The chairman of embattled Malta-registered Pilatus Bank has been arrested by US authorities for taking part in attempts to foil anti-Iranian sanctions.

The chairman of Malta-registered Pilatus Bank, which provides private banking services and other offerings, has been arrested on US charges that he took part in a scheme to break US sanctions against Iran and funnelled more than $115 million paid under a Venezuelan construction contract via the US financial system, federal prosecutors said, according to media reports.

Iranian-born Ali Sadr Hashemi Nejad, 38, was charged in a six-count indictment filed in federal court in Manhattan accusing him of a role in a scheme to evade US economic sanctions, Reuters and others reported.

Sadr was arrested in Dulles, Virginia, court papers reportedly said. A lawyer for Sadr declined to comment.

WealthBriefing has contacted Pilatus Bank about the matter. It has also contacted the Malta Financial Services Authority, the jurisdiction's regulator, for comment and may update this news item in due course.

Prosecutors said Sadr’s family controlled an Iranian conglomerate called Stratus Group, which had international business operations and that led a project to construct thousands of housing units in Venezuela. The project stemmed from agreements that Iran and Venezuela entered into in 2004 and 2005 calling for cooperation between the two governments in constructing housing units in the South American country. 

The indictment said an Iranian company that Stratus incorporated called Iranian International Housing Corporation entered into a $476 million deal in 2006 with a Venezuelan state-owned energy company to build 7,000 housing units.

Sadr played the part of trying to evade US anti-Iran sanctions by covering up the role of Iran and Iranian parties in the payments sent via the US banking system, reports said.

“As alleged, Ali Sadr Hashemi Nejad created a network of front companies and foreign bank accounts to mask Iranian business dealings in Venezuela and evade U.S. sanctions,” Manhattan US Attorney Geoffrey Berman was quoted as saying.

The bank appeared to make no reference to the arrest and issues around it on its website today. It has offices in Malta and London.

Reports said Sadr faces six counts, including conspiracy to defraud the United States and conspiracy to violate the International Emergency Economic Powers Act.

The bank has been mired in controversy recently. It had been locked in a legal clash with the late Maltese journalist, Daphne Caruana Galizia over several articles she wrote that accused the bank and Ali Sadr of facilitating corrupt political activities and money laundering. (The journalist was murdered last October in Malta and investigations into her killing continue.) The bank said her articles were false and defamatory. A former bank employee, Maria Efimova, who was the main source for Caruana Galizia’s accusations, had handed herself in to Greek police this week. A European arrest warrant was ssued by the Maltese government in response to a complaint of fraud by Pilatus Bank.

Media reported in February that the European Banking Authority was conducting preliminary inquiries into Pilatus Bank following requests by the European commission and the European parliament. A report in the Guardian newspaper on 2 February said: “Financial authorities at the EBA, which monitors the integrity of the EU banking sector, have been asked by the European parliament to examine whether Maltese financial authorities, which have oversight of Pilatus and other banks, are fully equipped and free from conflicts of interest in their work. The EBA has also been asked to assess whether Pilatus should continue to hold an EU licence or whether the European Central Bank or EBA should intervene.” In the same report, a spokesperson for the bank was quoted as saying: “Pilatus firmly believes in the rule of law and stringent regulation, as this is paramount for the integrity of the financial systems in which we operate. Our Maltese licence was assessed and issued by the [Malta Financial Services Authority] in full compliance with the laws after a two-year process. Our robust compliance and governance meet the highest European standards and is thoroughly and independently audited.”