When shareholders invest money to create a new bank, they invariably take the long-term view on the prospects of seeing their new venture flourish.

Banks like to think that they have eternal life. They usually grow slowly as they put down deep roots in the community they serve. But this is not always the case, especially when the real intentions of the promoters are not quite in line with what they state in their business plan.

In the last two years, two banks operating from Malta have had their licences withdrawn by regulators. In 2018 the European Central Bank revoked the licence of Pilatus Bank, which had links with corrupt local politicians and their business cronies.

This followed a recommendation by the Malta Financial Services Authority on the basis of its owner’s indictment in the US on allegations of financial criminal offences as well as breaches of liquidity coverage requirements.

The ECB has now also withdrawn the licence of another bank, Satabank, after the local regulator froze 12,000 of this bank’s accounts in 2018 as it investigated alleged money-laundering breaches.

These two banks were relatively small when compared to the leading banks that serve the local market. But the damage they have done to Malta’s reputation internationally is massive.

What is even worse, it seems that these two banks enjoyed the support of the former prime minister, Joseph Muscat, who frequently castigated local banks for being too conservative.

Muscat attended the inauguration of the Satabank plc offices in March 2016.

The bank’s chairman stated that his bank’s objective was to become a leading player in the field of provision of innovative banking services through the use of state-of-the art technology and alternative delivery channels.

The bank was born at a time when Malta was projecting itself as a supporter of innovative financial services. The MFSA was prepared to roll out the red carpet to investors who were committed to financial innovation.

It was also the time when the leading local banks, HSBC and BOV, were tightening their anti-financial crime processes to meet the expectation of regulators.

In November 2014 the ECB took over the direct supervision of systemically important banks in the eurozone.

This meant that the two larger local banks were then subjected to a stricter regulatory regime.

At present, Malta is under the spotlight of MoneyVal as the perception that some operators in iGaming and the financial services sector have been using their local base to launder money gained from criminal activities.

There was a time in the recent past when some local operators thought they could bypass the strict enforcement of anti-financial crime regulations implemented by the larger banks. They opened accounts with the two banks that have now lost their licence thinking that by doing so, they would beat the duopoly of the larger local banks.

The enthusiasm for innovation in financial services needs to be tempered with a conviction that strict regulation is required to protect consumers and also the country’s reputation.

Hundreds of Satabank bona fide customers have been unable to withdraw their money from the bank, which is now under administration.

Now that the bank has lost its licence, these small depositors must get all their money back as soon as possible.

The clean-up process of various services sectors in the Maltese economy needs to be accelerated.

This will help the country rebuild its reputation as a trustworthy jurisdiction that respects international anti-financial crime regulations.