Pilatus Bank and former legal official charged with money laundering

Follow us live as police charge Pilatus Bank and its former head of legal Claude-Anne Sant Fournier

Pilatus Bank and the head of its Compliance and Legal department have been charged with money laundering, after a formal arraignment took place on Thursday.

Prosecutors Cinzia Azzopardi Alamango and Marthese Grech from the office of the Attorney General, assisting Inspectors Claire Borg and Pauline Bonello arraigned Claude Anne Sant Fournier before magistrate Joe Mifsud this afternoon.

Also accused was the shuttered Bank itself, represented by PwC as the MFSA-appointed competent person.

Both accused pleaded not guilty to the charges. Sant Fournier’s lawyers, Stefano Filletti and Kathleen Calleja Grima requested bail.

The lawyers also objected to the request for a freezing order, which they said was “pointless and cruel” in view of the fact that the prosecution itself had admitted in court that Sant Fournier had not received any money from the bank besides her wages.

The court upheld the request for bail against a €10,000 deposit and a personal guarantee of €40,000. It denied a request for a freezing order over Sant Fournier’s assets but upheld it with regards to the bank itself.

Pilatus Bank was fined a record €5 million by the Financial Intelligence Analysis Unit (FIAU) earlier this week. The bank was closed in 2018 after the arrest of Hasheminejad in the United States on charges of having facilitated the laundering of dollar payments from a Venezuelan housing project, to his family’s Iranian company, in what was a breach of US sanctions. But the case was dropped after the US District Attorney withheld evidence from the defence.

The Pilatus story

Pilatus Bank was implicated in the Egrant affair, when the late journalist Daphne Caruana Galizia claimed that the bank had processed a $1 million payment from the Aliyevs of Azerbaijan to the wife of former prime minister Joseph Muscat. The allegation was disproven by a Maltese magisterial inquiry along with other allegations she made about Pilatus Bank, but by then the banks’ other dealings for Azerbaijan had come under the lens of financial investigators.

After Hasheminejad’s arrest, the MFSA launched a “transaction-by-transaction” review at Pilatus Bank together with the Financial Intelligence Analysis Unit.

The bank’s operations became the subject of at least two magisterial inquiries, the Egrant inquiry; and a complaint filed by the former PN leader Simon Busuttil on money paid by Nexia BT partner Brian Tonna to the PM’s chief of staff Keith Schembri shortly after receiving payment from Russian clients who had acquired Maltese citizenship under the IIP.

In 2018, the MFSA’s director of enforcement Anton Bartolo had stated there was “no way” the regulator could have known of the US investigations on Hasheminejad when the licence for Pilatus Bank was being processed back in 2013. He also said the MFSA could not have acted on either “rumour” or information published in the press. “Even if MFSA officials had all the information in their hands, this might not have resulted in the drastic action some are calling for,” referring to calls from the Opposition to shutter the bank at the time claims of money laundering were being made. “Taking action too hastily could even have disrupted ongoing investigations in other jurisdictions,” he said.

A stark warning on Pilatus Bank and its business model of “secrecy” for politically exposed persons (PEPs) was spelt out clearly by the FIAU as early as May 2016. It came in a hard-hitting letter from former FIAU director Manfred Galdes. However, it appears that it was only in February 2018 when a money laundering probe at Pilatus was kicked off by the MFSA.

In late May 2016, an FIAU compliance visit revealed “serious shortcomings” that placed Pilatus “in breach of several provisions” of Malta’s money laundering rules, and which exposed the bank and “the jurisdiction as a whole to a high level of risk”. These were the serious observations pointed out by Galdes after the compliance visit that revealed “serious deficiencies” due to Pilatus’s dependence on a small clientele of mainly Azerbaijani PEPs. But the red flag raised by the FIAU was not deemed serious enough for immediate intervention by the MFSA.

