BRUSSELS, Belgium - After conducting a probe into how EU anti-money-laundering rules were applied at Pilatus Bank, the European Banking Authority (EBA) is now reported to have dropped the probe.

In an indictment filed in a federal court in Manhattan in March this year, the chairman of Pilatus Bank, Ali Sadr Hashemi Nejad, was accused of involvement in a scheme to evade U.S. economic sanctions against Iran.

The same month, Maltas regulators froze the business of Pilatus Bank after the EU Parliament sought clarification on how Pilatus got its licence.

Then, after the EU Commission requested an inquiry into alleged incorrect or insufficient application of EU law pertaining to the prevention of money laundering in Malta, the EBA launched a preliminary investigation.

Subsequently, in July, the EBA said that it found general and systemic shortcomings in how the islands Financial Intelligence Analysis Unit (FIAU) applied EU anti-money laundering rules.

However, on Tuesday, the Malta Financial Services Authority (MFSA) announced in a statement that the preliminary European Union investigation was dropped since the EBA found that no EU rules had been broken.

The Maltese watchdog said, The EBA has decided to close the preliminary enquiry into a potential breach of Union law by the MFSA."

Adding, "The MFSA welcomes recommendations from the EBA" to further improve supervision of Maltas financial services industry.

The watchdog said, The MFSA looks forward to future collaboration with the EBA, as well as other supervisory bodies in the EU, to improve AML supervision and ensure a strong AML environment within Malta and across the EU."

Meanwhile, the EBA said in a brief statement that it would publish the letters it has sent to the European Commission and the European Parliament in relation to the case.