11 July 2018

The European Banking Authority (EBA) issued today a Recommendation addressed to the Maltese Financial Intelligence Analysis Unit (FIAU) after establishing it had breached Union law in relation to its supervision of Pilatus Bank. The EBA Recommendation aims at remedying the particular failings identified by the EBA by encouraging the FIAU to take all the necessary actions to comply with the Anti-Money Laundering and Countering Terrorism Financing Directive (AML/CTF). 

Following the European Commission's request of 23 October 2017, to investigate a possible breach of Union law (BUL) regarding the apparent failure of the Maltese FIAU and the Maltese Financial Service Authority (MFSA) to effectively supervise Pilatus Bank Ltd in relation to its AML/CFT obligations, the EBA conducted a preliminary enquiry, including an on-site visit to the Maltese competent authorities. In particular, the EBA's preliminary enquiry on the FIAU aimed at understanding the extent to which its approach to AML/CFT supervision and enforcement in relation to Pilatus Bank Limited had been effective and in line with Union law.  

On 23 May 2018, the EBA Chairperson, having consulted with the Alternate Chairperson, opened an investigation into a possible BUL by the Maltese FIAU. The EBA concluded that the FIAU failed to conduct an effective supervision of Pilatus Bank due to a number of failures, including procedural deficiencies and lack of supervisory actions by the FIAU after its decision to close the case without imposing any sanctions on the bank. 

Despite the several measures taken by the FIAU to remedy the identified failures, the EBA deemed these measures as not sufficient to satisfy the deficiencies that led to the launch of a BUL investigation. Therefore, the EBA called on the FIAU to adopt recommendations aimed at addressing the identified shortcomings. In particular, the EBA asked the FIAU to take actions to systematically assess the ML/TF risk associated with the Maltese financial sector; to supervise the effectiveness of the AML/CFT policies and procedures put in place by the obliged entities; to ensure enough resources are available and robust procedures are in place to supervise its obliged entities.

Legal basis and next steps

The Recommendation has been issued in accordance with Article 17 of the EBA's Founding Regulation regarding the BUL powers conferred to the Authority in case of non-compliance with Union law by competent authorities.  

In accordance with the second paragraph of Article 17(3) of Regulation (EU) No 1093/2010, the FIAU shall inform the EBA within 10 working days of receipt of this recommendation of the steps it has taken or intends to take to ensure compliance with Union law. 

The EBA's preliminary enquiries in relation to the MFSA are still ongoing.

Related documents:

Recommendation to the FIAU on action necessary to comply with the AML directive (EBA-Rec-2018-02)