BOV not accepting cryptocurrency, medical cannabis customers as instructed by regulators

Helena Grech - 8th November 2019 

The bank’s CEO was speaking on TVM’s Dissett. 

Medical cannabis and cryptocurrency companies attempting to open bank accounts and/or form relationships with Bank of Valletta (BOV) are not accepted as a result of rules imposed by Malta’s regulators.

Additionally, BOV is moving in line with the risk appetites of international and correspondent banks. Over the past year, two correspondent banks cut ties with BOV in efforts to reduce the level of risk exposed, leaving Malta’s largest bank unable to have US dollar transactions processed.

This information came to light through BOV’s CEO Mario Mallia who was speaking on popular TVM programme Dissett.

With regards medical cannabis and cryptocurrency companies, Mr Mallia said that it is not just the BOV’s decision to exclude the industries from the bank’s risk appetite. He pointed towards rules imposed by regulators, presumably the Malta Financial Services Authority (MFSA) and the Financial Intelligence Analysis Unit (FIAU).

"The risk appetite in this cased is imposed on us by the regulator, and the regulator does not want us entering into this kind of risk," he said. 

The Government legalised medical marijuana in 2018, and since then, the industry has been slow to get off the ground. Earlier in the programme, when pressed about the bank’s refusal to take on clients in the industry, Mr Mallia remarked that it is “in its infancy.”

CANNABIS

“If you do not understand a business, how will you take on the risk? The fact that the Government is promoting an industry, does not mean that the bank’s risk appetite will be widened to reflect this”.

Joining Mr Mallia on the show was businessman Reggie Fava, who sounded incredulous when responding to the CEO’s comments. He questioned how the bank could write off an industry simply because it did not have the expertise and called it a wasted opportunity.

When pressed, Mr Mallia said that years down the line, the situation with the medical cannabis industry could change. He sounded frustrated when reminding the audience that ultimately, when BOV provides loans to businesses, for example, it is lending out money that belongs to depositors.

“The risk has to be calculated well,” he said. “When you have an innovative sector, and the whole world sees it as high risk, you need to take note. The medical cannabis industry is not legal across all of Europe, so we cannot just do a deep dive into it”.

On the issue of correspondent banking, Mr Mallia suggested that since international, bigger banks are viewing the two industries as being high risk, maintaining relationships with such banks would not work out.

crypto

He stressed the importance of BOV on Malta’s economy and further suggested that since Malta’s economy does not generate the volume of transactions as larger economies, correspondent banks would be reluctant to take on any risk generated through transactions stemming from BOV when the profits generated are relatively small.

Mr Mallia was questioned about the number of gaming companies who have had their accounts and relationships shut down by the bank. The CEO explained that the situation is different with regards the gaming industry.

“Gaming companies fall within our risk appetite, however one cannot deny that the industry is high risk at the end of the day. That does not mean we exclude it a priori; we accept gaming companies under certain conditions in order to reduce that risk.”

When pressed by Mr Fava and the programmes host, Reno Bugeja, Mr Mallia conceded that in the past the bank accepted gaming companies that were not registered in Malta, and that standards were more lax.

“What counted five to 10 years ago does not count today. Risk appetite has fallen across the world”.

When questioned whether issues with Pilatus Bank and other financial scandals to have rocked the nation over the past four years, Mr Mallia replied in the negative, pointing towards million-euro fines imposed on huge banks in Europe for failing to comply with money laundering regulations. As a result of this global drive to curb money laundering, risk is being reduced all over, Mr Mallia concluded.


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