MFSA-FIAU joint investigation in Pilatus Bank completed and handed to police

Malta’s financial regulator and the Financial Intelligence Analysis Unit have completed a lengthy “transaction-by-transaction” review at Pilatus Bank, and presented its findings to the police.

The extensive review had been launched by both the MFSA and the FIAU before the US indictment of Ali Sadr Hasheminejad on charges of breaching sanctions against Iran, in February 2018.

The review was meant to provide a robust assessment of the now-shuttered bank’s actions and – as stated by MFSA director-general Marianne Scicluna to MEPs – to “get to the bottom of allegations and concerns as to whether money laundering was carried out in the bank”.

The bank’s operations are still the subject of at least two magisterial inquiries, one triggered on an allegation by the late journalist Daphne Caruana Galizia that it processed a $1 million payment on behalf of the Azerbaijani ruling family, to the wife of Prime Minister Joseph Muscat; the other on a complaint filed by the former PN leader Simon Busuttil on money paid by Nexia BT partner Brian Tonna to the PM’s chief of staff Keith Schembri shortly after receiving payment from Russian clients who had acquired Maltese citizenship under the IIP.

Control of the bank passed under a third party ‘competent person’ when the FBI arrested owner Ali Sadr Hasheminejad at Dulles airport. Although the US charges are on actions that predate the 2014 licence granted to Pilatus, the MFSA removed Hasheminejad from chairman of the bank.

While Hasheminejad awaits trial in a New York court, Pilatus Bank’s owners and directors are still contesting the MFSA’s decision to shut down the bank.

Hasheminejad’s arrest immediately pushed the MFSA to put the bank under controllership, but officials inside the regulator had also said the decision was rushed and ‘political’, in a bid to counter the public impression that the MFSA had licensed a problematic bank.

Since the publication of the Egrant inquiry conclusions, the bank has been on the offensive against its detractors, after the allegation by the late journalist Daphne Caruana Galizia that the bank had processed a $1 million transaction from the Azerbaijani ruling dynasty to Joseph Muscat’s spouse turned out to be untrue.

Pilatus protested the appointment of American banking veteran Lawrence Connell as controller, whom it said cost “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 claimed it is incurring expenses of $100,000 (€87,000) a month.

Hasheminejad – a naturalised US national – is 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 but has restricted travel and electronic monitoring.

Pilatus also accused its former employee turned whistleblower Maria Efimova – sacked after three months and later charged by Maltese police of misappropriating funds from the bank – of being a ‘Russian informant’ who 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; but Efimova later denied being Caruana Galizia’s main source, saying she only confirmed allegations that the journalist was already working on.

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