Wednesday 19th December 2018
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ECB shuts Malta’s Pilatus Bank after money laundering allegations

ECB shuts Pilatus Bank as EU readies new move on Malta

BRUSSELS, Nov 5 (Reuters) – The European Central Bank has withdrawn the banking licence of Malta’sPilatus Bank, the island’s financial regulator said on Monday, as the European Commission acted to step up a disciplinary procedure against Maltese authorities.

The ECB decision came after the chairman of the bank was charged in the United States over money laundering and bank fraud. The lender had been accused by investigative journalist Daphne Caruana Galizia of processing corrupt payments for senior Azeri and Maltese figures. She was killed a year ago by a car bomb in Malta(graphic).

Neither the bank nor the ECB were immediately available for comment.

MFSA had recommended revoking the bank’s licence in June. The decision took longer than expected due to legal hurdles, ECB officials have said, highlighting the weakness of the European Union framework for preventing and countering money laundering.

The EU began investigating the Pilatus case after Caruana Galizia’s murder in October 2017, for which there is no proven link to the reports she wrote about the bank.

Maltese authorities took no action until the Iranian chairman of the bank, Ali Sadr Hashemi Nejad, was arrested in the United States in March on charges of money laundering and sanctions violations.

After that arrest, the MFSA, which had granted the bank a licence in 2014, froze the assets of Pilatus and recommended the withdrawal of its licence.

The European Banking Authority, the EU-wide banking watchdog, last year opened two investigations into how Malta dealt with Pilatus.

One, into MFSA, was closed in September in part due to the vagueness of EU regulation, EBA chairman Andrea Enria told EU lawmakers. EU governments are discussing an overhaul of the bloc’s powers to tackle a spate of money laundering scandals, but have so far not considered legislative changes.

A second EBA investigation into the Maltese Financial Intelligence Analysis Unit (FIAU), the country’s anti-money laundering agency, pointed to serious shortcomings that the body did not remedy, Enria said in a letter to FIAU.

Malta has already taken some steps to strengthen controls over its financial system after the Pilatus case, including the creation of a committee to oversee the application of new EU anti-money laundering rules. But Brussels wants more changes.

The EuropeanCommission reached preliminary agreement on Monday on new actions against the FIAU over its handling of the Pilatus case, which will force Malta to improve the way its anti-money laundering body operates, a senior EU official said.

The move will be formally announced on Thursday unless it is blocked by one of the 28 commissioners, the official said.

A deadline for the decision expires on Nov. 11.

In case of no changes, the EU executive could start infringement proceedings against Malta, though they take years to conclude and tend to have limited effect as a deterrent.

 

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