Playing by the rules | Seyed Ali Sadr Hasheminejad

Pilatus Bank chairman Seyed Ali Sadr Hasheminejad has defended his bank’s anti-money laundering setup, but is tight-lipped about the possibility of being host to accounts for local PEPs and foreign kleptocrats

matthew_agius
Matthew Agius
30 April 2017, 11:00am
Seyed Ali Sadr Hasheminejad
Seyed Ali Sadr Hasheminejad
Let’s start with the enduring image of the past week: you walking out of the bank’s back entrance, carrying luggages in hand. The impression out there is that you were trying to dispose of documents, at a late hour in the night. What do you say to this?

On Thursday morning I landed in Malta at 11:30 from Washington DC through Frankfurt. I caught an eCab, came directly to the bank, got my luggages out and went directly to the boardroom. I was in the boardroom for the entire time that I was at the bank. From around 12:30 to almost 9pm I was at the bank with my luggages intact. As you know the bank is monitored by CCTV cameras. We voluntarily submitted everything we had, not only the eight or nine hours I was at the bank, but the entire day’s footage.

It was important on that day that I get straight to work and don’t go home. That is what is required of someone of my calibre to get to work faster. I worked on the Chairman’s Statement and Director’s report so we would be prepared for the day after, which was the board meeting that was scheduled on Friday. All of that is captured, throughout the entire day, to put people’s minds at rest, I did not touch any of the clients’ documents, and it’s not my job to touch clients’ documents. Or the allegation or the claim that any of the documents were taken out of the bank – all of that is just patently false. That’s the entire amount of time that I spent inside the bank and then what happened outside of the bank is known to everyone.

Having seen what people are talking about, if I were to make those decisions again, hindsight being what it is I would have taken a different course. I would have handled the situation better.

How?

I would have walked out of the front door and not the side door. My opinion of the matter of the time was for the safety and for the fact that employees of the bank can’t talk to media, they can’t disclose information to media.

So you were aware that the media was outside the bank?

Yes we were told by the security people that there’s media outside. For their safety, not that there’s anything wrong, I just didn’t want the friction of our employees who are working really hard till 9pm to face media questions that they can’t answer.

Were you aware why the media was there?

Of course there were claims that had come out in blogs and posts that had made some claims that the bank had certain accounts. So that was probably the intention of the camera crew to come out and be at the side of the bank, obviously you would have to refer to them to see what the intentions were.

The next day you were challenged about your bank’s relationship with the Aliyev family and you never denied this. Would you like to comment on this?

The bank is prohibited by law from making any comment on any client it has, had or wants to have. Putting that aside, I want to get to the fact that the bank had very, very rigorous compliance and governance system in place. That is important to understand that and it is also important to ask what type of banking we’re talking about here.

In fact I was about to ask you: what kind of clients, what sort of services do you offer. You’re obviously not a high street bank with ATMs, you don’t give out home loans as far as I know. What does Pilatus Bank do?

Pilatus Bank is a private bank. The notion is that we deal with private individuals, high net worth individuals and mass affluent people who do not live in Malta. However, this is a Maltese bank. If a high net worth individual from Malta came and asked to experience private banking in Malta we would assess the risk and business model and risk appetite to onboard them.

But coming back to your question, Pilatus Bank is a private bank and it caters for investors out of Malta, just like private banking happens in Switzerland, just like private banking happens in Luxembourg, just like private banking happens in Vienna, just like how private banking happens in Lichtenstein. I’m naming these countries because they’re known for private banking. You can go to the likes of bigger countries like Germany and France and you find very large private banks. 

But as a private banking hub, Malta is ripe. Malta is ready. Malta can become the next global player in the Private Banking sector. That’s the message, that’s the takeaway.

That is obviously an important aspect and thank you for sharing it, but we know for a fact that for example Azeri businessman Manuchehr Khangah is a client of yours. He opened a company in formation account with Pilatus Bank. How did he come to choose your bank and do you feel comfortable with having clients like him and the Aliyevs, a dynasty of kleptocrats?