14:23 The sitting is now over. Thanks for following today's hearing with us. A summary of the day's events will be posted here shortly. Nicole Meilak
14:22 Bail is being granted against a €10,000 deposit, and a personal guarantee of €40,000. Nicole Meilak
14:21 Her bail conditions are as follows: she must not approach the prosecution witnesses, nor commit another crime. She must sign a bail book three times a week, and has been ordered to obey a curfew, as well as deposit her ID and passport in the acts of the case. Nicole Meilak
14:20 Having seen the decrees in the Hillman and Vincent Buhagiar cases, as well as the sentence by Judge Aaron Bugeja in the case of Rabia Yavuz and Musecca Deneri – the two Turkish mothers, feels that it is in the interest of the two young children, as well as due to her cooperation with the prosecution, that the magistrate would be granting her bail. Nicole Meilak
14:14 If she fails to stick to her bail conditions, she will be re-arrested, together with her father and aunt, both of whom are elderly, the lawyer points out. She also never tampered with evidence, nor tried to escape. “This is the first time in my career where the prosecution has declared the investigation finished. Are we still going to refuse bail Nicole Meilak
14:11 The refusal of bail will have a devastating impact on her family, argues the lawyer, especially on her children as they have particular needs. Nicole Meilak
14:10 Filletti continues arguing against the denial of bail. Regarding any possible tampering of evidence, the lawyer argues that all the necessary evidence about the bank are in the State’s possession. The magistrate asks if she was sent for during the magisterial inquiry, and her lawyer says she wasn’t.
“Tell me why I should give bail,” remarks the magistrate.
Nicole Meilak
14:03 The gravity of the crime is a consideration, but is not grounds for the denial of bail, argues Filletti. Reasons for arrest should have been brought today to overcome the fears mentioned in the criminal code, such as the fear of absconding, the tampering of evidence. Nicole Meilak
14:00 The prosecution objects. Primarily because of the serious nature of the crmines with which she is accused. “It is a very early stage, where there are several witnesses yet to testify,” Azzoparid Alamango says.
Filletti says that an accurate reading of the Constitution would mean that the default position should be the granting of bail, and that it should be the prosecution fighting to have the accused remanded in custody.
Nicole Meilak
13:56 Sant Fournier has broken down in tears, as her aunt is summoned to the stand to testify as to whether she will act as a guarantor. The prosecution is asked whether it will object to bail. Nicole Meilak
13:53 Sant Fournier had known about the charges since April, and had always attended her appointents for police bail purposes, said the inspector. The accused’s father will act as guarantor. Nicole Meilak
13:48 Filletti is asking for bail. He asks the inspector how many times Sant Fournier has been questioned, to which he says four times. She hadn’t answered any questions, and according to the inspector, said that she knew she would be taken to court, and if she was going to fight she would do so in court. Nicole Meilak
13:47 However, after seeing the law and a decree by judge Edwina Grima in June 2021 in the case against Progress Press, Michel Rizzo and Claude Licari, and after hearing the evidence of Pauline Bonello, the court denies the request for a freezing order on Sant Fournier. The court ordered instead that freezing order remain in force for a temporary period only, in case the Attorney General decides to appeal. She will only be allowed €13,000 annually. Nicole Meilak
13:43 The magistrate upholds the freezing order on the bank Nicole Meilak
13:43 Filletti, representing Sant Fournier, tells the court that there is no legally-binding requirement to impose a freezing order. “Why does the state want to punish the accused over nothing? […] The court cannot close its eyes when it is clear that there is no proceeds of crime,” he says.
“There is nothing illegitimate in her wealth,” Filletti states, saying that the request is vexatious and intended only to harass the defendant.
Nicole Meilak
13:40 Azzopardi Alamango from the Attorney General’s office tells the court that it is bound to uphold the request by the prosecution, or issue a temporary freezing order. Nicole Meilak
13:37 The magistrate points out to the prosecution that one of the key elements to money laundering is that the funds had to be coming from criminal activity. “The only thing found in the bank account is her money… tell me why I should freeze them?” Nicole Meilak
13:32 Grima Calleja, representing Sant Fournier, adds that a freezing order is usually precautionary, and not a punitive measure. "You cannot crucify her with a freezing order when in the worst case scenario there is nothing to seize from our client’s assets.” Nicole Meilak
13:29 Camilleri is contesting the freezing order as the bank can do nothing with the money anyway. It cannot dispose of it, except by paying fines or professional fees.
“There is no risk. What is the point of the freezing order
Nicole Meilak
13:27 Meanwhile: Rule-of-law NGO Repubblika have since welcomed news of the prosecution against persons associated with Pilatus Bank, remarking that it was journalist Daphne Caruana Galizia that had initially reported on the bank's questionable operations. Nicole Meilak
13:25 Initially, Lawrence Connell was appointed as a competent person for the bank in 2019. Today, the bank cannot operate as its license has been withdrawn. Camilleri suggests that the competent person appointed by the MFSA can do very little, and the inspector confirms this. Nicole Meilak
13:23 The inspector confirms that Sant Fournier is no longer a director in the bank, and the bank has since ceased to operate, with the competent person taking over during the investigation. The directors have no say in the management of the bank once a competent person is appointed. Nicole Meilak
13:21 Lawyer Kathleen Calleja Grima is asking the inspector whether there was any money in Sant Fournier’s account besides her salary. The prosecutor says there were no funds besides her wages. No attachment order was issued against her either. In light of this, the lawyer asks what is the point of requesting a freezing order – the inspector explains that this is procedure. Nicole Meilak
13:19 The prosecution is asking for a freezing order over the assets of the bank and Sant Fournier. The magistrate asks how the €5 million administrative fine will be paid if the assets are frozen, and the prosecution clarifies that an application will be made. Nicole Meilak
13:17 Camilleri explains that PwC was appointed as the competent person for the bank by the MFSA in May this year. Axisa is only appearing today in this capacity. Nicole Meilak
13:16 Pilatus Bank and Sant Fournier have both pleaded not guilty to the charges, which we have not seen yet. PwC lawyer Stefan Camilleri is dictating a note to the court. Nicole Meilak
13:13 Sant Fournier was MLRO and director of the bank, the inspector says. She was responsible for seeing that the bank was in line with anti-money laundering (AML) regulations. She had to be arraigned because of the gravity of the offence. Nicole Meilak
13:11 In November 2018, a magisterial inquiry into the operations of the bank was initiated. This has now been concluded, as have police investigations on the matter, the inspector says. The inquiring magistrate eventually directed criminal action to be taken against the bank and Sant Fournier.
Sant Fournier, was on police bail. She never answered any questions, always opting to remain silent during interrogation.
Nicole Meilak
13:08 The sitting begins, as the magistrate emerges from the court chambers. Inspector Pauline Bonello is explaining the reasons for today's arrest. Nicole Meilak
13:08 Together with the case against Progress Press, this is one of the first cases in Malta dealing with criminal corporate liability. This notion was introduced through an amendment to the Criminal Code. Nicole Meilak
13:01 Meanwhile, lawyer Stefan Camilleri is assisting Fabio Axisa, who is the competent person from PwC appointed by the MFSA to oversee the bank’s affairs. Nicole Meilak
12:56 Lawyers Cinzia Azzopardi Alamango and Marthese Grech from the office of the Attorney General are assisting Superintendent Frank Tabone, Inspectors Claire Borg and Pauline Bonello. Nicole Meilak
12:44 Pilatus Bank is going to be charged as a sole entity, represented by Fabio Axisa. Meanwhile, Sant Fournier is being represented by lawyers Stefano Filletti and Kathleen Calleja Grima. Nicole Meilak
12:41 Our court reporter Matthew Agius is in Hall 25, where the sitting will be presided by Magistrate Joe Mifsud. Nicole Meilak
12:38 Good afternoon. Follow this space as we live blog the arraignment of Pilatus Bank and its former Head of Legal Claude-Anne Sant Fournier. Nicole Meilak

