Malta’s Financial Intelligence Analysis Unit (FIAU) has fined Pilatus Bank for several breaches of anti-money laundering and counter-terrorism financing (AML/CTF) regulations.
The “very serious and systemic concerns” regarding the bank’s ability to implement its legal obligations under AML/CTF frameworks resulted in a €4.9m (£4.2m, $5.7m) penalty.
Measures such as carrying out enhanced due diligence were “indispensable” for Pilatus, the FIAU said, as it dealt with high net worth clients as well as politically exposed people coming from, and doing business in, high-risk jurisdictions.
“Of particular concern for the committee was the bank’s lax approach towards both its due diligence and enhanced due diligence obligations albeit being established to purely provide banking services to high-risk customers,” the FIAU said.
“It must be remarked that the committee could not in any way ignore the bank’s direct or indirect exposure to a series of connections with figures from the Caucasus region considered to present extreme risks of money laundering.
“The committee also acceded to the concerns raised in the FIAU Supervisory Examination Report that the bank’s dependence on these connections for its viability made it impossible for the bank to ever take concrete action actions in respect of any transaction, activity or relationship deemed to be suspicious and to report the same to the FIAU.”
Lack of oversight
The unit said that Pilatus exposed itself and Malta to “egregious money laundering risks that were not mitigated in any manner”.
It added that the bank relied heavily on generic information provided by its customers, “which was not even considered to be sufficient to establish the customer profile for normal risk customers”.
In some instances, Pilatus asked for CVs of its clients and beneficial owners as proof, despite their unreliability nor them being independent sources of information.
In other cases, the bank held data on the customers’ operations and expected turnover that were “exceptionally high in value”, without asking for evidence to back them up.
The FIAU continued: “The bank’s total disregard towards necessary AML/CFT safeguards, led to it allowing millions to pass through the Maltese economy without any consideration of possible money laundering taking place.
“The committee ascertained that the bank’s systemic failures in the implementation of AML/CFT controls, measures and processes has greatly exacerbated the risks of its being used and abused by money launderers to process illicit proceeds through the bank.
“The seriousness and systemic nature of the failures determined following the supervisory examination on the bank, exacerbated by the considerations set out hereabove has led the committee to impose an administrative penalty of €4,975,500.”
