Tuesday, January 26, 2021

Malta’s Appeals Court slash Satabank’s €3.7m money laundering fine to €851,000

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The Appeals Court has reduced a €3.7 million fine imposed by the Financial Intelligence Analysis Unit on Satabank to €851,000 after it ruled that the fines had to be capped at 10 per cent of the bank’s turnover.

While the court acknowledged that the Prevention of Money Laundering and Funding of Terrorism Regulations allowed significant discretion as to the amount of the administrative sanction, it had to be within the thresholds set within the same regulations.

The court also considered that the exceptional circumstances present in this case had to be taken into account when reaching a decision as to the amount of the administrative penalty.

The regulations state that the administrative penalty is capped at €5 million or not more than ten per cent of a business’s total annual turnover, based on the latest available approved annual financial statements. It, therefore, reduced the administrative penalty to €851,792.50.

Why was Satabank fined?

Satabank was slapped with the record €3.7 million fine in March last year after it was found guilty of widespread breaches of money laundering laws.

The bank had been on the regulators’ radar ever since a joint inspection by the Malta Financial Services Authority and FIAU in 2018 found extremely weak structures in place to prevent its clients from using it to launder potential proceeds of criminal activity.

This had led regulators to come down hard on the bank. All 12,000 of Satabank’s accounts were effectively frozen by the Malta Financial Services Authority last October, with EY (formerly Ernst and Young) appointed to administer the bank’s assets in “the best interests of depositors”.

Police and financial regulators then moved in to comb through suspicious transactions with potential links to fuel smuggling, drug trafficking and trade with sanctioned countries. They investigated billions of euros in suspicious transactions through Satabank.

Since then, more than 300 reports of suspicious transactions at Satabank worth in excess of €130 million have been flagged by experts tasked with reviewing the lender.

The bank subsequently lost its banking license.

It was the second time in as many years that the ECB has withdrawn a Maltese bank’s licence: in 2018 the Frankfurt-based institution pulled Pilatus Bank‘s licence after it was implicated in alleged money laundering breaches.

The action against the beleaguered bank came after the bank had been on the MFSA’s radar since late 2016.

The findings of the compliance examination by the FIAU exposed “very serious and systematic breaches” of anti-money-laundering regulations but it had also shed light on the bank’s “lack of commitment…to take anti-money-laundering requirements seriously”.

The bank had justified its serious and systemic failures by saying that it was at the initial stage of its operations and that it took more time than originally anticipated to develop all systems, processes and procedures necessary.

Investigators had found, however, that at the time of the compliance review, the bank had already been in operation for three years, during which time it had established in excess of 150,000 customer accounts. In 2017, the bank had processed approximately 32 million transactions amounting to around €15 billion in value.

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