As a result of inadequate Customer Due Diligence procedures (checks), including lack of adequate due diligence in accepting clients, and in controls on transactions, on 20 October 2018, the MFSA (Malta Financial Services Authority, appointed Ernst & Young Limited (EY) as a ‘Competent Person’ in terms of the Banking Act, to take charge of the Bank’s assets, and to assume control of its business.
In accordance with law, the competent person has the duty to prepare a detailed report every six months, of the transactions carried out during the period. It is also the duty of the competent person, to present the report to the Minister of Finance, who has the duty to table the report in Parliament.
This report covers the six-month period from 20 October 2018 to 30 April 2019, however the competent person included certain data up to 20 September 2019. This report will be followed by an updated one-year report up to October 2019, however this report has not yet been presented to Parliament.
The following are some of the more important aspects highlighted in the report and some running observations I made. The competent person, as at 30 September 2019:
- Released Euro 121.6 million to 2,342 customers.
- Filed with the FIAU (Financial Intelligence Analysis Unit) 309 Suspicious Transactions with a total value of Euro 131 million, in respect of 601 customers. This means that these transactions were suspect in terms of Money Laundering and Funding of Terrorism (ML/FT) Regulations.
- Restricted access to €40.3 million of funds for 55 customers, following receipt of Investigation and Attachment Orders issued by the Maltese Courts. The 601 customers referred to in point 2, include 43 of the 55 customers above.
Financial position of the Bank
The following are points extracted from the financial position of the bank at 31 December 2016, which are based on the audited accounts, and extracts from the unaudited management accounts at 20 October 2018, the date of appointment of the competent person.
- The audit of the financial statements for the year ended 31 December 2017 was in an advanced stage, but the audit report was not concluded by KPMG. No reason is given for this, however, I would like to point out that all the directors of the bank resigned with effect from 30 October 2018, that is, 10 days after the appointment of the competent person. This could have been done specifically to avoid having to sign the financial statements, due to suspicious transactions for which they were not prepared to take responsibility. In fact, one also questions why the shareholders did not appoint new directors, unless they tried and found no one willing to accept.
- The main assets of the bank consisted of balances with the Central Bank of Malta, Cash and Treasury Bills, amounting to Euro 204.1 million at 31 December 2016, and Euro 195 million on 20 October 2018, a decrease of Euro 9.1 million, and Investments amounting to Euro 109.2 million at 31 December 2016, and Euro 151.9 million at 20 October 2018, an increase of €42.7 million. It is pertinent to point out that the main increase happened in 2016, after the group the bank forms part of, had voluntarily surrendered its electronic money institution licence issued by Luxembourg shortly after Satabank was given its licence in Malta. In fact, the audited accounts for 2016, show an amount of €260 million due to e-money holders, which amount was €6.2 million in 2015. The amount showing in the report of the competent person at 20 October 2018, is more or less unchanged from December 2016.
- Income figures for the financial year 2017 are unavailable, and in 2016, the bank generated its income mainly from commissions. The main expense in 2016 was also commissions, which were paid to a related company, and amounted to €3.5 million. Interest on customers deposits amounted to just €7.6 thousand as against €11.7 thousand in the previous period of 15 months.
Ownership of Satabank and ultimate controlling party
- Satabank is owned by Signia Holding Ltd with 13,574,999 shares, and Christo Georgiev, of Bulgarian Nationality, owning one share.
- Signia Holding, is owned by E E Capital Limited registered in Jersey holding 3 million shares, NET-M Privatebank 1891 AG registered in Germany and holding 1 million shares, Signia Group AG registered in Switzerland and holding 4 million shares, and Eugene M Alexander of American Nationality, holding 2 million shares.
- Note 30.1 of the financial statements of Satabank, states that the immediate parent company of the bank is Signia Holding, and its ultimate controlling party is Christo Georgiev.
- Note 30.1 of the financial statements of Signia Holding, states that the Group is ultimately controlled by Mr Georgiev, who indirectly owns 70% of the issued share capital of the Group as at the reporting dates. This may indicate that EE Capital and Signia Holding, are owned by Mr Georgiev.
- The Malta Business Records, as at today, state that information on beneficial ownership has not been received, neither for Satabank, nor for Signia.
Transactions through Satabank before the appointment of the Competent Person
An interesting read on Satabank, is an article uploaded by a local newspaper on 27 January 2019, with the title ‘Billions of euros in Satabank transactions deemed ‘highly suspicious’, and a quote ‘This makes previous money laundering cases look like child’s play’.