ECB withdraws licence of Maltese bank after scandal
Pilatus at centre of murdered journalist’s reports of alleged 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The European Central Bank has withdrawn the banking licence for Pilatus Bank, the Maltese lender caught up in a scandal that has raised concerns that the financial systems of some EU member states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The European Central Bank has withdrawn the banking licence for Pilatus Bank, the Maltese lender caught up in a scandal that has raised concerns that the financial systems of some EU member states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
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Former Pilatus Bank chairman Ali Sadr Hasheminejad