FRANKFURT (Reuters) - Malta’s regulators have imposed a freeze on the business of Pilatus Bank after its chairman’s arrest on charges of breaking U.S. sanctions prompted a fresh wave of criticism of the island’s authorities.

A washing machine and a mock plaque commemorating the opening of Pilatus Bank by Maltese Prime Minister Joseph Muscat in 2014, which was left outside Whitehall Mansions, which houses the Maltese-registered Pilatus Bank, whose Iranian chairman Ali Sadr Hashemi Nejad was arrested in the U.S. on charges of evading U.S. sanctions and money laundering,, in Ta' Xbiex, Malta March 21, 2018. The placard beside it reads "We don't want any more corruption". REUTERS/Darrin Zammit Lupi

Earlier this week, the bank’s chairman Ali Sadr Hashemi Nejad, 38, was accused in an indictment filed in a federal court in Manhattan of involvement in a scheme to evade U.S. economic sanctions against Iran, prosecutors have said.

Sadr was arrested on Monday, according to court papers. A lawyer for Sadr has declined to comment.

That prompted criticism of the Maltese authorities for inaction, including from the children of a journalist murdered in Malta last year. Daphne Caruana Galizia had reported on corruption and accused Pilatus of money laundering.

Some lawmakers had also questioned whether Pilatus Bank, which is registered in Malta, should keep its license.

The developments prompted new protests by anti-corruption activists outside the bank’s headquarters near the capital of Valletta, who placed a washing machine on a plaque marking the opening of Pilatus Bank by Prime Minister Joseph Muscat.

Malta’s police said the alleged sanctions busting did not involve Maltese citizens or institutions and that no transactions passed through Malta.

Malta’s financial supervisors nonetheless responded by imposing controls on Pilatus that effectively freezes the bank’s business.

“The bank has been directed not to transact any business whatsoever,” the Malta Financial Service Authority said in a statement, adding this applied to “all deposits and withdrawals and any disposal of the bank’s assets.”

It was not clear how long the controls would stay in place. The bank has not responded to requests for comment.

The events unfolded after a former employee of Pilatus, who ignited a political scandal in Malta after she became a source for the murdered journalist, surrendered herself to Greek police.

Maltese prosecutors have filed a European warrant for the arrest of Maria Efimova, a Russian who left Malta for Greece last year with her family, on suspicion of fraud. A Greek police official said she had been arrested at Malta’s request.

Efimova was employed for three months in 2016 by Pilatus. Caruana Galizia named her as the source of internal bank documents which she said indicated that Michelle Muscat, wife of Prime Minister Joseph Muscat, owned a secret company in Panama.

Joseph Muscat and his wife have denied the accusations.</s>Malta's financial regulator has ordered the Iranian chairman of a bank investigated by slain journalist Daphne Caruana Galizia to step down following his arrest in the United States on charges of evading U.S. sanctions on Iran.

The Malta Financial Services Authority said in a statement on March 21 that it was ordering the removal of Ali Sadr Hashemi Nejad, 38, as Pilatus Bank director and suspend his voting rights as a shareholder.

The regulator's decision came after charges were filed in a U.S. court in Manhattan on March 19 saying Sadr "allegedly funneled more than $115 million of a nearly $500 million Venezuelan construction contract through the U.S. banking system for the ultimate benefit of Iranians," in violation of U.S. sanctions.

U.S. Attorney Geoffrey Berman said that Sadr "created a network of front companies and foreign bank accounts to mask Iranian business dealings in Venezuela and evade U.S. sanctions."

Caruana Galizia's sons Matthew, Andrew, and Paul said on March 21 that Sadr's arrest as he was visiting the United States on March 19 ended the impunity with which he had operated and vindicated their mother's work.

Caruana Galizia was killed in a car bombing in October.

Pilatus Bank had filed a defamation lawsuit against the investigative journalist over articles in which she accused Sadr and the bank of facilitating corrupt activities and money laundering. The bank said her reports were false.

Her sons said Malta's actions against Sadr "vindicate our mother's work, but it has come at a terrible cost."

For months, "Malta's authorities failed to hold Ali Sadr Hashemi Nejad to account, leaving our mother to do so alone. Hashemi Nejad threatened our mother relentlessly," they said.

