Scandal-stricken Pilatus Bank will be shut down once and for all as its licence is finally withdrawn on Monday.
The authorities now have to figure out how to handle the tens of millions of euros the bank still holds, The Sunday Times of Malta has learnt.
A well-placed source said that following a request by the local regulator, the Malta Financial Services Authority, the European Central Bank will be writing to the beleaguered bank’s directors on Monday to inform them that its licence has been withdrawn and the bank is no more.
The move comes some eight months after its Iranian-born chairman Ali Sadr Hasheminajad was arrested for alleged sanctions busting in the US.
The Ta’ Xbiex bank has been at the centre of political controversy ever since a series of leaked financial intelligence reports flagged evidence of money-laundering and serious compliance shortcomings back in 2016.
It has also been alleged that the bank was used as a conduit for Azerbaijani millions making their way into Europe, while it was linked to shocking allegations that Prime Minister Joseph Muscat’s wife Michelle secretly received graft payments, of which no evidence was found in a magisterial inquiry.
The MFSA eventually issued a number of sanctions against Pilatus last March after Mr Hasheminajad was arrested in the US, effectively seizing all the bank’s operations pending an investigation.
The revocation of the bank’s licence is only the second time this had ever happened in Malta and is the most extreme intervention a regulator can undertake.
In a letter, dated September 24 and sent to European Union lawmakers, European Banking Authority chairman Andrea Enria had said the move by the Maltese watchdog to seize the bank’s operations was justified by “the current circumstances of the bank’s ultimate beneficial owner”.
Mr Hasheminajad was indicted in the US in March for alleged bank fraud, money laundering and the evasion of US sanctions against Iran. Malta’s regulator first recommended the withdrawal of Pilatus’ licence in June after Mr Hasheminajad’s arrest.
Justified by the current circumstances of the bank’s ultimate beneficial owner
The 38-year-old was charged in a six-count indictment filed in a federal court in Manhattan accusing him of his role in a scheme to evade US economic sanctions against Iran. During the bail hearing in court it was claimed that money used to set up Pilatus Bank in Malta came from criminal activities in Venezuela.
The final closing down of the bank may be the end of the road for Pilatus but it is just the beginning of what sources close to the financial regulator on Satuday described as a long liquidation process.
Insiders at the regulator have regularly commented that the handling of the funds frozen in the bank was perhaps the most delicate part of tackling the institution.
“The main concern is that proceeds derived from crime or money laundering could potentially end up back in the hands of those who put them in the bank in the first place,” one source said.
Meanwhile, others explained that a controlled process for the liquidation of assets would need to be carried out in consultation with other authorities like the Financial Intelligence Analysis Unit and the police. It is still not clear how this will take place because an analysis of the bank’s deposits and accounts will need to be carried out first.
Other sources meanwhile indicated that the liquidation process could also be carried out in conjunction with authorities from other financial jurisdictions with an interest in some of the assets held by Pilatus.
Reform needed - MFSA CEO
When contacted, the head of the Malta Financial Services Authority, Joseph Cuschieri, did not confirm or deny that the bank was about to be shut down. However, he did say that “rather than looking at individual cases, we need to look at banking activities in Malta with a long-term view of where we see Malta as a jurisdiction for banking services. There are learnings which can help us look back to address future challenges.”
The banking situation in Malta, he said, was high on the authority’s agenda and efforts were under way to put together a policy that focused, among other things, on governance.
A reform in banking legislation, he said, is needed to modernise Malta’s legal and regulatory framework.
“It is abundantly clear that Malta needs more banks to assist in the development of our economy particularly in the digital and Fintech space. I am not happy with the current situation and doing nothing is not an option,” he said, assuring that the authority would consult with stakeholders before any decisions were taken.
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