RIGA - In the culmination of what was arguably the most dramatic money laundering scandal in the Baltics, the United States Department of the Treasury has cleared one Latvian bank and upheld its prohibitive regimen against another. The move is part of the department's ongoing campaign to root out the legalization of suspicious funds in the Baltics' banking system.
The Financial Crimes Enforcement Network, a branch of the Treasury Department, cleared Multibanka of money laundering suspicions, though it will continue to forbid U.S. financial institutions from "establishing, maintaining, administering, or managing any correspondent account on behalf of VEF Banka." The department has designated VEF Banka as an institution of "primary money laundering concern."
The U.S. Embassy said in a press release that "the decision to finalize the rule on VEF Banka was taken to safeguard the U.S. financial system from abuse."
"Both decisions were based on a lengthy review of the facts presented on the record," the press release said.
The unprecedented decision to blacklist the two banks last year caused a sensation in Latvia, though for years U.S. officials had warned Latvian regulators to crack down on money laundering. However, the perception in Washington, D.C. was that little was being done to combat the problem, and so the Treasury Department decided to act.
Latvia's banking system is the largest in the Baltics 's in both number of banks and assets 's and at one time was notorious for its willingness to cooperate with legal entities from Russia, Belarus and Ukraine.
"The two FinCEN actions taken today demonstrate case-by-case assessments of specific risks to the financial system and our discretion to take action based on those assessments to defend the U.S. financial system," Robert W. Werner, director of FinCEN, was quoted as saying on July 12.
The U.S. government has also noted significant progress by Latvia in efforts to combat financial crime and money laundering but to ensure proper protection of Latvia's financial sector, authorities will need to continue their efforts to effectively implement and enforce their strengthened anti-money laundering regime, said the press release.
"We are pleased to come to closure on this particular issue involving these two Latvian banks," U.S. Ambassador to Latvia Catherine Todd Bailey was quoted as saying. "We must continue to work together and remain vigilant against abuse of the Latvian and U.S. financial systems. We look forward to additional exchanges of information and training opportunities between our two governments."
The continued blacklisting of VEF Banka surprised bank officials given efforts the financial institution had taken over the year to tighten up its controls. The bank has revised its policies and procedures, closed approximately 600 questionable accounts and changed management, FinCEN said in its statement. Still, it was not considered to be enough.
"Despite the steps VEF Banka already has taken, we have continued concern with reported links between the bank's ownership and organized crime groups that are suspected of facilitating money laundering," said Werner.
VEF Banka Chairman Arvis Freibergs refused to comment on the decision as he had not yet been informed about it. He did say, though, that such statements were harmful to any bank and have had a certain effect on VEF Banka.
Multibanka Vice President Maija Treija told the Baltic News Service that she was happy about the decision as it cleared the bank of any suspicions. "This is good news," she said.
Multibanka and VEF Banka are now the smallest banks in Latvia in terms of assets. Before the U.S. announcement on money laundering suspicions, released in April 2005, Multibanka ranked 15th among 23 banks in Latvia and VEF Banka was in 20th place at the end of March 2005.
Still, the damage for Multibanka has been done. Vladimirs Solomatins, one of the bank's owners, confirmed this week that the bank was up for sale.
He refused to identify potential buyers and give any detailed comments on the planned transaction, saying that it still had to be approved by the financial watchdog and an application will be filed with the Financial and Capital Market Commission soon to get its permission.
Multibanka's current shareholders are individuals 's Jurijs Simanenkovs, Vladimirs Solomatins and Irina Simanenkova.
VEF Banka's largest owners are Aleksejs Durandins and Juris Savickis.