The move against Sadr came one day after Maria Yefimova, a Russian employee at the bank and whistle-blower who helped Caruana Galizia expose alleged corruption in the highest circles in Malta, handed herself over to authorities in Greece, saying she feared for her life.

In the U.S. sanctions case against Sadr, prosecutors said his family controlled an Iranian conglomerate called Stratus Group, which had international business operations and that led a project to construct thousands of housing units in Venezuela.

The project stemmed from agreements that Iran and Venezuela entered into in 2004 and 2005 calling for cooperation between the two governments in constructing housing in the South American country.

The indictment said an Iranian company that Stratus incorporated called Iranian International Housing Corporation entered into a $476 million deal in 2006 with a Venezuelan state-owned energy company to build 7,000 housing units.

Sadr belonged to a committee overseeing the project's execution, prosecutors said.

They said Sadr took steps as part of the project to evade U.S. economic sanctions by concealing the role of Iran and Iranian parties in payments sent through the U.S. banking system.

With reporting by dpa, Reuters, and AFP</s>FRANKFURT (Reuters) - Lawmakers and campaigners have criticized Malta’s authorities for lax controls of a bank whose Iranian chairman was arrested on U.S. charges of evading sanctions and money laundering.

The critics include the children of an investigative journalist murdered in Malta last year and some lawmakers questioned whether Pilatus Bank, which is registered in Malta, should keep its license.

The bank’s chairman Ali Sadr Hashemi Nejad, 38, was charged in an indictment filed in a federal court in Manhattan accusing him of involvement in a scheme to evade U.S. economic sanctions against Iran, prosecutors have said.

Sadr was arrested on Monday in Dulles, Virginia, according to court papers. A lawyer for Sadr has declined to comment.

Pilatus Bank, which was not mentioned in the U.S. prosecutor’s statement, did not respond to requests for comment.

The case deals a further blow to Malta’s image, following the murder last October of journalist Daphne Caruana Galizia in a car bomb attack. She had reported widely on corruption and had also accused Pilatus of money laundering.

The arrest and the U.S. charges are also a setback for the European Union’s regulators who have attempted to tighten EU banking controls in recent years, putting the European Central Bank in charge of monitoring big euro zone banks.

The ECB said it was not responsible for Pilatus and declined to comment when asked whether its supervisors had ever discussed the group.

Malta’s financial supervisor announced that Sadr should not continue in his role at the bank and ordered Pilatus not to allow the group’s top management to carry out transactions such as withdrawing money.

The agency also said it was considering other supervisory measures but its response fell short of what lawmakers had called for earlier in the day.

“Don’t keep on washing your hands,” Adrian Delia, the leader of the country’s opposition Nationalist Party, wrote in a message on Twitter, addressed to the country’s prime minister.

David Casa, a Maltese member of the European Parliament said: “It is disgraceful that this bank was ever given a license to operate in Malta.”

Pilatus received its license after the Iranian group at the center of U.S. claims made $115 million of payments now being contested.

In a statement, the sons of murdered journalist Caruana Galizia - Matthew, Andrew and Paul - said: “Malta’s authorities failed to hold Ali Sadr Hashemi Nejad to account, leaving our mother to do so alone.”

They welcomed the U.S. move, saying: “Their action vindicates our mother’s work, but it has come at a terrible cost. One of our mother’s sources ... now sits in an Athens prison cell, and our mother is dead.”

The European Commission, the EU’s executive arm, said earlier this week it had been monitoring the situation on the Mediterranean island - before the arrest of the bank executive.

“At this stage there are no grounds for sanctions but we keep looking into the issue and if at some stage ... there would be grounds for sanctions we would not hesitate to propose those sanctions,” its First Vice President Frans Timmermans told journalists on Tuesday.

“We do everything we can so that this horrible murder and those responsible ... are brought to justice.”

The events unfolded after a former employee of Pilatus, who ignited a political scandal in Malta after she became a source for the murdered journalist, surrendered to Greek police. [L8N1R22XO]

Maltese prosecutors have filed a European warrant for the arrest of Maria Efimova, a Russian who left Malta for Greece last year with her family, on suspicion of embezzlement. A Greek police official said she had been arrested at Malta’s request.

