RIGA – The Latvian Finance and Capital Market Commission (FCMC) has fined Norvik Banka with EUR 1.3 million and Rietumu Banka with EUR 1.56 million for violations, the commission reported.
FCMC in collaboration with the Federal Bureau of Investigation’s (FBI) Counterproliferation Center has identified Latvian banks, Norvik Banka and Rietumu Banka which had not complied with the provisions of anti-money laundering and counter terrorist financing (AML/CTF) regulatory framework.
Violations relate to customer due diligence, including also transaction monitoring and obtaining insufficient information about the beneficiaries indicated by the customers and transactions performed.
Norvik Banka in the period from 2013 to 2014 and Rietumu Banka from 2009 to 2015, several customers of those banks, making use of off-shore companies and complicated chain transactions, transferred the funds from their bank accounts, to circumvent international sanctions requirements imposed against North Korea.
Norvik Banka has been fined with EUR 1,324,667, Rietumu Banka has been fined with EUR 1,566,604, and both banks have an obligation to assess their AML/CTF internal control system and take the necessary measures to improve their functioning and effectiveness in line with the action plan, to perform external testing by external audit company.
Both mentioned banks are cooperating with the FCMC and have admitted the identified weaknesses. FCMC has entered into administrative agreements with the banks that most effectively enable the banks to ensure taking immediate measures, and to act in line with the procedures defined in laws and regulations. Conditions of the agreements stipulate that the banks pay the monetary fine in the total amount of EUR 2,891,271 into the national budget.
The monetary fine has been calculated by taking into account detected violations in targeted inspections and also planned onsite inspections. FCMC will monitor the fulfilment of the banks’ commitments under the predefined time schedules and scope. The banks are committed to improving the AML/CTF internal control systems and ensuring external testing, and other measures.
FCMC detected similar violations of circumventing international sanctions requirements in three other banks in Latvia. At the end of June this year the FCMC entered into administrative agreements that stipulates banks pay the monetary fine. The FCMC also publicly disclosed the findings and provided comprehensive information.
"Cross-border cooperation offers to the FCMC more opportunities to investigate in depth such complicated cases as the circumvention of sanctions against North Korea. I would also like to thank U.S. Department of Treasury’s Financial Crimes Enforcement (FinCEN) and FBI for cooperation. The measures taken in this case is a lesson to all the banks in Latvia not to be used for suspicious deals. The banks have to reassess their AML/CTF internal control systems as well as ensure international sanctions compliance accordingly to global risks. Today’s announcement confirms that Latvia is a stable and safe jurisdiction and only with such countries that sort of cooperation is possible,” said FCMC Chairman Peters Putnins.
In addition to targeted inspections about mentioned transactions of circumventing international sanctions requirements in Norvik Banka and Rietumu Banka, the FCMC also carried out the planned onsite inspections. They covered a broader scope of banks' internal control programs. The FCMC identified that Norvik Banka and Rietumu Banka failed to ensure effective functioning internal control system to the exposed risks of their operations.
As reported, at the end of June FCMC slapped fines totaling EUR 641,514 on three Latvian banks - Regionala Investiciju Banka, Baltikums Bank and Privatbank - for non-compliance with the anti-money laundering and counter terrorist financing (AML/CTF) regulations.