Pilatus Bank fined €5 million by FIAU after ‘systemic failures’ in implementation of AML controls

Pilatus Bank has been fined €4,975,500 by the Financial Intelligence Analysis Unity (FIAU) for a “serious and systemic failure” in following anti-money laundering laws.

The controversial Pilatus Bank had its licensed stripped by the European Central Bank back in 2018. The bank later shuttered.

The FIAU, in a notification on its website, said that the Supervisory Examination has identified very serious and systemic concerns with respect to the Bank’s ability to implement measures aimed at satisfying its AML/CFT legal obligations and in safeguarding its operations and the jurisdictions from possible ML/FT threats.

“Such robust measures, including the need to carry out enhanced due diligence measures, were indispensable for the Bank as it held banking relationships with PEPs and high net worth individuals, and was exposed to a series of other high risk factors such as high risk jurisdictions, complex corporate structures, complex transactions, transactions of extreme high value, money movements atypical of any business or trade and an unusual high number of loans for significant amounts between Bank customers, third parties or the Bank itself.”

Of particular concern, the report reads, “was the Bank’s lax approach towards both its due diligence and enhanced due diligence obligations, albeit being established to purely provide banking services to high-risk customers. It must be remarked that the Committee could not in any way ignore the Bank’s direct or indirect exposure to a series of connections with figures from the Caucasus region considered to present extreme risks of money laundering. The Committee also acceded to the concerns raised in the FIAU Supervisory Examination Report that the bank’s dependence on these connections for its viability made it impossible for the bank to ever take concrete action actions in respect of any transaction, activity or relationship deemed to be suspicious and to report the same to the FIAU.”

The report read that throughout its operations, the bank has exposed itself, and the Maltese jurisdiction to “egregious money laundering risks that were not being mitigated in any manner. The bank’s total disregard towards necessary AML/CFT safeguards, led to it allowing millions to pass through the Maltese economy without any consideration of possible money laundering taking place.”

It read that the bank’s” systemic failures in the implementation of AML/CFT controls, measures and processes has greatly exacerbated the risks of it being used and abused by money launderers to process illicit proceeds through the bank.”

The seriousness and systemic nature of the failures determined following the supervisory examination on the bank led the FIAU imposing an administrative penalty of € 4,975,500.