A group of Pilatus Bank depositors are threatening to sue the financial services watchdog in a bid to reclaim about €80 million in frozen assets, The Sunday Times of Malta has learnt.

Sources said the Malta Financial Services Authority had received the legal threat several weeks ago and it was being taken “very seriously”.

“This is something that has some people worried. The last thing we want is for an institution like the MFSA to end up in court over such a sensitive case,” a government source said.

The MFSA did not comment when contacted, with sources there saying only that the action taken to freeze all the funds in the bank had been the maximum action allowed at law. 

Pilatus Bank has been at the centre of a political storm since a series of leaked financial intelligence reports claimed money-laundering evidence and flagged serious compliance shortcomings.

 More recently it was revealed the bank had been used as a conduit for Azerbaijani millions making their way into Europe.

The MFSA issued a number of sanctions against the beleaguered bank in March after chairman Ali Sadr Hasheminajad was arrested in the US for alleged sanctions busting and money laundering. The MFSA then issued another round of sanctions, effectively seizing all the bank’s operations pending an investigation.

It has since defended its decision, insisting it did not want any potential proceeds of crime or money laundering leaving the bank until the bank’s servers were thoroughly analysed. 

'Innocent victims'

Meanwhile, sources told The Sunday Times of Malta that the group of Pilatus depositors were insisting they were the “innocent” victims of Mr Hasheminajad’s alleged crimes, since their funds had been frozen due to his alleged transgressions.

Freezing their assets had led to them defaulting on a number of obligations and they were reserving the right to sue for damages.

It turns out that the legal threat was sent to the MFSA by the same law firm which threatened to “financially cripple” the late journalist Daphne Caruana Galizia – Mischon de Reya. The British firm has been accused by her family of harassment, intimidation and an attempt to ruin her by threatening a lawsuit in the UK.

In the months before she died in a car bombing last October, the controversial journalist received letters from the London office of the blue-chip law firm, which specialises in defamation cases.

At the time, Mischon de Reya was acting on behalf of maligned passports-for-cash agent Henley & Partners, which has a contract with the government to market citizenship to wealthy investors.

The law firm wrote to Ms Caruana Galizia more than once in 2017 asking her to remove what it said were defamatory articles, reader comments and factual inaccuracies. Journalists have described the law firm as the preferred option for those seeking to kill unwanted media attention. 

Ms Caruana Galizia was also central to the Pilatus affair, with a whistleblower telling her Prime Minister Joseph Muscat’s wife had used it to receive graft from Azerbaijan’s ruling elite.

MFSA concern 

Meanwhile, a source within the MFSA said they were concerned about the looming European Banking Authority scrutiny. The EBA concluded earlier this month that the Financial Intelligence Analysis Unit had breached the requirements of an anti-money-laundering directive.

The EBA was in February asked by MEPs to open a preliminary inquiry on the possible breach of EU law by the Maltese authorities in relation to Pilatus. After opening a formal investigation in relation to the FIAU, the EBA made eight recommendations. The FIAU has complained about its approach, with sources going as far as describing the inquiry as a witch-hunt.

The MFSA source, who has long been with the regulator, said constructive criticism was welcome but questioned if the EBA would give Malta a fair shake. “There are questions, like why has the EBA never carried out such proceedings against other jurisdictions which have had major cases of money laundering in the past, but is so keen to look into Malta?”

This resonates with remarks from Finance Minister Edward Scicluna that Brussels put political pressure on the EBA to make an example of the FIAU. Those lobbying for action on the Pilatus saga were immediately outraged, some calling for his resignation.