Satabank “blindly” took on a portfolio of clients from another financial institution in 2015 without assessing the money-laundering risks involved, according to a report by the Financial Intelligence Analysis Unit (FIAU).
Banks are obliged to carry out strict anti-money laundering checks on new clients before taking them onboard, to ensure accounts are not used for criminal activity.
A review of client portfolios in 2016 revealed “gross deficiencies” in relation to Maltese anti-money laundering and terrorism financing laws, the FIAU said.
“Thus, although the bank became aware of the widespread deficiencies and the risks it exposed itself to, it remained passive and never implemented remedial actions,” it said.
Regulators shuttered the bank in 2018 after analysis of its operations found “lax and at times inexistent” safeguards to prevent money-laundering and terrorism financing through the St Julian’s-based bank.
The FIAU said these lax safeguards exposed not only the bank to money-laundering risks but Malta as a whole, as Satabank serviced various financial intermediaries and enablers who used the bank to transfer “significant volumes of monies”.
Satabank was used to provide accounts to two e-money providers owned by Christo Georgiev, who was also the bank’s co-owner.
Georgiev last year sued Times of Malta in Bulgaria, claiming its reporting had led him to suffer damage to his reputation.
Investigators found that Satabank was in certain instances failing to identify who was behind these e-money accounts, significantly raising the risks that they could be used by criminals.
The FIAU identified how customers on these two e-money platforms were given a great deal of flexibility since they could easily open up to 50 and 25 accounts respectively and be provided with up to five debit cards per customer, with each card having a daily withdrawal limit of €1,000.
Since the bank applied the €1,000 limit per card and not per customer, clients could easily increase the limit to €5,000 per day across the five cards.
This degree of flexibility “substantially increased” Satabank’s risk of being exposed to money laundering and terrorism financing, given that “unverified account holders” could transact significant amounts of money.
Furthermore, the FIAU found that customer relationships on two of these platforms were being authorised by an outsourced service provider, meaning Satabank was not even involved or in control of the identity of its clients on these platforms.
Two Satabank employees were in charge of handling customer relationships on these two platforms, but they only had viewing rights of the customer portfolios, meaning they were not capable of immediately blocking transactions if suspicious activities by the clients were identified.
“It was hence amply clear that the bank was being utilised by the outsourced service provider as a vehicle for servicing clients without the bank having any say over which type of clients to onboard and what customer due diligence measures to employ,” the FIAU said.
Apart from having it licence withdrawn by the European Central Bank last year, Satabank was also slapped with a €3.7 million fine by the FIAU, which was later reduced to €851,792 on appeal.