BOV told to release Debono cash bank withheld under OFAC sanctions

A judge has ordered Bank of Valletta to release some €296,000 in funds belonging to Darren Debono, which had been frozen under American sanctions, after ruling that there was nothing at law binding Maltese banks to obey sanctions from the Office of Foreign Assets Control.

The U.S. Department of the Treasury’s OFAC had sanctioned Debono from a total of six individuals and 24 entities in 2018 over their alleged role in a €30 million fuel smuggling ring that stretched from Libya to Italy. Debono is facing charges on his role in the ring in Sicily.

Lawyers for his companies World Water Fisheries and Nesvan Company had filed separate cases in court when BOV refused to release their deposits – €99,080 and €196,289 respectively.

Debono is currently facing charges in an Italian court in Catania after having been arrested in September 2017 along with Gordon Debono (no relation), for their involvement in an oil smuggling ring. After being hit by OFAC sanctions, he petitioned the US embassy in Malta to have the sanctions lifted.

In court, his companies complained that BOV was refusing to release the amounts, citing OFAC sanctions which “prohibited the bank from allowing the account in question to operate in a normal manner.”

But lawyers for the plaintiffs argued that the sanctions were issued by the USA and were not enforceable in Malta, a sovereign and independent EU state.

Additionally, there were no freezing orders issued in Malta, arguing that the bank’s stance was unreasonable.

On its part, the bank explained that the World Water Fisheries had been specifically named, as had the restaurant Scoglitti – the company behind which is Nesvan – in guidance notes issued by the Maltese government’s Sanctions Monitoring Board.

The bank said that it was legally impossible to allow the companies’ accounts continue to be operated freely without a serious risk to the bank, particularly in the context of its importance to the Maltese banking sector. Bank representatives testified that in contractual relationships with international banks and in line with banking practice, they were oblige to observe OFAC sanctions; failure to do so would jeopardise its US dollar payment system.

Mr. Justice Toni Abela however noted that the SMB had never ordered any asset freeze, but “recommended” extreme caution by financial institutions when dealing with property belonging to people on the OFAC list.

This caution consisted of enhanced due diligence, close monitoring and keeping up to date records of property. “Nowhere is there some ad hoc order to freeze or block assets,” he said.

George Grech, for the SMB, told the court that OFAC sanctions affected anyone dealing in the American dollar, not just an American national. “So if I start giving money to an OFAC targeted person, I can be on an OFAC list for breaching their actions. And they could deny me access to American dollar.”

BOV had insisted this international practice had the strength of law, even though it had no formal basis in Maltese laws.

But the court observed that there was nothing stopping the bank from closing the account if it felt that the account holder was a risk, or from keeping it open but closely observing it and alerting the regulatory authorities as necessary.

It also had the opportunity to pre-emptively advise the client that it recognised and enforced OFAC sanctions. “Once the client is given this notice upon opening an account, he cannot afterwards complain… If the client doesn’t want to obey this condition, then the account will not be opened.”

The court ruled that the defendant bank had no legal right to hold on to the assets of the plaintiff companies without the authorisation of the same companies. It therefore ordered BOV to release the money together with legal interest accrued from September 2018. The bank was also ordered to pay costs.

Lawyer Victor Bugeja appeared for World Water Fisheries and Nesvan, while lawyers Louis De Gabriele and Jasmine Abela appeared for BOV.