Issue link: https://maltatoday.uberflip.com/i/1032158
maltatoday | WEDNESDAY • 26 SEPTEMBER 2018 7 MEWS THE European Banking Author- ity (EBA) will not open a breach of EU law against the Malta Fi- nancial Services Authority and closed a preliminary inquiry in relation to the supervision of the private bank Pilatus. The inquiry focused on the authorisation process, the pru- dential supervision of Pilatus Bank, and the recent supervisory measures taken by the MSFA. The bank's licence was with- drawn on 30 June 2018 after the indictment of its owner Ali Sadr Hasheminejad in the United States over charges of breaching US sanctions against Iran. MFSA CEO Joseph Cuschieri said the regulator was pleased that its supervisory actions with respect to Pilatus Bank were recognised. "It is clear that there were lessons to be learnt from the Pilatus Bank case, but it is also clear, and recognised by the EBA, that there has been an un- compromising commitment to identify and address these issues by the MFSA." Pilatus chairman Ali Sadr Hasheminejad was arrested in the US in March 2018. Pilatus Bank was alleged to have held accounts for the Prime Minister of Malta, an allega- tion by the journalist Daphne Caruana Galizia which was later proved to be false in the ensur- ing Egrant inquiry. The bank did hold accounts for members of the Azerbaijani ruling elites, as well as the Prime Minister's chief of staff Keith Schembri. The Nationalist MEP David Casa said that the MFSA had narrowly escaped a formal inves- tigation because it withdrew the Pilatus Bank licence. "The EBA nevertheless identi- fied serious concerns with the manner in which Pilatus Bank was handled, and which must be addressed," Casa said. "The MFSA took far too long to take the obvious decision to prevent Pilatus from continuing to oper- ate in Malta. The MFSA must effectively and immediately ad- dress the serious concerns raised by the EBA. The financial sector and the many livelihoods that depend on it must be put above the interests of corrupt politi- cians." In a letter written to MEPs, the EBA Chairman Andrea Enria said, however, that the EBA's preliminary inquiries had raised "significant concerns concerning the MFSA's authorisation and supervisory practices in relation to Pilatus Bank. However, in the light of the requirements set out in Union law for prudential su- pervisors which make it difficult to conclude that there have been breaches of clear and uncondi- tional obligations established in Union law, and especially in light of the significant supervi- sory actions taken by the MFSA in relation to Pilatus Bank, I have decided to close the case without opening a breach of Union law investigation." The EBA issued a number of recommendations for the MF- SA, and acknowledged that the Maltese regulator had informed it of a number of measures it is implementing to improve its supervisory processes. "The EBA intends to monitor this, in- cluding through an on-site visit which we currently propose to carry out in mid-2019," Enria said. The EBA specifically referred to four key areas of concerns: the MFSA's engagement with the Financial Intelligence Analysis Unit during authorisation pro- cess, robustness of due diligence checks, prudential supervisory response to concerns about ef- fectiveness of anti-money laun- dering and financing of ter- rorism controls, and the risk prioritisation given to private banks with non-resident clients. Enria said the MFSA will be updating the EBA on a quarterly basis on the measures adopted to strengthen supervision. Enria, however, said the EBA had identified deficiencies in EU law which led to perceived shortcomings in prudential su- pervision. These included better harmonisation of member states' efforts in to verify the accuracy of information provided by banks requiring authorisation. "Com- petent authorities making suit- ability assessments of individuals face significant difficulties under some national legal regimes be- cause of constraints in taking into account negative elements other than definitive judicial and administrative findings in the as- sessment of the fitness and pro- priety of qualifying holders and managers," Enria said. MFSA CEO Joseph Cuschieri The EBA chairman said the level of information exchanged can vary between Member States, and that there were no specific triggers for particular forms of supervisory action. On his part, Cuschieri said the MFSA had already started to im- plement a number of initiatives to strengthen its regulatory per- formance. These include improving en- gagement with the FIAU, pro- tocols for FIAU cooperation for ongoing supervision of banks, digitisation for due diligence checks both during authori- sation and throughout the li- censee's lifecycle, integrating anti-money laundering risks in the risk assessment framework for banking supervision at the MFSA, and increasing human resources at the MFSA. EBA inquiry 'confirmation of in- stitutions' robustness' In a statement, Parliamentary Secretary for Financial Services Silvio Schembri said the EBA's decision to close the preliminary inquiry had confirmed the "ro- bustness" of Malta's authority. Schembri said that the decision came at a time when "destruc- tive criticism" was being directed at the MFSA with the intention of undermining the financial ser- vices sector for the sake of "parti- san antics". Schembri emphasised that the EBA had also noted Malta's commitment to implementing anti-money laundering direc- tives. The junior minister insisted that the financial services sector was of the utmost importance to the country, acting as a large contributor to employment and economic growth. "Therefore, its nurturing by the government is crucial." Furthermore, Schembri point- ed out that government had "enacted changes with respect to the operations of the MFSA, giving it more tools with which to carry out its work more effi- ciently and effectively". The government, he said, was fully committed to investing further in the MFSA through the "engagement of more em- ployees, investment in IT, mod- ernisation of processes, and im- proved working conditions." No breach of EU law by MFSA on Pilatus supervision, EBA says JAMES DEBONO THE construction of boat mooring fa- cilities in the Blue Lagoon should only be considered as part of a holistic manage- ment plan for Comino, the Environment and Resources Authority (ERA) said in its reaction to a project proposed by the Gozo Ministry to construct a 660sq.m pier along with the reconstruction of the road leading to the Blue Lagoon. ERA noted that the proposal is located in an area which is "exceptionally sensi- tive" in terms of scenic, geological, geo- morphological and ecological aspects. "The project needs to be set in the con- text of a holistic environmentally-orient- ed management plan". Moreover, the project should be kept as "minimalistic" as possible so as not to sig- nificantly alter the "sensitive environment and landscape" of the area. ERA has also requested that the propos- al is redesigned with a more minimalistic approach which retains a more natural character and the proposed pier exten- sion should be temporary and demount- able. The plans for the pier and the recon- struction of the road leading to the Blue Lagoon are designed by Doric Studio, the same company entrusted with preparing a masterplan for Comino which has still to be approved and is still being discussed with the Environment and Resources Au- thority. Last month a Gozo Ministry spokesper- son told MaltaToday that the latest ap- plication is "not related to the plan being discussed with ERA." The ministry claims that the urgency to present the application was dictated by the fact that there is "an imminent danger and risk that the road collapses". In May, environment minister Josè Her- rera had claimed that the Comino mas- terplan was aimed to modernise berthing arrangements at the Blue Lagoon in an eco-friendly manner, including new re- strictions on anchoring to safeguard the marine environment. Plans show that the new pier will consist of steel deck beams erected on supporting pillars which indicates that the infrastruc- ture will be of a permanent nature. As a Natura 2000 site, Comino is subject to a management plan published in 2015. The plan calls for the urgent implemen- tation of a carrying capacity assessment for the Blue Lagoon, including seasonal variability of number of tourists, landings of tourists by ferries, entrance fee options, zoning and patrolling. It also lays down that tourism at the Blue Lagoon and elsewhere should be "prac- tised in harmony with the site's conserva- tion needs". The local plan approved in 2006 had ear- marked San Niklaw and the Blue Lagoon bay areas as a possible site for a "destina- tion port". In 2010, the PA approved an application by Transport Malta to erect a small demountable jetty at the Blue La- goon on the footprint of the dilapidated part of an existing quay. Keep it minimal: ERA's advice on Comino development