FIAU still unclear why Pilatus didn’t provide all documentation during inspection, leaked correspondence shows

After an original inspection in March 2016, objections by the bank and a subsequent investigation showed that previously highlighted shortcomings no longer existed

Leaked correspondence between the FIAU and Pilatus Bank shows that no issues were raised following a second, August 2016 inspection however doubts remained over why all the necessary documentation had not originally been provided
Leaked correspondence between the FIAU and Pilatus Bank shows that no issues were raised following a second, August 2016 inspection however doubts remained over why all the necessary documentation had not originally been provided

Leaked correspondence published by newspaper Illum on Sunday have revealed that while an on-site inspection at Pilatus Bank by Financial Intelligence Analysis Unit (FIAU) and Malta Financial Services Authority (MFSA) officials had served to address the shortcomings flagged at Pilatus bank, it remained unclear to the agency why the necessary documentation had not been provided to it in the first place.

The revelations from the documents - which include three letters sent between Pilatus Bank and the FIAU between June and September 2016 - come ahead of a debate at the European Parliament scheduled to take place next Tuesday where one of the draft resolutions is to

In the first page of a letter from June 2016, the bank is seen to strongly oppose the findings from an on-site inspection carried out at the bank in March 2016.

“The bank, whilst seeking to put across to the FIAU its account of the facts and to clarify a number of issues which have not been reported correctly in the Letter [with the results of the inspection], takes the opportunity to strongly object to the numerous unsubstantiated allegations in the Letter, which coupled with the subjective inferences made, not only fails to reflect the factual position, but creates a perception which is misleading and untrue,” wrote the bank.

Moreover, the bank also stresses that it had engaged the legal firm Camilleri Preziosi Advocates and the auditing firm KPMG to “independently and rigorously review the Bank on the same scope of the FIAU had inspected the bank during the visit”. Correspondence signed by the two firms states that no issues were flagged as regards the bank’s compliance with money laundering regulations.

The bank was at the centre of the allegations made by the late journalist Daphne Caruana Galizia, that it was involved in money laundering and that it held an account for a Panamanian company owned by Michelle Muscat, the wife of the Prime Minister. The bank’s chairman was famously filmed by Net TV film crew exiting the bank the night Caruana Galizia made her claims. Muscat has vehemently denied the accusations which are the subject of a magisterial inquiry.

In response to the bank’s letter, and following two meetings, acting FIAU director Alfred Zammit who replaced former director Manfred Galdes, refuted claims by the bank that the FIAU had not understood its business model and that officials did not ask for “all the relevant information at the time of the on-site examination”.

Despite this Zammit said that “due to a possible misunderstanding between the officials carrying out the examination and the bank”, not all the information requested had been provided during the inspection and the FIAU would therefore be carrying out a second inspection the following month, on 8 August.

In the final letter, Zammit again writes to the bank stating that “the findings of the follow-up on-site examination were brought to the attention of the committee”, which was told that “during the follow up visit, a significant amount of information and documentation which had not been made available during the March examination was provided to the FIAU and MFSA officers.”

“Upon review of the information and documentation provided, the committee had determined that the shortcomings that had been identified and communicated in our letter of 17 May 2016, no longer subsist,” read the letter.

He also notes however that while the bank was found to be in possession of all the required documentation, the FIAU remained concerned that the documentation, which had been requested during the March inspection, was not provided at the time.

“The reason why the relevant documentation was not provided to the officials during the first examination remains unclear,” wrote Zammit, adding that the matter would be kept on record and that the FIAU could choose to carry out further inspections in the future.