RIGA - The Financial and Capital Market Commission (FCMC) has imposed a fine of EUR 5.85 million on Rietumu Banka for infringements of regulatory requirements regarding anti-money laundering and counter-terrorism and proliferation financing (AML/CTPF), FCMC representatives informed LETA.
The bank is also subject to a number of legal obligations to address identified violations and shortcomings, the regulator said.
In 2019, the FCMC carried out an onsite inspection at Rietumu Banka, and in 2019 and 2020 targeted inspections followed in the field of AML/CTPF, assessing compliance of the bank with the AML/CTPF regulatory requirements, as well as whether there was an internal control system in place capable of identifying risks to enable the bank to take further measures necessary to manage risks, thereby preventing the use of the bank and Latvia’s financial system for ML/TPF purposes.
During the inspections, the FCMC identified irregularities and deficiencies related to insufficiently effective bank’s internal control system and risk management, as well as came to the conclusion that the bank had not adequately assessed the risks associated with the activities of payment service providers (including foreign) and, in some cases, the level of ML/TPF risk inherent to the customer was determined lower than the actual risk level.
The inspection revealed that insufficient resources were available in the bank for the ML/TPF risk management, as well as there had been a lack of comprehensive internal audit service inspections, incomplete internal regulatory framework in the field of AML/CTPF and lack of customer due diligence quality control.
The FCMC concluded that these had been the causes of significant irregularities in several customer due diligence and transaction monitoring processes, such as carrying out timely and high-quality customer due diligence, including enhanced due diligence and documentation of its findings, identification of the origin of financial funds, ensuring sufficient customer transaction monitoring, identification of beneficial owners and reporting timely to the Financial Intelligence Service, identification of shell corporations.
The FCMC has imposed a number of obligations on the bank to address identified violations and shortcomings: to develop an action plan to immediately address the irregularities identified in the inspections and continue work on changing the business model and reducing risk exposure rates of high-risk jurisdictions; to review the customer’s risk assessment scoring system and to carry out audits of customer base with increased ML/TPF risk.
Rietumu Banka is also obliged to perform an independent assessment of the effectiveness and compliance of the bank’s internal control system with the AML/CTPF regulatory requirements by the involvement of sworn auditors or commercial company of sworn auditors; after carrying out an assessment the bank should develop measures to comply with the recommendations of independent assessment.
The bank is also expected to comply with restrictions on attracting new high-risk customers of particular categories until the identified shortcomings have been rectified.
Rietumu Banka posted EUR 5.604 million in profit for the first quarter of 2021, down 18.7 percent year-on-year, according to information released by the bank. At the same time, the banking group’s profit rose 6.6 times to EUR 8.522 million.
At the end of 2020, Rietumu Banka was the fifth largest bank in Latvia by assets. The bank's main shareholders are Esterkin Family Investments (33.12 percent), Maltese company Boswell (International) Consulting Limited (33.11 percent), and Suharenko Family Investments (17.34 percent).