Malta’s Lack Of Anti-Money Laundering Enforcement Slammed By EU

Due diligence

The European Banking Authority, the main banking regulator in Europe, slammed Malta for “systematic” failings in the enforcement of anti-money laundering rules, reported the Financial Times.

The report, citing a report put out by the European Banking Authority (EBA), reported that the agency determined the government of Malta failed to act on “serious breaches” at Pilatus Bank. The owner and former chairman of the bank have been charged in the U.S. with trying to evade sanctions against Iran by illegally sending $115 million or more from Venezuela to Iranian businesses. The Financial Times noted that Pilatus Bank was the focus of reporting by Daphne Caruana Galizia, who was murdered in a car bombing in October of 2017. She had been reporting on claims that the government was corrupt and that money laundering was going on. Prosecutors in the U.S. contend the bank was created in 2014 with the intention of getting around the Iranian sanctions. The bank is now in the hands of regulators and the activities have been frozen. It had around 130 clients that included Iranians and companies that were owned by Azerbaijani nationals with links to the Azerbaijan regime, reported the Financial Times.

The European Banking Authority report said there were “general and systematic shortcomings” at Malta’s Financial Intelligence Analysis Unit or FIAU, which is an independent government agency in charge of fighting money laundering and terrorism financing. It pointed to the agency’s move to close an investigation into Pilatus without imposing sanctions or other supervisory measures.  It said FIAU “failed to ensure” that the bank “put in place adequate and appropriate . . . policies and procedures.” The EBA said the FIAU closed the inquiry into Pilatus in September of 2016 despite getting a notice in May that there were concerns the bank may have violated anti-money laundering regulations. After the May letter KPMG was hired to conduct an audit along with a local firm and was given a “clean bill of health,” noted the report. The audit, EBA said, was not enough to allay any concerns laid out in the letter.   In response, FIAU said in a letter to the EBA the conclusion was based on one case and that it denied breaching EU laws.  The FIAU has ten working days to respond and say how it will improve operations. If it doesn’t the EU can direct banks in Malta to follow EU rules.