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Latvian banks victims of U.S. regulators

Jan 08, 2014
From wire report

Latvian banks victims of U.S. regulators
CUTTING TIES: JPMorgan will no longer offer transfer services in Latvia.

RIGA - Global banking giant JPMorgan Chase & Co., which has been told by U.S. regulators to bolster its money-laundering safeguards, has stopped clearing dollar transfers for Latvian lenders, reports Bloomberg business news agency.

“JPMorgan was a meaningful partner, no doubt,” Martins Bicevskis, president of the Latvian Commercial Banking Association, said in an interview. “But that will not hinder working further and looking for other partners.”
Latvia, a hub for ex-Soviet cash, adopted the euro on Jan. 1, focusing the spotlight on $8 billion of non-resident deposits and claims by Global Witness, a London-based anti-corruption campaign group, that regulation and client vetting are not adequate in the Baltic country. U.S. regulators have reprimanded lenders including JPMorgan for lax controls over transfers that could allow terrorists and drug rings to move money around the world.

The exit of the U.S.’ largest bank leaves Deutsche Bank AG and Commerzbank AG as the only two Western lenders Latvian banks can use for international dollar transfers. New York-based JPMorgan declined to comment on Bicevskis’ remarks. Deutsche and Commerzbank declined to comment on the potential effect on their businesses due to JPMorgan’s absence.

The U.S. Office of the Comptroller of the Currency issued a consent order in January 2013 after finding JPMorgan “has an inadequate system of internal controls and independent testing” for anti-money-laundering compliance. The bank “failed to identify significant volumes of suspicious activity” and to file reports alerting regulators, according to the order.
JPMorgan did not admit or deny wrongdoing in consenting to the regulatory orders at the time, saying in a statement that the bank has been “working hard to fully remediate the issues identified in the consent order.” The bank said in August that it was reviewing its correspondent banking unit and would not take on new clients or new business.

Losing access to correspondent banks could raise the cost of doing non-resident business, according to Gene Zolotarev, chairman of Geneva-based asset-management and advisory company Maximus Capital SA (and co-owner of The Baltic Times).
“It means it is more expensive to get access to a dollar clearer for smaller banks,” he said by phone. “You can still clear U.S. dollars. You just have to go through more layers of middlemen to make payments.”

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