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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