The Pilatus Bank saga is entering a new stage. The police have started legal action against the bank and its former head of compliance and legal department.
It is expected that other former senior bank officials will eventually be charged for similar money laundering offences.
This follows the record fine of €4.9 million imposed on the bank by the Financial Intelligence Analysis Unit for “serious and systemic failure” to follow anti-money laundering laws.
The bank’s dependence on “connections to the Caucus region” made it impossible for Pilatus to take concrete action over suspicious activity, the FIAU found.
Former Pilatus Bank chairman Ali Sadr Hasheminejad believes that attack is the best form of defence. He is taking action against Malta in the International Centre for Settlement of Investment Disputes, an international arbitrator.
He claims that corrupt regulators “wrongfully” shuttered his bank. While it is up to the courts to decide on the guilt of individuals for any criminal activities, many questions remain unanswered as to how this bank was allowed to stain the country’s reputation indelibly.
The due diligence conducted by the Malta Financial Services Authority in 2013 failed to identify the risks of granting a banking licence to an entrepreneur who had no experience running a bank.
The then chairman of the MFSA, Joe Bannister, must have been informed about the lack of valid credentials of the bank’s chairman and promoter.
What action did Bannister take to justify granting a banking licence when it was already evident that the promoters were not fit and proper to run a bank?
MFSA must surely assume political responsibility for the gross failure of the MFSA to scrutinise applicants thoroughly for a banking licence
Former finance minister Edward Scicluna would argue that he did not get involved in the financial regulator’s granting of banking licences. But he must surely assume political responsibility for the gross failure of the MFSA to scrutinise applicants thoroughly for a banking licence.
It is legitimate to ask whether Scicluna is the right man to serve as Governor of the Central Bank and attend ECB board meetings in Frankfurt.
The Pilatus Bank owner tried to muzzle a whistleblower and journalists by threatening to take defamation action in the US.
Former prime minister Joseph Muscat argues he was the victim of the whistleblower’s allegation that his wife was the titular owner of Egrant, a secret offshore company linked to the same bank.
Pilatus Bank has inflicted irreparable damage to the country’s reputation, to the perception about its competence, and to the integrity of its political leaders and heads of regulatory bodies.
Given the sleaze that it perpetrated, it is appropriate to dig deeper to determine who owns Egrant. The country needs to know if there are other skeletons in the bank’s cupboards.
The FIAU’s money-laundering investigations, like those of the MFSA, were very clearly weak even when there were indications of suspicious activities. Both regulators failed to act robustly enough to nip the problem in the bud.
It was the European Central Bank that stripped Pilatus Bank of its licence in 2018 when US authorities were investigating the bank’s chairman.
One can only hope that the anti-financial crime net is being cast wide enough to catch the big and small fish
The European Banking Authority, a watchdog for banks’ governance in Europe, criticised the FIAU for failing to impose sanctions on the bank long before the current developments.
The failure of Pilatus Bank will be added to other notorious banks’ failures, like that of Lehman Brothers, Barings Bank and BCCI – failures caused by incompetence, fraud or criminal behaviour.
Trust in a financial jurisdiction takes decades to build and only a few months to destroy.
At this stage, one can only hope that the anti-financial crime net is being cast wide enough to catch both the big and small fish involved in this scandal.