FIAU trawling every single Pilatus transaction in search of money laundering evidence

The Maltese financial regulator has said it is carrying out a “transaction-by-transaction” review at Pilatus Bank together with the Financial Intelligence Analysis Unit.

The extensive review is still ongoing, MFSA director-general Marianne Scicluna told MEPs in the TAX3 committee on financial crimes, tax evasion and tax avoidance.

Scicluna and the Maltese FIAU director Kenneth Farrugia were giving statements to MEPs, along with the Latvian financial regulator on the subject of the shuttered bank ABLV.

Scicluna said that the MFSA and FIAU were already carrying out the comprehensive review before the US indictment of Ali Sadr Hasheminejad on charges of breaching sanctions against Iran.

She said the purpose of the review is to “get to the bottom of allegations and concerns as to whether money laundering was carried out in the bank” and that it would provide a robust assessment of the bank’s actions.

The bank’s operations are already the subject of at least two magisterial inquiries, one triggered on an allegation by the late journalist Daphne Caruana Galizia that it processed a $1 million payment on behalf of the Azerbaijani ruling family, to the wife of prime minister Joseph Muscat; the other on a complaint filed by the former PN leader Simon Busuttil on money paid by Nexia BT partner Brian Tonna to the PM’s chief of staff Keith Schembri shortly after receiving payment from Russian clients who had acquired Maltese citizenship under the IIP.

Scicluna said the MFSA was awaiting the outcome of the review while monitoring the bank, whose control passed under a third party ‘competent person’ when the FBI arrested owner Ali Sadr Hasheminejad. Although the US charges are on actions that predate the 2014 licence granted to Pilatus, the MFSA has removed Hasheminejad from chairman of the bank.

Scicluna also said the MFSA followed a standard due diligence process for Pilatus Bank’s licence, which included a thorough review of documents, numerous follow-up questions, and an independent third-party intelligence report on Hasheminejad.

“The intelligence company was not KPMG,” she said referring to the bank’s auditors, “but an international firm used by other regulators such as the UK’s FCA. The remit was to check Hasheminejad’s background, because he hailed from a jurisdiction that represented certain risks. At the time, the report did not highlight any adverse information,” Scicluna said.

She described the 12-month process to authorise the bank, as a normal licensing duration.

“Since then Pilatus was the subject of a high degree of supervision, including multiple on-site inspections and liaising with the FIAU for off-site reviews and updates on due diligence. The supervisory review intensified in 2017 when various allegations were made, including close liaising with the FCA.”

Scicluna said due diligence can be comprehensive but even such reviews can be limited, giving only ‘pointers’ to regulators but never the kind of information head by law enforcement entities. “After the US arrest, we felt we had the legal basis to act quickly and decisively to remove the chairman of the bank and take the assets under control.”

The MFSA’s director of enforcement Anton Bartolo also said there was “no way” the regulator could have known of the US investigations on Hasheminejad when the licence for Pilatus Bank was being processed.

He also said the MFSA could not have not acted on either “rumour” or information published in the press. “Even if MFSA officials had all the information in their hands, this might not have resulted in the drastic action some are calling for,” referring to calls from the Opposition to shutter the bank at the time claims of money laundering were being made. “Taking action too hastily could even have disrupted ongoing investigations in other jurisdictions,” he said.

FIAU director Kenneth Farrugia was also asked about investigations related to the mysterious company in Dubai called 17 Black, which the PM’s chief of staff Keith Schembri having admitted selecting it as a “target client” for his Panamanian company.

“I cannot divulge too much information, but I do provide my assurance that whenever the FIAU established reasonable suspicion of money laundering it has passed on a report to the Malta police.”