The day after a car bomb claimed the life of Maltese investigative reporter Daphne Caruana Galizia in October 2017, a libel suit against her, one of 47, ( for $40 million in damages) was quietly dropped. She had not been notified of the lawsuit before she died; she never got to know about it. The suit had been filed in the US by Pilatus Bank and by its owner and Chairman.
Pilatus Bank and Sadr first surfaced in the Maltese media after Daphne accused the bank of a number of crimes including money laundering and kickbacks involving Maltese politicians.
The bank had been set up by a 32-year old Iranian, Ali Sadr Hasheminejad, holding a St. Kitts and Nevis passport.
A number of points about the application for the bank licence should have raised multiple flags:
- The applicant was a single beneficial owner, a 32-year-old with no public record in banking.
- He was an Iranian with a St.Kitts and Nevis passport:
“While many countries offer programs similar to the [St Kitts and Nevis] SKN citizenship-by-investment program, the SKN program is attractive to illicit actors because the program, as administered, maintains lax controls as to who may be granted citizenship. While the SKN government has publicly pledged to improve these controls, FinCEN believes that they remain ineffective.”Advisory by the US Treasury’s Financial Crimes Enforcement Network (FinCEN) in May 2014
Ali Sadr had at least two valid Kittian passports according to the US Department of Justice. St Kitts and Nevis passports can be easily acquired through a scheme similar to the Individual Investor Programme (IIP) scheme in Malta, also run by Henley & Partners.
According to the US Department of Justice (DOJ), the bank was set up using criminal proceeds. The funds were held in accounts at Bank of Valletta (BOV). According to a European Central Bank ECB report, BOV, a bank controlled by the government, kept scant details about the source of wealth of Pilatus’s directors and no documentation was provided when Ali Sadr opened an account in 2014, despite warnings.
The failure to ascertain the provenance and legitimacy of the funds marks two critical failures if the DOJ is correct; one by the MFSA, and one by BOV.
Sadr had a close relationship with the Prime Minister Joseph Muscat and his then chief of staff Keith Schembri. They even attended his wedding, an exclusive event held in Venice in 2015.
A source inside the FIAU had told Daphne that Keith Schembri frequently called FIAU to call off investigations into Pilatus and other banks, and FIAU documents show that Keith Schembri held bank accounts at Pilatus Bank where he is suspected to have received kickbacks from Brian Tonna of Nexia BT from the sale of passports.
A strong warning on Pilatus Bank and its business model of “secrecy” for politically exposed persons (PEPs) was completed by the Financial Intelligence Analysis Unit (FIAU) as early as May 2016 but shelved by those who should have paid most attention to it.
The FIAU revealed “serious shortcomings” that placed Pilatus “in breach of several provisions” of Malta’s money laundering rules, and which exposed the bank and “the jurisdiction as a whole to a high level of risk”. FIAU at the time had found Pilatus’s dependence on a small clientele of mainly Azerbaijani PEPs of great concern. Sadly MFSA and the Police Commissioner did not share the FIAU’s view.
The bank was found by the Daphne Project to have been a channel for moneys owned by the Azeri ruling family and those close to them. A network of over 50 companies and trusts secretly owned by Azerbaijan’s ruling elite used accounts at Pilatus Bank to move millions around Europe.
Ali Sadr was arrested March 19 2018 in the US as a result of an investigation by the Manhattan District Attorney’s office that started in 2013. He was indicted on six counts, including money-laundering and bank fraud. He faces a maximum penalty of 125 years in prison.
Following his arrest, Mr Sadr was removed from his role at Pilatus and his voting rights suspended. The Maltese Financial Services Authority (MFSA) appointed an 82 year old experienced former US regulator, Lawrence Connell, to take control of the bank’s assets (“competent person) and stopped all transactions, including withdrawals or deposits.
This saga was one of the first that started to seriously damage Malta’s reputation in the international scene. Malta is now viewed as a high risk jurisdiction.
Despite all this, neither the government nor MFSA, nor the Police Commissioner have ever updated the public on Pilatus Bank.
The Maltese public has a right to know. The Pilatus scandal is a matter of public interest for several reasons. The closure of a bank is an extremely unusual and serious matter, and a measure applied only in extreme circumstances. It is logical to assume that the bank was involved in wrong-doing, otherwise it would still be open.
Here are some questions that the public should be demanding answers to:
Experienced auditor Godfrey Leone Ganado points out that
” Under Article 29 (3) (e) of the Banking Act, any person appointed by the competent authority under any of the provisions of this article shall submit six monthly reports of his activities and annual accounts of all transactions carried out by him in the performance of his functions audited by an independent auditor to the Minister who will place such reports and accounts on the table of the House of Representatives within fifteen days. “
- Have these reports been submitted? If so, how can the public access them? If not, why not?
- At what stage are the police investigations (if there are any ongoing, as the police commissioner seems to have an allergy towards investigations?
- Have any arrests been made, or any planned?
- Has the application process for the bank’s licence been investigated?
- How was the fact that the bank was founded on funds from illicit gains missed?
- Has BOV’s failure to have appropriate due diligence on the source of funds of li Sadr (we are speaking of 8 million euros) been investigated?
- Has the work of the Head of Legal/Compliance been vetted? Were there any omissions on her part?
- Auditors and lawyers had given Pilatus a clean bill of health; is there any discrepancy between their findings and the police’s? If so how come?
- Has the relationship between Prime Minister Joseph Muscat and Ali Sadr been investigated?
- Has the relationship between Keith Schembri and Ali Sadr been investigated?
- Were there any other PEPs who held a bank account at Pilatus?
Malta’s reputation has been dragged into the mud because of the reluctance of the institutions (more accurately captured institutions) to do their job.
A woman was assassinated because of the reluctance of the institutions (more accurately captured institutions) to do their job.
This government has transformed our island into an island state, complete with padrini, omerta and executions.
Should anyone be surprised that people are livid?