The European Banking Authority is opening a probe on Malta’s regulatory oversight of Pilatus Bank.
Pilatus Bank is embroiled in a scheme to circumvent economic sanctions against Iran.
In March, Malta’s financial regulatory authority – the Financial Intelligence Analysis Unit (FIAU) – imposed a freeze on the operations of the lender.
The freeze came after a US Federal Court signalled out the chairman of the lender, Ali Sadr Hashemi Nejad, 38, for attempting to evade U.S. economic sanctions. Ali Sadr Hashemi Nejad was arrested on March 20, 2018.
US Prosecutors said Sadr’s family controlled an Iranian conglomerate called Stratus Group, which between 2004 and 2005 has made a deal to construct 7,000 housing units in Venezuela. Status group incorporated an Iranian company – the International Housing Corporation – as well as capital. According to US authorities, this fact was concealed to evade U.S. economic sanctions. In time, the Iranian International Housing Corporation received payments via Switzerland and Turkey to the tune of $115 million.
Before Ali Sadr’s arrest in March, the Maltese regulatory agency raided the bank seizing data that are currently under examination. Mr. Ali Sadr Hasemi is no longer the chairman of the bank’s board.
But, according to a letter sent by EBA Chair Andrea Enria to the European Commission on Wednesday, the Maltese FIAU agency is suspected of breaching EU law, particularly the third anti-money laundering directive.
“The FIAU neither imposed effective, proportionate and dissuasive sanctions nor any other supervisory measures to correct the shortcomings it had identified to ensure the institution’s compliance,” says Enria’s report, according to Reuters.
The probe onto Malta’s regulatory oversight agency (FIAU) follows a preliminary investigation launched by demand of the European Parliament (EP).
The EBA’s preliminary investigation suggests FIAU failed to put in place anti-money laundering rules or impose sanctions to correct money laundering activity. The EBA now believes that the Maltese agency was possible in violation of EU law and a panel is tasked with recommending appropriate action by mid-July.
Further clarifications have been sought by Malta’s Financial Services Authority (MFSA), which needs to respond by June 10.
In a statement to the Times of Malta in April, a FIAU spokesman produced two external audit reports to contest that the agency did not show due diligence in its mission.
FIAU reiterated on Thursday its commitment to cooperating with the EBA to facilitate an understanding of the facts to date. “The FIAU remains confident that the evidence shows that it has not been in breach of Union law,” the agency said in a statement.
FIAU claims that the Pilatus Bank has been intensively monitored since 2015 and has conducted multiple on-site inspections, collaborating closely with judicial authorities as well as foreign law enforcement agencies.