Efimova was employed for three months in 2016 by Pilatus. Galizia named her as the source of internal bank documents which she said indicated that Michelle Muscat, wife of Prime Minister Joseph Muscat, owned a secret company in Panama.

Joseph Muscat and his wife have denied the accusations.

Emanuel Delia of the Civil Society Network told a news conference outside Pilatus Bank on Wednesday: “Malta’s good name has ... been seriously tarnished across the world.”

Pilatus was in litigation with Galizia over articles she wrote accusing the bank and Ali Sadr of facilitating corrupt political activities and money laundering. The bank said the articles were false and defamatory.</s>An Iranian businessman faces U.S. charges of evading economic sanctions on Iran by moving $115 million from Venezuela through the U.S., signifying that prosecutors are intensifying a crackdown on illicit attempts to transfer money through the American financial system.

Ali Sadr Hashemi Nejad, who Reuters said is chairman of Malta-based Pilatus Bank, was arrested and charged on Monday. Sadr, whose family controls the Iranian conglomerate Stratus Group, illegally moved the money through the U.S. as part of a $476 million deal to build 7,000 housing units in Venezuela, U.S. prosecutors said.

The charges come two months after Turkish banker Mehmet Hakan Atilla was convicted of helping Iran evade U.S sanctions. The government’s star witness against Atilla, who headed international banking at state-owned Turkiye Halk Bankasi AS, was a Turkish-Iranian gold trader who testified about how Halkbank secretly moved Iran’s cash from overseas oil sales through the global financial system to help pay Iran’s bills.

“The arrest of Sadr shows that US economic sanctions against Iran are for real, and violators will be exposed and prosecuted,” U.S. Attorney Geoffrey Berman said on Twitter Tuesday as he announced the charges.

Sadr, 38, is alleged to have set up a network of front companies and foreign bank accounts to hide the business between Venezuela and the Iranian companies. The charges stem from an investigation begun by the Manhattan District Attorney Cyrus Vance in 2013.

The charges stem from what prosecutors said was a 2005 deal in which Iran agreed to build thousands of housing units in Venezuela, a project led by Stratus Group. The following year, a Venezuelan state-owned energy company agreed to pay $476 million to a Stratus Group-formed company for the work, prosecutors said.

Sadr is alleged to have helped the Venezuelan company pay $115 million by “concealing the role of Iran and Iranian parties in U.S. dollar payments sent through the U.S. banking system,” prosecutors said.

“For example, in 2010, Sadr and a co-conspirator used St. Kitts and Nevis passports and a United Arab Emirates address to incorporate two entities outside Iran that would receive U.S. dollar payments related to the project on behalf of” the Stratus Group-formed company, they said.

Sadr was arrested in Dulles, Virginia, according to an arrest warrant filed with the federal court in Alexandria, Virginia. He’s in the custody of U.S. Marshals and is to be transported to New York. He faces six counts including conspiracy, money laundering and sanctions violations. The maximum penalty for bank fraud is 30 years behind bars.

Sadr’s lawyer, Baruch Weiss, declined to comment. An email sent to a Pilatus Bank representative wasn’t returned.

The case is U.S. v. Sadr, 18-cr-00224, U.S. District Court, Southern District of New York (Manhattan).

— With assistance by Christian Berthelsen, Patricia Hurtado, and Chris Dolmetsch</s>An Iranian who chairs a Maltese bank has been arrested on U.S. charges that he participated in a scheme to evade U.S. sanctions and funnel more than $115 million paid under a Venezuelan construction contract through the U.S. financial system, federal prosecutors said on Tuesday.

Ali Sadr Hashemi Nejad, 38, was charged in a six-count indictment filed in federal court in Manhattan accusing him of a role in a scheme to evade U.S. economic sanctions against Iran, prosecutors said.

Sadr, chairman of Maltese-registered Pilatus Bank, was arrested on Monday in Dulles, Virginia, according to court papers. A lawyer for Sadr declined comment.

Prosecutors said Sadr’s family controlled an Iranian conglomerate called Stratus Group, which had international business operations and that led a project to construct thousands of housing units in Venezuela.

The project stemmed from agreements that Iran and Venezuela entered into in 2004 and 2005 calling for cooperation between the two governments in constructing housing units in the South American country.

