ECB shuts Pilatus Bank as EU weighs new move on Malta

By Francesco Guarascio

BRUSSELS (Reuters) – The European Central Bank has withdrawn the banking license of Malta’s Pilatus Bank, the island’s financial regulator said on Monday, after the chairman of the bank was charged in the United States over money laundering and bank fraud.

The lender was also accused of processing corrupt payments for senior Azeri and Maltese figures by investigative journalist Daphne Caruana Galizia. She was killed a year ago by a car bomb in Malta (https://tinyurl.com/yd8nmmap).

“The ECB’s Governing Council has decided to withdraw the authorization of Pilatus Bank with effect from today,” Malta Financial Services Authority (MFSA) said in a statement.

Neither the bank nor the ECB were immediately available for comment.

The European Commission is now considering actions against Maltese authorities over their handling of the Pilatus case, a senior EU official said.

MFSA recommended revoking the bank’s license in June. The decision took longer than expected due to legal hurdles, ECB officials have said, highlighting the weakness of the European Union framework for preventing and countering money laundering.

The EU began investigating the Pilatus case after Caruana Galizia’s murder in October 2017, for which there is no proven link to the reports she wrote about the bank.

Maltese authorities took no action until the Iranian chairman of the bank, Ali Sadr Hashemi Nejad, was arrested in the United States in March on charges of money laundering and sanctions violation.

After that arrest, the MFSA, which had granted the bank a license in 2014, froze the assets of Pilatus and recommended the withdrawal of its license.

WEAK POWERS

The European Banking Authority, the EU-wide banking watchdog, last year opened two investigations into how Malta dealt with Pilatus.

One, into MFSA, was closed in September in part due to the vagueness of EU regulation, EBA chairman Andrea Enria told EU lawmakers. EU governments are discussing an overhaul of the bloc’s powers to counter a wave of money laundering scandals, but have so far not considered legislative changes.

A second EBA investigation into the Maltese Financial Intelligence Analysis Unit (FIAU), the country’s anti-money laundering body, highlighted serious shortcomings that the body did not remedy, Enria said in a letter to FIAU.

This could lead the European Commission to force legal changes bringing Malta in line with EU rules.

The EU official said the EU executive will discuss this further move on Wednesday, before a Nov. 11 deadline.

In case of no changes, the EU executive could start infringement proceedings against Malta, though they take years to conclude and tend to have limited effect as a deterrent.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.