Matthew that’s a great question. As you know I can’t comment because of the legal framework that binds me to confidentiality.

You didn’t want to answer about individual clients, but some of these clients are subject to sanctions or blacklisted. So how do you reconcile that with your legal obligations and responsibilities?

The notion that there are individuals that you’re saying the bank was never allowed legally to bind itself into a relationship, that legally the bank was not allowed to onboard. That is just patently false. Not only is that patently false but the bank goes above and beyond to ensure that there is a proper risk framework around such clients and transactions.

When you say risk framework, does this include due diligence and KYC?

Absolutely. In banking there are many things you have to follow prior to onboarding a client and after you onboard a client that there is ongoing monitoring of the client and his transactions and many things that come through. There are many words that are technical here: source of funds, source of wealth, many technical words that we can talk about. All of that, through our policies and procedures need to translate into practical ways and means for the bank to make sure that it is not only abiding by the rules and the laws stated by the regulators, but goes above and beyond to protect its own reputation.

Walk me through it. I’m a client, I have $150 million and I want to deposit them at Pilatus bank. 

First of all I don’t do the onboarding of clients but I can tell you about the procedure.

In the broadstrokes.

You go through a very rigorous process. Onboarding of clients if they come from some element of high risk – that onboarding, it takes time. The process is rigorous. For some people, it could take, for known quantities to the bank, for some people it could take less, for some people it could take more. What I can tell you is this. We don’t cut corners. Everybody is subject to a rigorous process. You as your example goes, we go through a very rigorous process to establish the source of funds. This is the issue. We’re a regulated entity and a regulated entity is subject to a lot of standard inspections.

We are subject to a lot of audits.

In fact the bank was reportedly investigated for unspecified irregularities by the FIAU. Can you tell me what the investigations were about?

Any bank, all banks are subject to regular inspections by the regulators. We’re in constant communication with all regulators, including the FIAU and MFSA and whatnot.

But are you being investigated by them?

This is another piece... I’m bound by confidentiality not to disclose any past, ongoing, future inspections. The FIAU is a respected institution and has brought a lot of reputational... positive elements not only to Malta but to the banking system. It remains an important force as we move forward and make Malta a financial hub in the EU. I want to come to this, because this is a very important part – these inspections are good. We welcome these inspections all the time. Our doors are open all the time to any regulators to come and ask questions and get a better sense.

And we get a better sense of what they expense. As we move forward, I encourage these conversations, these inspections. So that the institutions and the regulators come together more often so their expectations do match. If the regulators want the institutions to go further in certain areas, that is exactly how it comes to the subject person to the bank to all financial institutions. So not only are we subject to all of that, we encourage that and we’re extremely forthcoming.”

There was also speculation that your bank should not have been granted a licence in the first place, because you’re born in Iran if I understand correctly. How did that work? I understand that you have a St Kitts and Nevis passport. This is pertinent to the issue.

For someone to suggest that someone who was born in Iran, as a matter of an accident – I’m sure we never chose in which country we were born, that that should determine who we can become in life is a wrong statement to make. I don’t want to get into racism or the likes of racism, I want to stay with this positive message. No matter where you were born: in Iran, in Malta or in any other country on this planet, you can achieve anything if you set your mind to it. That’s the takeaway. I am a person who went to an Ivy league school. To somehow suggest the notion that because someone was born in a certain country they can’t achieve the highest standard in life – that notion is past us. 

You have a strong relationship with Nexia BT and KPMG. What was their role in bringing Pilatus Bank to Malta.

We have a working relationship with all audit firms, there are the big Four in Malta, including KPMG, PWC, Deloitte and Ernst and Young. We have relationships with all of them. We have relationships with a lot of law firms, not only locally but across Europe. It is normal for any bank to operate that way today, because you need their expertise.

When we came to Malta, it was important to find an advisory firm to go through the licensing process and the licensing process is a lengthy, rigorous, strict process, and it takes years. 

