Sparkasse Bank fined €217,000 for anti-money laundering breaches by FIAU

Sparkasse Bank has been fined €217,000 for anti-money laundering breaches by the Financial Intelligence Analysis Unit. 

The Austrian bank was used by Portmann Capital Management, which was identified as the suspect investment firm named in US Homeland Security Investigations investigating illegal payments from the Venezuelan state oil company to top Maduro government officials. 

During the FIAU’s onsite examination, various shortcomings found at Sparkasse which included a failure to have a customer risk assessment on file; customer risk assessment carried out after, and not before the establishment of the business relationship; and insufficient detail in customer risk assessments. Such shortcomings were noted in a total of thirty-four (34) files, the FIAU said. 

In total of 31 files, the jurisdictional risk assessment performed by the Bank was considered to be inadequate by the Compliance Monitoring Committee (CMC). Although the bank made reference to public sources, this could not be considered as adequate since there was no information whatsoever as to how the bank made use of such public sources and what the result of such consideration was.  

The bank also failed to consider the geographical factor, one of the four main risk pillars when performing the customer risk assessment.  

The compliance review performed on the Bank revealed that it has failed on numerous occasions to adhere to its obligation to obtain sufficient information and documentation to establish the purpose and intended nature of the business relationships it maintained with its customers.  

The Bank failed to collect information on source of wealth and estimated size of transactions on the basis that it exercised reliance on another subject person even though the exercise of reliance does not exempt subject persons from collecting sufficient information to have a comprehensive customer profile. 

The Bank could not explain how documentation collected and found on file was to be considered within the context of the purpose and intended nature of its relationship with the customer. 

The Bank failed to collect information on how the customer was intending to use the account such as the estimated annual turnover and the estimated size and activity passing through the said accounts.  

The failure to scrutinise transactions appropriately was observed in a number of transactions effected to/from the various accounts or sub-accounts of 6 files. Whilst in certain instances the volumes passing through the Bank’s accounts were extremely large, with single payments at times even exceeding €1 million, in other cases the transactions did not tally with the customer profile. The Bank neither questioned such voluminous amounts nor did it attempt to obtain further information about the payments from its customers. Instead, it proceeded to allow the transactions being effected. 

The Homeland Security investigation that touched on Malta concerned an embezzlement of about $600 million from Petróleos de Venezuela, S.A. (PDVSA), the Venezueluan state-owned oil company, through a foreign currency exchange scheme in 2014. The following year, the embezzlement scheme ballooned to $1.2 billion. The money laundering scheme reached Malta: a hefty portion of this cash was wired to a Maltese intermediary between late 2014 and early 2015. Using a series of fraudulent bond issues and investment funds, around €511 million in 10 wire transfers was laundered through Malta. Maltese police later started a data extraction at the offices of Maltese private investment firm Portmann Capital Management. 

The company was identified as the suspect investment firm named in the Homeland Security Investigations criminal complaint, and the Malta Financial Services Authority has ordered it to stop the on-boarding of any new clients and any outgoing transactions from all clients’ accounts held by Portmann. The firm was also fined €62,893 for providing payment services without a licence. 

The company is owned by Swiss financier Kurt Portmann and his son Yves-Alain Portmann. MaltaToday is informed Bank of Valletta filed a suspicious transaction report with the FIAU in 2015 before closing the company’s accounts. Portmann last banked with Austrian bank Sparkasse.