The EU Court of Justice has turned down an application by Pilatus Bank calling for an interim remedy over claims that the European Central Bank violated its rights.
The bank applied for an interim measure from the European Court of Justice in November to annul an order for all communication between Pilatus Bank and the ECB to be made through the “competent person” appointed by the MFSA last March to take control of the day-to-day running of the bank.
Veteran US financial regulator Lawrence Connell was appointed by the MFSA to run the bank following the arrest of its chairman Ali Sadr in the United States last March on money-laundering and sanction-busting charges.
Pilatus Bank argued that the order by the ECB to channel all communication through Mr Connell lacked any legal basis in national or European law.
Knee-jerk manner with which it took action against the bank
This request for an interim measure was turned down by the Court of Justice last month, on the basis that Pilatus Bank did not provide evidence to support its contention that the ECB had refused to communicate with it if such communication was not channelled through Mr Connell or communicated without the approval of the latter.
There was no reason to believe that the ECB would in fact refuse to accept such communication from Pilatus Bank, the court maintained.
“That is even more unlikely since the ECB has expressly acknowledged in its written observations that, in view of a judgment by the Court of Appeal of Malta of November 5, 2018, it will no longer request the applicant ‘to coordinate’ with the competent person its communication with the ECB,” the court said.
Pilatus Bank’s licence was withdrawn by the ECB in November upon a recommendation by the MFSA.
Apart from the action being taken at EU level, the bank has also brought a number of cases against the MFSA over the way it handled the case.
Pilatus Bank has objected locally to the way the MFSA appointed Mr Connell and effectively shut down all the bank’s operations.
According to legal filings by the bank, the MFSA informed it about a directive freezing all its operations through a telephone call, rather than a written notification as required by the law.
One financial industry source who spoke to Times of Malta said there was a real risk that the MFSA might lose the case brought against it by Pilatus Bank, due to the “knee-jerk” manner with which it took action against the bank following news of Mr Sadr’s arrest.
Prior to his arrest, the bank had been in the spotlight after an FIAU report highlighted shortcomings in its anti-money laundering procedures following a 2016 inspection was leaked.
A subsequent visit by the FIAU had found no reason to take further action against the bank.
Last year, the European Banking Authority found the FIAU in breach of anti-money laundering laws over its handling of the case and the lack of follow-up action in 2016.