Thursday, December 9, 2021

EU AML crackdown has Pilatus Bank and ABLV Bank in sight


The revelations that have surfaced situation at Malta’s Pilatus Bank and at Latvia’s ABLV will see European Union banks in the near future facing an anti-money laundering crackdown, according to top EU officials.

The crackdown is expected before the end of the year and specifically follows allegations of wrongdoing at the Latvian and Maltese banks.

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The collapse of Latvia’s ABLV and the freezing of operations at Malta’s Pilatus Bank exposed shortfalls in recent reviews of anti-money laundering rules, which the 28-member EU is now trying to address, Reuters reported yesterday.

Both banks were at the centre of money laundering allegations by US authorities, which the head of euro zone banking supervision, Daniele Nouy, said revealed a “very embarrassing” weakness in European oversight.

“There is agreement on the importance of enhancing the current monitoring of the implementation of anti-money laundering measures,” Mario Centeno, head of the Eurogroup of eurozone finance ministers, said in a letter to the President of the European Council, Donald Tusk, published yesterday ahead of today’s summit of EU leaders.

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A report on strengthening oversight, he said, will be prepared in July, paving the way for “further measures by end 2018”.

The new anti-money laundering rules, set to enter into force by 2020, will foresee the establishment in all EU countries of centralised bank account registers to gather financial data.

But cooperation among national forces to counter financial crime is still weak and has prevented enforcement measures, even in cases where there has been serious suspicion of wrongdoing.

Malta’s Pilatus Bank had long been a concern for eurozone supervisors, but Maltese authorities only acted to freeze the bank’s assets after its Iranian chairman was arrested in the United States in March on charges of money laundering and bank fraud.

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Latvia’s ABLV has denied any wrongdoing, while Pilatus has not replied to several requests for comment from Reuters, the agency reported yesterday.

The two cases raised wider concerns over national oversight in smaller EU states. The European Banking Authority (EBA) this month began a formal inquiry into how Maltese supervisors dealt with Pilatus after they failed to act for several months on its Azeri connections.

Latvia is investigating whether its banks acted as conduits for Russian funds used to interfere in elections and politics elsewhere, Reuters exclusively reported last month.

“We need to draw practical lessons from the events in Malta and Latvia,” EU justice commissioner Vera Jourova told European parliamentarians this week, calling the Pilatus and ABLV cases “scandals” that required actions.

She flagged the possibility of setting up an EU “centralised body” to address money-laundering risks, which are now supervised by a range of national authorities.

Some states have already expressed a will to establish a new body to counter money laundering, while others favour giving more power to one of the existing EU regulators, like the EBA.

Germany and France, the euro zone’s largest members, last week called for an EU deal by the end of the year to measure the money-laundering risks within the banking sector.

However, the growing political demand for a crackdown faces a tight legislative calendar, giving new proposals nearly no chance of EU parliament approval before elections due next year.

Changes could however be made to existing proposals, such as an overhaul of banking capital rules on which final talks are due to begin next month. But that would require a significant deviation from the scope of the proposed rules.

The European Banking Authority is currently investigating Malta’s Financial Intelligence Analysis Unit’s handling of Pilatus Bank, which could potentially lead to the initiation of  infringement procedures should deficiencies be found.

The EBA had said, early June, that the FIAU may have failed to ensure Pilatus Bank put in place ant-money laundering procedures, and that sanctions were never imposed on the bank.

The FIAU had given Pilatus Bank a clean bill of health under a new director after his predecessor had flagged problems.

The bank’s owner, Seyed Ali Sadr Hasheminejad, faces up to 125 years in American prison and stands accused of money laundering and accused of circumventing US sanctions on Iran when he brokered a development deal for thousands of housing units in Venezuela.

The US Justice Department has accused him of using “criminal proceeds” to set up the now infamous bank.

Ali Sadr, an Iranian banker, was detained in the USA last March and accused of circumventing US sanctions on Iran when he brokered a development deal for thousands of housing units in Venezuela. He is accused of having used American and Swiss banking systems to effect transactions $115 million, and using complicated structures to conceal that the money was ultimately to be deposited in Iran.

Sadr became a household name in Malta when slain journalist Daphne Caruana Galizia had alleged that the Prime Minister’s wife, Michelle Muscat, is the owner of a Panama registered company called Egrant. All involved vociferously deny wrongdoing and magisterial inquiries are currently underway.


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