A police investigation into the shuttered Pilatus Bank is not focusing on prosecuting account holders “at this stage”, two sources have confirmed.
The bank and one of its senior officials were charged with money-laundering earlier this month, with further charges expected against other senior bank officials.
However, those whose money these bank officials could have allegedly been laundering are not being seen as priority targets by the police, the sources say.
Scores of potentially suspicious transactions, structures
The investigation into Pilatus Bank’s operations came across scores of potentially suspicious transactions and corporate structures operated by the bank’s clients, including the daughters of Azerbaijan’s president, Ilham Aliyev. Using an array of complex corporate vehicles, Aliyev’s two daughters alone parked over €120 million in loans and deposits at the Ta’ Xbiex-based bank.
Around 25 per cent of the funds held by various customers at the bank flowed in from the UAE, including payments to Azeri-controlled accounts.
Other significant financial flows into the bank were detected from Turkey, Kazakhstan and Azerbaijan.
Pilatus appears to have been used as a staging post by account holders to move funds out of countries viewed as being at a high risk of financial crime into relatively lower risk jurisdictions.
Sources privy to the investigation said the United Kingdom was the most popular destination for funds flowing out of Pilatus, followed by Luxembourg and payments to other accounts in Malta.
Instances were identified of Pilatus staff alternating payments for euro transactions between two of its correspondent banks – Bank of Valletta and Société Générale – depending on which one was asking the least questions about transactions involving certain companies.
Correspondent banks act as intermediaries, processing payments on behalf of other financial institutions like Pilatus.
BOV starts to raise questions
Towards the end of 2016, BOV started questioning the rationale behind certain payments and even refused to process one €1 million transaction. This appears to have led Pilatus to instruct its staff to seek approval from senior management before using BOV to process payments. Staff members were advised to minimise interactions with the bank as much as possible.
Earlier that same year, Société Générale started to question Pilatus about potential Iranian involvement in a €14,000 transaction it was seeking to pass through the French bank.
Iran is considered to be an extremely high-risk country for financial crime and has been slapped with an array of sanctions by the international community.
The transaction questioned by Société Générale was being sent from a company owned by an Iranian-born German national, with an account at Pilatus.
A few days later, Pilatus staff members were instructed to process another €10,000 payment from the same company, with explicit instructions not to pass the payment through Société Générale.
Another €90,000 payment from the same account was processed that same month, again with instructions not to use Société Générale as the correspondent bank for the payment.
Instead, the money was channelled through BOV.
The company in question was found by investigators to have received multiple potentially suspicious payments, including from entities linked to illegal arms exports from Ukraine and the UAE as well as other companies with links to alleged money-laundering schemes.
Transactions with ABLV
A notable amount of potentially suspicious transactions to and from certain accounts at Pilatus were found to have been carried out with ABLV, at the time one of the largest private banks in the Baltic states.
ABLV collapsed soon after the American authorities publicly accused it in February 2018 of being a hotbed for money-laundering, causing the bank’s depositors to flee.
Pilatus was even found to have processed two €50,000 payments in December 2015 for a property deal in Portugal, involving a company owned by a trust whose ultimate beneficiary was Brazilian-Portuguese national Raul Schmidt.
At the time, the Petrobas executive was already known to be one of the subjects of a major Brazilian corruption investigation known as Operation Car Wash.
Schmidt was later indicted for allegedly receiving kickbacks on certain Petrobas transactions, the proceeds of which are suspected to have been laundered.
Pilatus was fined a record €4.9 million by Malta’s anti-money laundering unit last month for a “serious and systemic failure” to follow anti-money laundering laws.