A payment company owned by Satabank’s director and shareholder was the St Julian’s bank’s main client, raising fears among the authorities that the set-up was exposing the bank to the risk of criminal activity.

A source formerly associated with the bank told Times of Malta that in some cases, thanks to the use of what are known as “virtual IBANs”, Satabank did not even know who ultimately owned the funds being parked at the bank.

The authorities came down hard on Satabank last year after their fears about the bank’s regulatory compliance standards were confirmed following a comprehensive audit led by the Malta Financial Services Authority and the Financial Intelligence Analysis Unit.

A report published by Moneyval, a Council of Europe anti-money laundering body, revealed this month how the FIAU ordered Satabank to terminate the relationship with its “main client”. The Moneyval report says the FIAU ordered the bank to terminate this business relationship as it exposed Malta to “significant” money-laundering and terrorism financing risks.

The source said the main client referenced in the Moneyval report was none other than the payment company owned by Christo Georgiev, the bank’s Bulgarian co-owner.

Mr Georgiev did not respond when asked for a reaction. Meanwhile, Satabank said it did not comment about individual customers.

“The bank continues to operate on a restricted basis. Funds are being returned to customers under the controlled release and after the checks and controls stipulated by the authorities have been completed,” a spokesman said.

Satabank has been fined over €3 million for these breaches in its anti-money laundering compliance standards.

The source said the close dynamic between Satabank, its co-owner and its main client made it difficult for staff to ask too many questions about the funds being introduced into the bank by Mr Georgiev’s company.

Difficult for staff to ask too many questions about the funds

According to the Moneyval report, an onsite examination of the bank by the authorities indicated “serious and systemic shortcomings” in the bank’s adherence to its regulatory anti-money laundering obligations.

These shortcomings included the failure to establish a comprehensive client profile, the lack of adequate on-going monitoring and the failure to submit suspicious transaction reports. This led the MFSA and FIAU to carry out a more comprehensive and unannounced site visit, to get to the bottom of what was going on at the bank.

It included the seizure of all relevant data found on the bank’s systems and servers.

Prior to venturing into Malta, Mr Georgiev ran an e-money business in Luxembourg.

Nationalist MP Jason Azzopardi has claimed the FIAU received a comprehensive report from its Luxembourg counterparts about Mr Georgiev’s activities there.

A spokesman for Satabank told Times of Malta last year that Mr Georgiev “voluntarily” surrendered his licence in Luxembourg before setting up shop in Malta.

Satabank gained its Malta licence in 2014, at around the same time that the ill-fated Pilatus Bank obtained its licence.

Moneyval assessors remarked how although fit and proper checks were conducted on both banks, the risk appetite of the MFSA in licensing a bank with a single beneficial owner, with no track record in banking, raises questions from a wider anti-money laundering perspective.

US prosecutors have accused Pilatus Bank owner Seyed Ali Sadr Hasheminejad of using the “proceeds of crime” to set up the Malta bank.

Mr Hasheminejad is facing up to 125 years in prison on money-laundering and sanction busting charges, which he denies.

Jacob.borg@timesofmalta.com