Ministers told Pilatus Bank could have successful claim against MFSA

Government ministers have been told that a case by the owners and directors of the shuttered bank Pilatus, could well be won to the detriment of the Malta Financial Services Authority.

The small private bank, owned by the Iranian family of Ali Sadr Hasheminejad, had its licence revoked in 2018 after its owner and chairman was arrested in the United States, on charges of breaching US sanctions on Iran.

The arrest in February 2018 immediately pushed the MFSA to put the bank under controllership, as well as carry out an investigation of each single transactions that passed through Pilatus Bank with the help of the Financial Investigation Unit – an exercise that is costing hundreds of thousands of euros.

But a government source privy to discussions with various ministers, told MaltaToday that MFSA officials expressed their doubts on the challenge mounted by Pilatus in the financial services tribunal.

“The decision by the MFSA to put the bank under controllership was described as ‘political’, and that it was rushed – the regulator felt it had to act fast to counter the public impression that it had licensed a problematic bank,” the source said – a view that has been corroborated by MFSA sources who also spoke to MaltaToday.

Ministers were told that the MFSA’s response to the arrest of Hasheminejad (pictured) had been informed by the bank being at the centre of the Egrant allegations – allegations that were yet to be proven unfounded in a magisterial inquiry published later in 2018 – and not to a breach of Maltese financial rules.

“They have been told that the Pilatus’s case in the financial services tribunal is no easy claim to repel,” the source told MaltaToday.
Pilatus was at the heart of accusations by the late journalist Daphne Caruana Galizia that it had processed a $1 million transaction from the

Azerbaijani ruling dynasty to Joseph Muscat’s spouse: an allegation that turned out to be untrue.

Since the publication of the Egrant inquiry conclusions, the bank has been on the offensive against its detractors.

It has protested the appointment of American banking veteran Lawrence Connell as controller, which the bank says will cost it “a potential USD600,000 (€523,000) per annum” in remuneration fees alone, apart from the remuneration of additional staff and advisors engaged by Connell.

The bank claims it is incurring expenses of $100,000 (€87,000) a month.

Hasheminejad – a naturalised US national – was arrested in February 2018 and was charged in a New York district court of having evaded US sanctions against Iran, apart from committing bank fraud, by funnelling over $115 million in payments for a Venezuelan housing complex through the US financial system for the benefit of his Iranian family’s companies.

To justify its decision to put the bank under controllership, the MFSA said the arrest raised reasonable doubt about the integrity and suitability of Hasheminejad to fulfil his duties.

Hasheminejad was granted bail in the United States after lawyers presented an impressive $34 million bail package that included restricted travel and electronic monitoring.

Pilatus Holding has accused its former employee Maria Efimova – who was sacked after three months and later charged by Maltese police of misappropriating funds from the bank – of being a ‘Russian informant’ that fed misrepresentations of the bank to politically-motivated collaborators.

Efimova was first held up as Daphne Caruana Galizia’s primary source on the Egrant allegation, claiming Prime Minister Joseph Muscat’s wife was the owner of a secret Panamanian company and that ownership documents had been kept inside Pilatus Bank.

But Efimova later denied being Caruana Galizia’s main source, and said she only confirmed allegations that the journalist was already working on.

The Egrant inquiry’s conclusions said Efimova gave contradictory accounts that have discredited her status as a lauded whistleblower after Magistrate Aaron Bugeja said the Egrant allegation was based on fabricated documents.

“The Egrant fiasco confirms the negligence and gullibility of MFSA, that blindly accepted the misrepresentations fed to it by the ‘Russian informant’ Maria Efimova, supported and used by her politically motivated collaborators,” Pilatus Holding said in a statement issued after the publication of the Egrant inquiry, accusing the MFSA of knowing that the Egrant allegations were “merely a fabrication”.

“MFSA has acted as judge and jury and interviewed multiple times the Bank’s top officials, asking pointed and incriminating questions about Egrant Inc and treating them like convicted criminals.”