The indictment said an Iranian company that Stratus incorporated called Iranian International Housing Corporation entered into a $476 million deal in 2006 with a Venezuelan state-owned energy company to build 7,000 housing units.

Sadr belonged to a committee overseeing the project’s execution, prosecutors said.

They said Sadr took steps as part of the project to evade U.S. economic sanctions by concealing the role of Iran and Iranian parties in payments sent through the U.S. banking system.

“As alleged, Ali Sadr Hashemi Nejad created a network of front companies and foreign bank accounts to mask Iranian business dealings in Venezuela and evade U.S. sanctions,” Manhattan U.S. Attorney Geoffrey Berman said in a statement.

The Venezuelan energy company made $115 million in payments to Iranian International Housing Corporation using entities in Switzerland and Turkey to conceal the Iranian connection to the funds, prosecutors said.

Sadr faces six counts, including conspiracy to defraud the United States and conspiracy to violate the International Emergency Economic Powers Act.

Pilatus Bank was in litigation with the Maltese journalist, Daphne Caruana Galizia, who was murdered last October, over several articles she wrote that accused the bank and Ali Sadr of facilitating corrupt political activities and money laundering.

The bank said the articles were false and defamatory. A former bank employee who was the main source for Caruana Galizia’s accusations was arrested on Monday night on a European arrest warrant issued by the Maltese government in response to a complaint of fraud by Pilatus Bank.</s>An Iranian banker at the centre of a corruption scandal in Malta that was closely followed by the murdered journalist Daphne Caruana Galizia has been arrested in the US on charges of money laundering and sanctions busting.

Ali Sadr, an Iranian who resides in Washington DC and is the owner of Pilatus Bank in Malta, was arrested and charged in a six-count indictment that alleged he participated in a scheme to illegally funnel $115m in payments from Venezuela to Iranian individuals, in violation of US sanctions and anti-money laundering rules.

The criminal charges raise significant new questions about the future operations of Sadr’s private bank in Malta, which an investigation by Maltese authorities showed caters to at least one Maltese public official and members of Azerbaijan’s ruling family. The investigation was initiated in 2013, authorities said.



Pilatus opened a branch in Mayfair, London, in 2017, under European “passporting” rules that allow a bank to open multiple branches with reduced anti-money laundering checks after it has been established in one EU country.



The development also poses questions about how Sadr, who is the son of one of Iran’s richest men, came to win – and keep – a banking license in the Mediterranean country.

The bank was the subject of a detailed investigation by Malta’s anti-money laundering agency, the FIAU, in 2016. The FIAU alleged in a report that the bank showed a “glaring, possibly deliberate disregard” for money-laundering controls. Pilatus has said in the past that it denies any wrongdoing and fully adheres to all laws and regulations.

Asked about Sadr’s indictment, a senior Maltese banking regulator who spoke to the Guardian on the condition of anonymity said that “fitness and properness” were important considerations in determining whether a bank could maintain a banking license in the wake of Sadr’s indictment.

Pilatus did not respond to a request for comment. The bank was not named in the criminal indictment and has not been accused of wrongdoing by US authorities.

But the charges against Sadr have bolstered critics of the bank.

David Casa, a Maltese MEP who is a frequent critic of Maltese prime minister Joseph Muscat, said in a letter to the chairperson of the European Banking Authority, that the indictment called for a further investigation into Pilatus.

He also called on the EBA to examine whether Malta’s chief banking regulator, the MFSA, was aware of Sadr’s alleged criminal activity and whether the decision to grant the bank a banking licence was the result of favourable political interference by an official within the Muscat government.

He pointed to an allegation by the FIAU that Keith Schembri, Muscat’s controversial chief of staff, had received questionable payments, which originated from Russian nationals, into a Pilatus account that was held in Schembri’s name.

Schembri has said the payments were a legitimate repayment of debts from a friend and has denied wrongdoing.

Caruana Galizia, who was killed in a car bomb in October, was being sued by Pilatus for defamation and for causing damage to the bank’s reputation at the time of death. The lawsuit was later dropped.

Caruana Galizia had made a wide range of enemies, reporting on a political system rife with corruption, businesses seemingly used to launder money or pay bribes, and a criminal justice system that seemed incapable, or unwilling, to take on the controlling minds behind it all.

