Latvian Regulator Imposes Largest Possible Fine on a Latvian Bank involved in Money Laundering Connected to the Magnitsky Case

June 19, 2013

Following a probe into six Latvian banks, Latvia’s financial markets regulator, the Financial and Capital Market Commission, has imposed a fine of 100 thousand Lats (around $191,000) the maximum fine possible on one Latvian bank for its role in laundering the $230 million stolen from the Russian government directly connected to the Magnitsky case.

The probe was based on a complaint filed by Hermitage Capital Management with the Latvian authorities in July 2012 naming six banks (Aizkraukles Bank, Baltic International Bank, Baltic Trust Bank, PrivatBank, Rietumu Bank and Trasta Komercbank) that received funds directly or indirectly from the $230 million illegal tax refund exposed by the late Sergei Magnitsky.

The name of the sanctioned bank has not been disclosed by the regulator.  

The aim of the probe was “to clarify whether the banks had complied with regulatory requirements for anti-money laundering and combating terrorist financing,” said the Financial and Capital Market Commission.

“Following inspections of six Latvian banks conducted in relation to Magnitsky case, Financial and Capital Market Commission (FCMC) adopted a decision to impose an administrative penalty for deficiencies in internal control system on one occasion, i.e. customer due diligence. A maximum fine of 100 000 lats is imposed for violations in the area of laundering the proceeds from criminal activities and terrorist financing,” said the Financial and Capital Market Commission of Latvia.

 

Commenting on the transnational nature of the money laundering conspiracy exposed by Sergei Magnitsky and which had victimized Hermitage in Russia, the Latvian regulator pointed out it spans “several dozens of banks” and many countries in Europe highlighting the need to unite forces against the common threat to EU financial systems.

 

A company that received the illicit funds in Latvia on accounts of PrivatBank, one of the banks inspected by the Latvian Financial and Securities Market Commission, called Technomark Business, was registered in the UK, had a parent company registered in Cyprus, which in turn had a Latvian director Erik Vanagels, named in this week’s Sunday Times (http://www.thesundaytimes.co.uk/sto/news/uk_news/People/article1274719.ece) for his involvement in other “several thousands (mainly UK) companies.”

 

It was previously reported that illicit funds stolen via a scheme exposed by Sergei Magnitsky were wired through six Latvian banks, including: Baltic International Bank: $8.5 million, Trasta Komercbank: $6.2 million, Rietumu Bank: $2.1 million, Aizkraukles Bank (now – ABLV Bank): $1.2 million, Baltic Trust Bank (now – GE Money Bank): $0.9 million, PrivatBank (previously Paritate bank): $0.5 million.

 

When this information was revealed last September by the Latvian investigative report “Nothing Personal” aired on TV3, none of the banks wanted to talk on camera, according to Latvian publication IR (http://www.ir.lv/2012/9/24/raidijums-magnitska-lieta-iesaistitas-vairakas-latvijas-bankas). ABLV Bank replied last September as follows: “Previously we had known this information. Currently, we are conducting the background investigation.”

The Trasta Komercbank’s comment at that time was: “At the moment we can only comment that, according to Latvian legislation, any kind of information on bank clients is confidential… TKB’s operation is in full compliance with national regulations and international banking standards.”

The news of the Latvian sanctions has been featured in the Latvian media (http://www.ir.lv/2013/6/16/fktk-magnitska-lieta-soda-vienu-latvijas-banku).

Laima Auza, Head of Communication Division
Financial and Capital Market Commission of Latvia
+ 371 6777 4860 or +371 26148001.
http://www.fktk.lv/

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