Malta's Pilatus Bank is set to lose its license after the European Central Bank reached a preliminary decision to revoke it, Reuters reported, citing two central bank officials.

Unspecified legal issues, however, need to be resolved before the decision is finalized, according to the Oct. 16 report.

The move comes after Pilatus Bank's Iranian chairman, Ali Sadr Hashemi Nejad, was arrested and indicted in the U.S. in March on charges of money laundering, conspiring to violate Iran sanctions and committing bank fraud. Following the arrest, the Malta Financial Services Authority froze the bank's assets and recommended the withdrawal of its license in June.

Pilatus Bank has been accused of processing suspicious transactions for the leaders of Azerbaijan and Malta by journalist Daphne Galizia, who was killed in 2017 by a car bomb in Malta, the news agency said.

The bank was granted a banking license by the MFSA in January 2014 through loopholes in EU rules, Reuters noted.

The European Banking Authority began a probe into the matter in 2017. The authority, however, was forced to halt inquiries in September because EU rules are too vague and "make it difficult to conclude that there have been breaches of clear and unconditional obligations," Reuters added, citing a letter from EBA Chairman Andrea Enria to EU lawmakers.