Satabank: FIAU found clients with suspected organised crime links

Satabank, the Bulgarian-owned bank recently ordered to stop operations by the Maltese financial regulator, was operating a high-risk model that had taken on clients with suspected organised crime links.

A source privy to the investigations currently underway inside the bank, which are being led by a ‘competent person’ under the guidance of auditors EY, told MaltaToday that Satabank had been operating “a very high-risk model, that is, taking onboard clients with suspected organised crime links and money laundering intentions. They were not doing proper know-your-customer and due diligence checks on the source of funds.”

The serious revelations were made clear on 12 October by the Financial Intelligence Analysis Unit, which found “serious potential breaches” that led the Maltese financial regulator (MFSA) to order the bank to refrain from carrying out transactions.

In a confidential letter to the bank, the MFSA said on 15 October that it could “no longer reasonably be expected to rely on the bank’s assurances given the systemic failures to implement satisfactory measures” on anti-money laundering safeguards.

While Satabank clients, mainly foreign residents, have protested the MFSA’s directive to halt any cash withdrawals, the regulator’s investigation inside the bank have to determine whether a suspicious transaction report will now have to be issued to the FIAU.

The government’s investment promotion arm Malta Enterprise has now set up a hardship fund for Satabank’s corporate clients, to provide them with bridge loans to assist them in paying salaries. The MFSA has also said an initial group of Satabank’s private customers will be getting their personal deposits back. Previously, the MFSA appointed a team from Ernst & Young to monitor the bank in the proper conduct of its business on 15 October, but five days later it told Satabank to cease taking new deposits or affecting withdrawals, freezing the bank’s operations.

Satabank has protested exorbitant rates it is being charged by EY, having to pay members of the international team up to €689 an hour. “It is absurd and incongruous that the competent person should charge the bank at the exorbitant and unreasonable hourly rates… depleting the bank’s capital and reserves in the process, while thousands of depositors are unable to access their funds,” the bank said.

EY’s international team rates range from €269 an hour for a senior official, to €689 an hour for partners. Satabank said it had no objection to hourly rates indicated by EY’s “Malta team” – whose rates start at €90 an hour and are capped at €240 – but said the “international team” rates were “an abuse of discretion since such rates are not objectively justifiable and are manifestly unfair.”

The bank has insisted it was liquid and operating well above minimum regulatory capital ratios, and that preventing customers to make withdrawals “created speculation and uncertainty on the bank’s financial soundness and liquidity.”

Satabank offered some 5,000 clients an innovative online and e-money platform.

It is the first time that the MFSA has appointed a competent person for a retail and commercial bank, and defended the need to introduce international banking expertise. “It is vital we have the appropriate team which can competently deliver the best outcome for Satabank’s customers while safeguarding the Maltese financial system,” the MFSA said.