The Financial Intelligence Analysis Unit has imposed an administrative penalty of €4,975,500 on Pilatus Bank in view of the notorious – and now defunct – bank’s ‘total disregard’ towards the necessary safeguards against money laundering or the financing of terrorism.
The bank had started its operations in 2014, and came into the spotlight in 2017 when Daphne Caruana Galizia accused it of being complicit in laundering proceeds of corruption. The bank’s licence was revoked by the European Central Bank in 2018.
In its review of the bank’s operations, the FIAU found that Pilatus failed to keep customer information up to date in 97% of the files reviewed. In 86% of cases, it allowed transactions “to pass through its customers’ accounts without the proper level of scrutiny being carried out.”
This “relaxed approach,” according to the FIAU, was aggravated by the high-risk nature of the customers serviced by the banks.
“This in view of their political involvement, their connection with high-risk jurisdictions and the large value of transactions passing through the accounts, at times also in extremely short period of time and without any economic or commercial sense being noticeable,” the unit said.
“Enhanced due diligence measures in such circumstances were paramount. Yet the bank proceeded to allow millions to pass through the said accounts without proper due diligence (let alone of an enhanced nature) being carried out,” it added.
The FIAU provided a number of examples, without mentioning names, including a customer who received around 239 million Emirati dirhams (approximately €55 million) from one of the bank’s beneficial owners and duly transferred €68.5 million to another bank customer, ostensibly as a loan repayment. A series of transfers to other companies followed, allegedly to purchase shareholding in a Russian company, but the bank failed to transfer any queries.
Another customer received over €11.9 million and $5.45 million USD from one of Pilatus’ beneficial owners, and remitted approximately €6.6 million back to them. The bank, the FIAU noted, “did not deem it necessary to obtain any additional information or supporting documentation.”
The FIAU even found that in cases, the bank itself prepared the documentation for its customers in order to justify accepting an exceptional high amount of funds.
Additionally, it found that customers had pressured the bank to process funds without questioning the rationale – and the bank duly acceding to such pressure.
The FIAU thus determined that “the bank completely disregarded the most onerous and important of its obligations, i.e. to ensure that transactions that were anomalous and for which there was no explanation or that were otherwise suspicious be escalated internally for consideration by the bank’s money laundering reporting officer and reported to the FIAU where there was a suspicion that these transactions were actually linked to proceeds of criminal activity, money laundering or the funding of terrorism.”
Through its operations, the bank was found to have exposed itself – and Malta – to “egregious money laundering risks that were not being mitigated in any manner.”
The bank’s “total disregard” towards the necessary safeguards “led to it allowing millions to pass through the Maltese economy without any consideration of possible money laundering taking place,” and its systemic failures “greatly exacerbated the risks of its being used and abused by money launderers to process illicit proceeds through the bank.”
The seriousness of the bank’s failures, the FIAU concluded, led it to deem the sizeable administrative penalty appropriate in this case.