­ine­jad

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