The FIAU has now identified 11 red flags they deemed should have raised the bank’s suspicion on its customers’ activity, when it had previously issued a clean bill of health to the bank after its site visit.

In 15 of the files reviewed by the FIAU, the source of wealth was indicated as being in part or in full being generated fro the operations of the same business operation, meaning that 15 customers were being funded by the same business activity. “However, it was observed that were one to combine the expected annual turnover of the 15 customers abovementioned, this would amount to a total of circa €390 million… the financial statements in question referred to comprehensive income of €23.5 million – the shortfall between the two amounts had to be considered as too significant to ignore.”

In issuing its fine this week – the maximum amount the agency can impose – the FIAU found that the bank had exposed itself and the Maltese jurisdiction to “egregious” money-laundering risks that were not mitigated in any manner. This included onboarding politically appointed customers, high net worth customers and companies dealing in high-risk jurisdictions and which were projecting to transact millions of euros annually. 

MaltaToday previously revealed, how Maltese companies set up by an Australian national identified as being close to the Azerbaijani oligarchy, were in the main set-up through the services of the private bank Pilatus. Back in April 2017, Heydarov was named as one the bank’s main clients by Caruana Galizia, while MaltaToday revealed the company interests of Heydarov associate Manuchehr Khangah – with companies opened by Nexia BT.