Caruana Galizia’s three sons – Matthew, Paul, and Andrew – welcomed the news that criminal charges would be considered by a court.

“We wish our mother could have been alive to see it happen,” the brothers said.



The US case against Sadr was brought by the US Department of Justice and by local law enforcement office in the district attorney’s office in Manhattan.



In court documents, prosecutors have alleged that Sadr – who is referred to as Ali Sadr Hashemi Nejad – skimmed $115m of a nearly $500m Venezuelan construction contract through the US banking system. He is alleged to have used a vast network of front companies and foreign bank accounts to mask Iran’s business dealings in Venezuela, and then used entities in Switzerland, Turkey, and British Virgin Islands to funnel the funds back to Iran.

“Sadr’s arrest and the FBI’s investigation into his actions are further evidence of Iran’s never-ending attempts to circumvent US sanctions. It also illustrates the FBI New York’s relentless pursuit of actors representing the Iranian government, and our success at thwarting the use of the US banking systems for Iran’s nefarious goals,” said assistant director-in-charge William Sweeney.

The court records alleged that a business owned by an Iranian conglomerate called Stratus Group, which was controlled by Sadr’s family, entered into a multi-million dollar arrangement with the Venezuelan government in 2004 in which they agreed to an infrastructure project to build thousands of homes in Venezuela.

According to prosecutors, Sadr took steps to hide the role of Iranian parties in the transaction as he funneled proceeds from the contract through the US banking system.

In one case, Sadr and an unnamed co-conspirator used passports they acquired in St Kitts and Nevis and an address in the UAE to incorporate two entities outside Iran to receive the dollar payments.

It is alleged that one entity, called Clarity Trade and Finance, was incorporated in Switzerland, while another, Stratus International Contracting, was incorporated in Turkey.

The two entities were used to funnel the dollar payments to an offshore entity in the British Virgin Islands. Clarity also wired $2m in proceeds from the Venezuelan project back into the US, where it was used to purchase real estate in California.

The justice department said that the case was being handled by the terrorism and international narcotics unit.</s>MANHATTAN (REUTERS) - An Iranian who chairs a Maltese bank has been arrested on US charges he participated in a scheme to evade US sanctions and funnel more than US$115 million (S$151 million) paid under a Venezuelan construction contract through the US financial system, prosecutors said on Tuesday (March 21).

Ali Sadr Hashemi Nejad, 38, was charged in a six-count indictment filed in federal court in Manhattan for his role in a scheme to evade US economic sanctions against Iran, prosecutors said.

Sadr, the chairman of Maltese-registered Pilatus Bank, was arrested on Monday in Dulles, Virginia, according to court papers. A lawyer for Sadr declined comment.

Prosecutors said Sadr's family controlled an Iranian conglomerate called Stratus Group, which had international business operations and that led a project to construct thousands of housing units in Venezuela.

That project stemmed from agreements that Iran and Venezuela entered into in 2004 and 2005 that called for cooperation between to two governments in constructing housing units in the South American nation.

The indictment said an Iranian company that Stratus incorporated, Iranian International Housing Corporation (IIHC), entered into a US$476 million deal in 2006 with a Venezuelan-state owned energy company to build 7,000 housing units.

Sadr belonged to a committee overseeing the project's execution, prosecutors said.

They said that Sadr took steps as part of the project to evade U.S. economic sanctions by concealing the role of Iran and Iranian parties in payments sent through the U.S. banking system.

"As alleged, Ali Sadr Hashemi Nejad created a network of front companies and foreign bank accounts to mask Iranian business dealings in Venezuela and evade US sanctions," Manhattan US Attorney Geoffrey Berman said in a statement.

The Venezuelan energy company made US$115 million in payments to IIHC using entities in Switzerland and Turkey to conceal the Iranian connection to the funds, prosecutors said.

Sadr faces six counts, including conspiracy to defraud the United States and conspiracy to violate the International Emergency Economic Powers Act.
Malta imposes a freeze on Pilatus Bank. The bank's Iranian chairman Ali Sadr Hashemi Nejad was arrested and charged in the United States earlier this week, accused of breaching United States sanctions against Iran.