Despite the institutions not because of them
The defunct Ta’ Xbiex-based Pilatus Bank was back in the news recently following a €4.9 million fine slapped by government’s anti-money laundering agency (FIAU). Subsequently there was the arraignment of Claude-Anne Sant Fournier who was the bank’s designated money-laundering reporting officer. She pleaded not guilty. More arraignments could follow in the coming weeks. These developments fuelled mixed reactions ranging from elation that action is being taken to criticism that this was too little and too late.
It all started in 2012
The Pilatus Bank saga started in the final months of 2012 when its eventual owner Ali Sadr, who had no banking experience, filed an application to get the banking licence in Malta.
Less than a year into Labour’s new administration, the Malta Financial Services Authority issued a licence in January 2014. For some reason, the MFSA had dropped certain conditions that would have required introducing a more experienced shareholder in the bank and Sadr taking a step back from its management.
The type of clients at Pilatus Bank had immediately raised eyebrows and should have sounded the alarm bells everywhere. It was more of a private bank catering for the needs of wealthy foreign clients and prominent Maltese like the then OPM chief of staff Keith Schembri, his accountant Brian Tonna, former Allied Newspapers managing director Adrian Hillman and former EU Commissioner John Dalli. Schembri, Tonna ad Hillman were subsequently charged with an array of financial crimes, to which they all pleaded not guilty. According to media reports Dalli could be following suit.
Chinese energy negotiator Chen Cheng who was involved in multi-million euro deals by Enemalta and the owner of a secret company (Macbridge) suspected of being set up to pay kickbacks to Keith Schembri and Minister Konrad Mizzi, was also an account holder at Pilatus Bank. Moreover, the bank had also come under scrutiny in the run up to the 2017 snap general election when allegations had been levelled that Pilatus had facilitated corrupt payments to the infamous secret Panama company Egrant. Yet, no action was taken by the authorities.
FIAU sounds the alarm bells then goes silent
In March 2016, the FIAU sounded the alarm bells following an onsite inspection whereby it was concluded that the bank was systematically failing its obligation to prevent financial crime. Yet, in September 2016 the FIAU informed Pilatus the matter had been resolved and the bank had been deemed to have become compliant with money laundering laws following a fresh inspection when the previously missing documents were made available. The move happened, a month after the resignation of FIAU chief Manfred Galdes. The Maltese authorities treated the issue as if it was a closed case, despite suspicions of foul play which had been raised by journalist Daphne Caruana Galizia and calls by Opposition leader Simon Busuttil for the police to investigate. In the 2017 general election Labour Party supporters had even gathered outside the bank to celebrate victory and discredit Busuttil and Caruana Galizia. The scene would come back to haunt the same supporters as evidence which emerged within a few years showed that the ones being taken for a ride were those who believed the this was just a figment of Busuttil’s and Caruana Galizia’s imagination.
Were it not for the US…
Significantly, Maltese authorities only lifted a finger in March 2018 when Ali Sadr was arrested in the US on money laundering and for breaching US sanctions against Iran. It was only then, that MFSA intervened to take control of Pilatus Bank which was placed under an administrator. Yet, the bank’s licence was not revoked by the Maltese regulator but by the European Central Bank in November 2018.
Three years down the line arraignments have been made. The move happened when Malta was placed under increased scrutiny following the FATF’s decision to place the country on the grey list due to severe shortcomings in the fight against money laundering. Inevitably, questions are being raised. Why is it only now that action is being stepped up? Who will shoulder responsibility for turning a blind eye when the first suspicions were raised in 2016? Are these people still in power? Was the investigation into Egrant hindered by the very same people who at the time felt there was no need to raise the alarm? The bottom line is that in the Pilatus Bank saga things only started moving due to pressure from outside the country – namely the US and the European Central Bank. Rather than a case of the institutions working, this seems more of a case of action being taken despite the institutions.