Saying ‘oh the application was submitted on this day and licence was granted on that day’. They only look at that period of time. They don’t know what has gone into that application. It takes sleepless nights to put that application together. You have to justify your business plan, how it’s going to work, who is going to make it work, what’s your governance in place, what’s your compliance in place, what kind of advisory services you need, what kind of engagement you have to have, what kind of core banking...it’s setting up an enterprise before having the enterprise. That’s the process and the process has to be like that to ensure that when the bank opens it can cater for the management of its risk.

The regulator, the MFSA has come out strongly in the past couple of days and defended the licensing process and you can’t get a stronger statement from the regulator defending the granting of a licence. But the public doesn’t know that and I believe it’s your job to inform the public that that process needs someone like KPMG involved, because it’s a rigorous process and needs the people who know this stuff to get involved and bring the right elements and resources to make sure that that licensing process is prudent, it’s strict, rigorous and at the end of it – there are no guarantees.” 

This process started in 2011, 2012, and it takes years. And back then there was another government in power.

When the licence is granted, and it’s not granted to an individual but to an institution, there are many pre-licensing conditions that you have to meet prior to getting into operation. Then there are post-licensing conditions that you have to meet. Then you have to meet all the laws and regulations as you go live. And that is rigorous. 

Yesterday the leader of the Opposition made a statement saying that Pilatus Bank was used for a money transfer from a Panamanian offshore account to the PM’s chief of staff. The upshot of this is that you’re accused of either enabling kickbacks or suspicious payments. How do you respond to that?

First of all, I’m bound by the confidentiality laws, not only to protect the institutions but also to protect the public... I cannot discuss any specific case. But what I can tell you is this: the bank goes above and beyond, and I keep mentioning this, to make sure that it has the right compliance framework in place, that it follows the right AML procedures.

But, if notionally speaking, PEPs were to hold accounts doesn’t this mean that the procedures have failed, that the procedures are not strong enough?

I can’t talk about something hypothetical here. The driving factor here is that there are laws and regulations that we are bound to follow and that’s what we do. Like every other bank, we’re bound by these laws and these laws call for certain things that the banks have to do.

Such as report suspicious transactions to the FIAU?

There’s a host of things that we have to do.

The reason I ask is because Mr Khangah had declared over €627,000 losses in a company that was closed down within less than 12 months, and which he paid off with a shareholder’s loan. Is this not suspicious? 

We seem to be going back to the same thing. I can’t comment.

Earlier this week you were questioned at length by Magistrate Bugeja in the inquiry. In the broad strokes what was discussed?

Pilatus Bank voluntarily made itself a witness for the purposes of the inquiry. It is not the subject of the investigation. We covered a lot of ground. I cannot get to the specifics... but I can tell you that in the five hours I was there we talked about the many things that we, as a bank, made ourselves witness to. 

This is the entire bank. This is the entire IT core system which is a massive thing in itself. All the records, all the papers, they were just given to the inspectors by the magistrate’s order. There is a lot and it’s natural for this process to take the time it deserves so that we can get to the bottom of this, to  find out whether those accounts were opened, those accounts were held, those transactions were done… this is a lengthy process but I want to say that I have so much respect for those men and women of the inspection team who worked around the clock over the weekend to get to the bottom of this as fast as possible.”

How has this scandal affected the bank and how do you see it recovering?

The bank is open. The scandal has not affected the bank’s operations. Everything is operating as normal and all that is in the past. What we need to focus on is the future. Malta is an amazing hub for banking. The stuff that’s happening. Let’s get past this stuff and look to the future.

For the first time in the history of this country, Pilatus Bank has ventured out and established a branch in London. It’s your job to make sure people out there know this. We’re putting the Maltese flag on the private banking map. This remains a Maltese bank, with its future legs in London... this shows commitment. That Malta can be that next private banking hub and the next global financial hub and we have shown it. We can go out and establish and operate a branch and carry the name, the great name of Malta abroad. 

(Interview was carried out before the whistleblower – a former Pilatus Bank employee – testified before the inquiring magistrate on Friday afternoon.) 

matthew_agius
Court reporter Matthew Agius is a Legal Procurator and Commissioner for Oaths. Prior to re...