RIGA - The Board of the Financial and Capital Market Commission (FCMC) on 09.07.2019 decided to apply a fine of 1 028 850 euro to Rigensis Bank AS (hereinafter – the Bank) for infringements of regulatory requirements regarding the prevention of money laundering and terrorism financing (hereinafter – the AML/TF), as well as to issue a warning to Renārs Degro, the member of the Board responsible for the field of AML/TF. A number of legal obligations have been imposed on the Bank, including request to submit to the FCMC a plan of measures to address the identified irregularities and shortcomings, to have an independent assessment of the internal control system and a customer base audit within the specified deadline.
The FCMC carried out an on-site and special purpose inspections of the Bank to examine customer transactions until February 2019. The FCMC identified a number of infringements related to the internal control system, customer base risks and their management. The irregularities showed serious shortcomings in the Bank's internal control system in the AML/TF field, as they were identified in the key elements of customer due diligence and transaction monitoring. The Bank had not established an adequate internal control system to meet its risks in the AML/TF field, which would ensure effective compliance with the regulatory requirements such as:
– the Bank had not taken adequate measures to make certain that a beneficial owner indicated indeed was the beneficial owner;
– in several cases, the Bank had not established the origin of financial means in its customer accounts and had not documented findings;
– the Bank had failed to provide timely and high-quality customer due diligence and documentation of results, as well as customer judgements were incomplete;
– the Bank's internal control system did not ensure the continuity of customer due diligence throughout the customer's life period;
– the Bank had not adequately assessed the risks associated with the customers and their transactions and had not addressed customers'; complex, unusually large inter-related transactions with no apparent economic or visible lawful purpose, including had failed to clarify and adequately document the findings and to timely obtain documents justifying the customer economic activity; – the Bank had not obtained and sufficiently evaluated the information to identify the characteristics of the banned shell corporations and therefore in certain cases had not terminated their business relationship with them within the specified time limit.
In view of above, it is concluded that the Bank has not ensured the effective functioning of the internal control system in the field of the AML/TF in a way that its activities comply with the regulatory requirements of the AML/TF; moreover, the breaches are considered as essential and sustainable. At the same time, the FCMC takes into account the progress made by the Bank in addressing shortcomings identified by the FCMC.
The Board of the Bank is responsible for general functioning, while the member of the Board is responsible for the specific scope of the credit institution. The FCMC concluded that Degro, the member of the Board responsible for the field of AML/TF, had not ensured that sufficient measures were taken at the Bank to prevent the Bank from being involved in regulatory infringements. In the light of above the FCMC has issued a warning to that person.
In accordance with the FCMC's decision, the Bank has to submit to the FCMC a plan of the measures to carry out the legal obligations laid down and to address the irregularities and shortcomings identified and to take the measures provided for in the plan within the specified time limits in order to prevent further irregularities of a similar nature in the internal control system in the field of the AML/TF risk management. Besides, an independent assessment of the appropriateness and effectiveness of the Bank's internal control should be carried out involving a sworn auditor or a commercial company of sworn auditors.
The amount of the fine imposed on the Bank shall be 80% of the maximum statutory amount, 10% of the Bank's total turnover. The fine specified for the Bank shall be paid into the State budget within one month from the date of entry into force of this administrative act. The FCMC has not previously applied sanctions to the Bank for breaches of the AML/TF regulatory requirements.