The European Commission has given Malta until Friday to explain what concrete measures Bank of Valletta is taking on what the ECB has called suspicious proceeds emanating from the controversial cash for passports scheme.
Sources in Brussels told Times of Malta that the EU executive is considering infringement procedures against Malta if the government does not give satisfactory replies about the conduct of the country’s largest bank.
In a letter sent last week, the Commission’s director-general for justice, Tiina Astola, asked whether the government had acted on the findings of the European Central Bank which had conducted an investigation earlier this year.
“Is there any specific follow-up given by the Maltese government to those parts of the report of the European Central Bank that concern the Individual Investor Programme?” she asked, referring to the cash-for-passports scheme introduced by the government in 2014.
The Commission is expecting the government to reply by Friday if it wants to avoid the possibility of formal infringement procedures being started.
The EU’s justice director-general said that the passport selling scheme posed several risks, including money laundering, corruption and tax evasion.
The Commission’s latest initiative follows a confidential report drawn up by the ECB over the conduct of BOV where it comes to risks and money laundering.
The ECB had found that BOV had “severe shortcomings” that could have permitted money laundering and other criminal activities.
According to the Frankfurt-based institution, Bank of Valletta failed for years to detect or address risks involving thousands of payments and had not dealt with a litany of risk management failings despite repeated warnings from the EU banking regulator stretching back to 2015.
Asking the bank to take remedial action within a short time-frame, the ECB harshly criticised the way the bank dealt with foreign passport buyers. The ECB claimed these were registered as Maltese citizens to reduce their risk profile.
BOV was on Wednesday asked by Times of Malta whether it was still accepting business from passport buyers and opening accounts for them. It was also asked whether passport buyers have had their accounts closed and to state how many accounts were held by passport buyers.
“As has already been communicated, the Bank is currently engaged in a Transformation and De-risking exercise in constant liaison with local and international regulators. We are confident that good progress continues to be made as part of this concerted programme,” the bank replied.
BOV was the only large retail bank opening accounts for passport buyers as HSBC had taken an early decision not to take any business from this programme.
In another development in 2017, BOV also benefitted indirectly from the scheme when it was decided that the fund administering proceeds on behalf of the government, the National Development and Social Fund, should invest nearly €22 million in BOV shares.
The decision was taken by a board headed by David Curmi, a former president of the Chamber of Commerce and Enterprise, who also occupies the role of CEO of MSV life. BOV owns half the shares of the insurance company.