LONDON (Reuters) - The European Banking Authority has opened a formal investigation into “shortcomings” over how Malta’s Financial Intelligence Analysis Unit (FIAU) enforced anti-money laundering rules at Pilatus bank.
Malta’s regulators imposed a freeze on the business of Pilatus Bank in March after its chairman, Ali Sadr Hashemi Nejad, was accused in an indictment filed in a federal court in Manhattan of involvement in a scheme to evade U.S. economic sanctions against Iran.
EBA Chair Andrea Enria said in a letter to the European Union’s executive European Commission dated June 6 that he has decided to open a formal “breach of union law” investigation in relation to FIAU, the Maltese anti-money laundering watchdog over its handling of Pilatus bank.
The announcement follows a “preliminary inquiry” into FIAU and the Maltese markets regulator opened in November 2017.
That in turn came after the EU Parliament asked for clarification on how Pilatus got its license and the EU Commission requested a probe of “alleged incorrect or insufficient application of EU law pertaining to the prevention of money laundering” in Malta.
Enria said his preliminary inquiry into the Malta Financial Services Authority (MFSA) was continuing, and he has asked for more information by June 10.
The MFSA said it was in close collaboration with the EBA to address the questions raised within the stipulated time frame.
The FIAU could not be immediately reached for comment.
Enria said the preliminary assessment showed that how FIAU conducted its “investigation and planned its supervisory activities” regarding Pilatus does not appear to have met EU anti-money laundering requirements.
“The FIAU appears to have failed to ensure that the institution put in place adequate and appropriate” anti-money laundering rules, Enria said in his letter made available to the media.
“The FIAU neither imposed effective, proportionate and dissuasive sanctions nor any other supervisory measures to correct the shortcomings it had identified to ensure the institution’s compliance” with the EU rules, Enria added.
An EBA panel will now decide if there has been a breach of law and, if so, propose recommendations for the EU watchdog to adopt by mid-July.
Enria said he wants more details about cooperation between MFSA and FIAU, the prudential supervision and interventions regarding authorization, and internal controls and business model of Pilatus Bank.
“The need for further action will be assessed on the basis of the reply of the MFSA,” Enria said.
Reporting by Huw Jones; Editing by Alexandra Hudson and Keith Weir
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