Venezuela dirty money probe: MFSA ordered to finalise Portmann review

 

Wealth management firm implicated in money laundering probe wins complaint to force MFSA to conduct review of operations within three weeks

Portmann is suspected of having been used in a high-profile $600 million money laundering scheme reaching up to the Venezuelan presidency of Nicolas Maduro, on embezzlement of the country’s petroleum profits
Portmann is suspected of having been used in a high-profile $600 million money laundering scheme reaching up to the Venezuelan presidency of Nicolas Maduro, on embezzlement of the country’s petroleum profits

Malta’s financial services tribunal has upheld a complaint by a wealth management firm embroiled in a United States investigation on dirty money from Venezuelan politicians, saying the regulator’s decision to stop Portmann Capital Management from taking on new clients was not in line with the law.

The FST has instructed the MFSA to conduct a review of Portmann’s restricted services within three weeks of the tribunal decision, since its indefinite suspension of the wealth management firm’s activities was “abusive”.

Portmann is suspected of having been used in a high-profile $600 million money laundering scheme reaching up to the Venezuelan presidency of Nicolas Maduro, on embezzlement of the country’s petroleum profits.   

The firm was fined €370,000 by the Financial Intelligence Analysis Unit over its scant due diligence on its politically exposed clients (PEPs), and €63,000 by the Malta Financial Services Authority.

The company, owned by banker Kurt Portmann, was revealed to have processed a total of €553 million in 735 transactions for its small clientele of just 53 clients between 2011 and 2018 without a payments services licence.

BACK STORY • Laundering the Bolichicos’ cash: how a Malta firm assisted the Venezuelan elites: How a Maltese firm is believed to have assisted in a money laundering network for the Venezuelan elite

The MFSA had said its decision to stop Portmann from taking on new clients and stop redemptions from client accounts was a result of the firm’s weaknesses in internal controls. “This measure was taken to ensure market integrity by preventing clients of Portmann suspected of committing a criminal activity from transferring their potential illicit investments on to other investment service licence holders.”

But Portmann protested that the MFSA had done nothing by way of a review of its operations, and that its inaction had seriously prejudiced its business, claiming it was tantamount to the cancellation of its licence.

In its decision, the tribunal agreed with Portmann that the actions of the MFSA had effectively cancelled its licence.

“Receiving interest and dividends from investments made prior to the decision, sending out statements to clients, communicating with clients without being able to executive instructions, paying utility bills and other bills and fees, and withdrawing management fees to pay operation costs are simply acts of administration of a funerary nature elating, in this case, to a dead licence.”

The FST also said that the MFSA had said back in August when it restricted Portmann’s activities, that it would monitor these restrictions, it had since then failed to specify how it would be assessing or monitoring the restrictions.

“The Tribunal considers the authority’s decision as abusive and manifestly unfair since by effectively cancelling the appellant’s licence without calling it such, the authority by its actions and inactions deprived it from the benefit would have enjoyed of a cancelled licence pending appellate proceedings.”

The FST said it would now consider the authority’s decision to be an effective cancellation, and ordered the MFSA to effect a monitoring and review assessment of Portmann’s internal controls within three weeks from 23 October.

 

Venezuela money laundering

Portmann’s clients include Venezuelan national Jose Vincente Amparan Croquer, aka ‘Chente’, described by the US investigators as a “professional money launderer” who uses a Spanish real estate firm as his front. According to the criminal complaint, “Amparan also maintains relationships with ‘European Financial Institution 1’ in Malta” now suspected to be Portmann Capital Management.   

US investigators used email search warrants to confirm the flow of funds from Venezuela’s state petroleum company PVDSA, to conspirators through ‘European Financial Institution 1’. One email, carrying an attachment titled ‘Operation 600k’, contained worksheets detailing the illicit cash flows from Venezuela to Malta: which included €20.4 million assigned to the Maltese ‘European Financial Institution 1’ as a 4% fee.

The MFSA and FIAU suspect that the company’s core business was carrying out unlicensed payments services for its select clients, of significantly high values not related to investment operations but as a substitute for banking or payment accounts.  

But both the MFSA’s and FIAU’s fines were only finally imposed in August 2018, after Portmann was implicated in the Venezuelan money laundering probe.  

While the MFSA discovered the unlicensed payments during a site visit in June 2016, the company is accusing both the regulator and the FIAU of acting belatedly in response to press attention. 

Indeed, the FIAU carried out its own site visit in November 2016, in which it discovered major breaches of financial rules on due diligence and client on-boarding, but again only fined the company €370,250 on 24 August 2018, 13 days after the Maltese press reported the Venezuelan money laundering investigation by United States investigators in Miami.  

Portmann is now claiming the FIAU’s and MFSA’s actions were only spurred by the press reports, since the two authorities were “silent for 10 months” after their follow-up requests on their 2016 site visits.   

“The FIAU was pushed into action by what emerged in the media as they referred to ‘the possible impact... on Malta’s reputation’ in their sanction letter,” Portmann’s lawyers said in a court document contesting the fines. “It is unfair that the company has been judged by what was published in the media... if nothing had happened, or had timely adjudication taken place before, the outcome would have been different.”   

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