Foreign Affairs Minister George Vella said he has not held any discussions with representatives of the current Libyan government over possible concerns it may have over how Bank of Valletta has allowed Libyan nationals to open bank accounts without the bank carrying out the necessary customer due diligence legally required of financial institutions.

When first asked whether any discussions to this effect have been held, the minister simply told this newsroom to “ask that to BOV”. Pushed on the matter, and mentioning that the Minister recently went on a trip to Libya, he said “that’s not on our agenda. We don’t decide on BOV policies and they have their own banking policies. If these allegations are to be believed then it’s for BOV to explain, not us”. Pressed further as to whether he has held any meetings with Libyan representatives, he finally said: “No, not with the government of Fayez al-Sarraj”.

Asked whether there have been any discussions at EU level, he said, “No, not in my sphere of action in foreign policy.”

This newsroom has reported over recent weeks how documents in its possession show that the bank had breached its legal obligations under the prevention of Money Laundering and Funding of Terrorism Regulations in favour of accepting lucrative business from Libya.

This breach had also been intentionally concealed from the relevant Maltese authorities, according to those documents. According to these sensitive documents, had informed the authorities that all proper due diligence was, in fact, being applied across the board when this was not the case.

This newspaper also holds documentation showing how the bank went to little or no effort to seek information on the source of the Libyan funds being deposited at Bank of Valletta, a critical step of due diligence for identifying suspicious transactions related to money laundering, politically exposed people or the funding of terrorism.

Libya has become a hotbed for terrorist activity in the vacuum left behind by the ouster of former dictator Muammar Gaddafi. There are also billions of euros in Libyan state wealth that have been leaking out of the country over recent years.

Previously, in response to the BOV leaks, the bank had categorically denied that it has knowingly conducted itself in any unlawful manner or intentionally concealed any breach of law as alleged in that article.

The bank’s CEO Mario Mallia, in comments to this newsroom at the beginning of May had said, “The Bank reiterates that it has the appropriate mechanisms and processes in place to comply with its anti-money laundering obligations. These processes and mechanisms are kept under constant review by the bank with the aim of enhancing those procedures and making them as robust as practicably possible.

“The volatility characterising the political scene in Libya has made the bank heighten the level of due diligence undertaken when accepting business from Libyan entities. The Bank’s processes ensure that no officer of the bank may “waive” or reduce the level of due diligence that is conducted in accepting any business”.

This newspaper has also confirmed that the European Central Bank is applying considerable pressure on Bank of Valletta to close down bank accounts opened by Libyan nationals since at least 2013 and which have been flagged as not having been subjected to legally-required due diligence procedures, this newspaper can confirm.

This newspaper is also reliably informed that Bank of Valletta is resisting the demand, and has instead agreed to close down trusts set up in recent years by Libyan nationals.  Such trusts have also raised the concern of Malta’s anti-money laundering and anti-terrorism funding authorities in that they lacked due diligence procedures when they were set up.

Bank of Valletta strongly refutes allegations of deliberate breaches of law or regulations

Bank of Valletta once again refutes in the strongest possible terms that it deliberately breached any law or regulation, and invites any person who has concerns regarding the Bank's conduct to raise such concerns with the appropriate supervisory authorities. 

In a statement, the Bank said it took all comments made by the regulators very seriously and responds, in as comprehensive a manner as possible, to explain its action in particular cases which may be raised from time to time by regulators. Our relationship with all regulators is a very professional one as we share the commitment to prevent people using our Bank for illegitimate purposes.  

The local and international financial landscape is changing rapidly. Political instability in neighbouring North African states, the wave of banking and financial regulation and the internationalisation of the Maltese economy are game-changers for the local banking sector.  BOV is taking all the necessary measures to face these challenges by strengthening its anti-financial crime defences in the shortest possible time.

One such measure is the ongoing due diligence review of financial intermediaries which do business with the Bank; this exercise has led to the termination of around 70 intermediary relationships over the past year. In the last several months the Bank has terminated hundreds of banking relationships many of which were established in the past decade and beyond. This exercise of continuous due diligence will continue in the coming months and more relationships may have to be terminated if and when there is evidence that they may not be meeting the Bank’s expectations in terms of proper standards of conduct.

Other measures include the setting up of an Anti-Financial Crime (AFC) Department, with responsibilities which stretch much further than the traditional prevention of money laundering and funding of terrorism function; the recruitment of a considerable number of employees for its Risk, Compliance and AFC functions; and the tightening of its Customer Acceptance Policy which, ironically enough, has led to widespread complaints from practitioners that the Bank is being excessively slow in on-boarding new customers.

In taking these and other measures, the Bank is being guided by expert external consultancies, including 'Big Four' audit firms and international firms specialised in gaming regulation. In the past three years the Bank commissioned three in-depth independent expert reports on its anti-financial crime process and shared the findings of these reports with the local and EU regulators. The process of implementing the recommendations of these reports is now in progress. Anti-money laundering issues are also a regular item of discussion at board and management committee level.

The Bank's objective is not to make short term profits, but to ensure long term sustainability.  Its primary concern is qualitative, and not quantitative. It will therefore continue to make the necessary investments in people, training and IT in order to protect the stability of the Bank itself, as well as that of the local financial services sector.