FILE PHOTO: Whitehall Mansions, within which the offices of Pilatus Bank are situated, is seen in Ta' Xbiex, Malta, October 28, 2017. REUTERS/Darrin Zammit Lupi/File Photo

VALLETTA (Reuters) - Malta’s banking watchdog on Saturday asked the European Central Bank to withdraw the banking license of Pilatus Bank, whose chairman was indicted earlier this year by a U.S. court.

Malta’s Financial Services Authority (MFSA) said it had formally filed for the withdrawal of the license due to the indictment of its chairman Ali Sadr Hashemi Nejad and because the bank had inadequate liquidity.

Sadr was arrested in March over his alleged involvement in a scheme to evade U.S. economic sanctions against Iran.

“The MFSA is no longer satisfied that the ultimate beneficial owner (Sadr) is a suitable person as required by the Banking Act,” it said in a statement.

It added that it had been monitoring the bank closely and noted that it had been “persistently breaching the liquidity coverage required by law” since Sadr’s indictment.

Pilatus Bank could not be reached for comment. The ECB declined to comment. A lawyer for Sadr declined to comment when he was arrested.

This month the European Banking Authority opened a formal investigation into “shortcomings” over how Malta’s Financial Intelligence Analysis Unit (FIAU) enforced anti-money laundering rules at Pilatus bank.

The MFSA, which froze the bank’s assets after Sadr’s indictment, said it would “continue to take all necessary actions to protect those assets until the results of the ongoing joint MFSA/FIAU investigation into alleged money laundering at the bank are completed”.

It added that it would now wait for the ECB’s assessment before proceeding with any further action.