The now-defunct Pilatus Bank in Malta, whose Iranian owner was found guilty on five counts of breaching US sanctions and fraud, failed to file audited company accounts for the two years it was under police investigation with the Malta Financial Services Authority.

This gap was highlighted by financial expert Godfrey Leone Ganado almost a year ago, and again last week, as he raised questions on social media about the lack of action taken by the bank and by the authorities against the bank.

First mentioned by journalist Daphne Caruana Galizia who accused the bank of a number of crimes including money laundering, kickbacks and large transfers to members of the Azeri ruling elite, Pilatus Bank was blighted by scandal up until the very end when it closed down in November 2018 after the European Central Bank revoked the bank’s licence.

Its owner, Iranian national Ali Sadr, was found guilty this week of breaching US sanctions, bank fraud and defrauding the US government, among others.

The bank’s assets were frozen by the Maltese financial authorities in March 2018 – when Ali Sadr was indicted in the US – who also appointed a “competent person” to take charge of all the bank’s assets, including any related to the investment services business, to assume control of the bank’s banking and investment services business and to continue carrying on that business until told otherwise by the MFSA. Official reports had to be submitted every six months.

Leone Ganado pointed out that it was not clear whether the person had presented the reports to the authorities and whether any action had been taken for any misdoings.

“To date, four reports should have been handed to the minister responsible for banking, and these reports should have been tabled in parliament. This is not the case and no minister has refuted this lack of adherence to the Banking Act,” he told The Shift.

It would be interesting to know as to why the person had been kept in his role if his assignment had been concluded, he said.

Turning to the lack of filed accounts, he said that the fact that the directors still retained their office on the board meant that the accounts should have been filed with the MFSA for 2017 and 2018.

“What would have happened is that, the auditors would have given a disclaimer, because of the events happening after the balance sheet date,” he said.

In fact, in the 2016 financial statements, the directors made reference in their report to what Caruana Galizia wrote on her blog about Pilatus Bank. They said this was far from the truth and that legal action would be taken.

Their auditors, KPMG, had made reference to this statement in their audit opinion and classified it as an audit matter that needed to be considered, Leone Ganado said.

“So, it was no excuse not to finalise the audited accounts and file them, because of an ongoing investigation”.

If anything, the auditors would have made reference to this to justify an audit disclaimer. The same directors responsible for the term of those accounts were still in office and were available and, therefore, responsible to sign their directors’ report and the financial statements.

“If they thought otherwise, they should have resigned as directors,” he said.

It was important to keep in mind that the competent person was appointed in March 2018, which meant that the audit for 2017 should have been practically concluded.

The Shift asked Leone Ganado for his opinion as to what should happen to the bank at this point in time.

“The bank would have been given back the licence, if there were no hints of breach of the Banking Act, fraud and money laundering. The fact, that this has not happened, is that there are enough reasons to start a criminal investigation against the bank and its owner/management,” he said.

Leone Ganado said he was surprised that the auditors and directors – with the exception of one or two – did not resign from their roles.

Pilatus Bank was recently mentioned in the ongoing public inquiry as the Financial Intelligence Analysis Unit Deputy Director told three judges that investigations into Pilatus Bank are ongoing. In another session, Assistant Commissioner Ian Abdilla, who is also head of the Economic Crimes Unit, said they had investigated Ali Sadr when he was caught leaving the bank with a briefcase. But the police carried out a search on the following day.

In fact, the lack of action by the authorities has led an international financial crime consultant claim that Sadr managed to cheat justice in Malta as a result of corruption or the threat of adverse publicity, or both.