Malta financial regulator freezes Pilatus Bank directors’ and owners’ operations

Maltese regulator only freezes transactions of bank directors and shareholders after Pilatus chairman is arrested in the United States

The Maltese financial regulator has issued an order to remove Pilatus Bank chairman Ali Sadr Hasheminejad, with immediate effect, from the position of director of the bank and any executive roles that he holds within the bank.

The order effectively means Hasheminejad will have to step down as a member of the bank’s board, but the MFSA did not suspend the private bank's licence, which has been connected to various high net worth individuals from presidential dictatorships like Angola and Azerbaijan.

The MFSA said it had directed that with immediate effect Ali Sadr Hasheminejad suspends the exercise of his voting rights as shareholder of the bank and refrains from exercising the legal and judicial representation of the bank.

The MFSA also directed Pilatus Bank not to allow any banking transactions, including withdrawals or deposits held with the bank by the shareholder, members of the board of directors and senior management officials of the bank, or any connected persons or related persons thereto, direct or indirect.

The bank was further directed to obtain the MFSA’s prior approval before effecting any movement of the bank’s assets. The MFSA said it is also considering other supervisory measures that may be applicable in the circumstances.

The MFSA’s statement was issued just before 5pm, after the finance minister delivered a ministerial statement in the House of Representatives.

Hasheminejad, 38, the son of an Iranian banker and holder of a Saint Kitts and Nevis passport, was arrested on U.S. charges that he participated in a scheme to evade U.S. sanctions and funnel more than $115 million paid under a Venezuelan construction contract through the U.S. financial system, federal prosecutors said on Tuesday.

Delivering a ministerial statement in parliament, Scicluna stressed that Hasheminejad’s indictment stated a number of payments were affected through banks in the British Virgin Islands, the United Arab Emirates and Switzerland among others.

He said that while a number of jurisdictions were mentioned, there was no link to Malta. Furthermore, he noted that judicial proceedings in the US were yet to begin.

“After the news was announced I spoke with the governor of the MFSA and other high-ranking officials, for them to discuss the latest developments, and for them to inform me on what action they would be taking,” said Scicluna.

He said the government was informed that the supervisory council had met today. He said the council was government by international rules and was discussing the developments, and was informed that it had decided to take a number of “significant measures”, which would be made public in the coming hours.

Opposition Economy spokesperson Kristy Debono said she would have expected more from the minister’s statement, insisting that Scicluna had only translated statements already made over the course of the day.

“I would have expected a knee-jerk reaction and a statement stating the bank’s operations had been suspended,” she said, adding that the country’s financial services sector was essential to the country’s economy.

Debono said that she had spoke with a number of practitioners in the sector, none of whom seemed as laid back about the news as the minister did.

The actions were instantly criticised in the House of Representatives by Nationalist MPs. “What responsibility will the finance minister carry after giving the bank a clean bill of health in 2016?” asked Jason Azzopardi, taking Edward Scicluna to task over the MFSA’s decision.

Democratic Party MP Marlene Farrugia called on the government to restore Malta’s reputation in financial services. “We have tarnished our country’s name because of the arrest of this bank’s chairman. I call on the prime minister to restore our reputation.”

Opposition good governance spokesperson Simon Busuttil accused the minister of omitting the fact that Hasheminejad had also been charged with money laundering.

He accused the government of trying to shift blame onto others by implying that the bank had been brought to Malta by a Nationalist government, emphasising that the bank’s license had been issued under the last Labour government.

Moreover, Busuttil said the government had no excuses since the bank had been named in every leaked FIAU report. He said OPM chief of staff Keith Schembri, Nexia BT owner Brian Tonna, and former Allied Newspaper managing director Adrian Hillman, who are all the subject of a magisterial inquiry, all had accounts at Pilatus Bank, as did a number of Azeri politicians.

He went on to say that despite the leaks, no action had been taken by a government that had “seized” the institutions in the country that could have taken action.

“Minister when will stop beating about the bush and playing with words, and grab the bull by the horns and close the bank once and for all,” said Busuttil. “When will you see to it that the bank is closed once and for all and when will you and the Prime Minister take political responsibility.”

Opposition MP Jason Azzopardi said that the measures announced by the MFSA could hardly be considered significant measures, and asked the minister whether he still believed that that leaked FIAU reports had been written to be leaked, as the minister had suggested last year.

Prime Minister Joseph Muscat dismissed accusations levelled at the government, that it had known that Hasheminejad was being investigated for over a year. He said that with the same reasoning one needed to question why the US had only taken action against the Iranian-born bank chairman now, when the crimes he is accused of committing took place in 2007. It was clear, said Muscat, that US authorities had waited to build a case against Hasheminejad.

Muscat also said the government did not believe in knee-jerk reactions, but rather in allowing the competent authorities take whatever decisions needed to be taken.

“The minister was correct in saying that he could not announce the measures being taken by MFSA until the authority did,” he said, adding the supervisory committee was autonomous and had announced the measures that were to be taken. Short of suspending the bank’s license, the measures announced, he said, were the most serious the authority could have taken.

Similarly Scicluna said the government could not take decisions on behalf of the MFSA, but noted that he was informed it was also considering other measures.

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