RIGA - Ukrainian investors have purchased a majority stake in VEF Banka, a small Latvian financial institution that ran into trouble with U.S. regulators in 2005 for alleged poor oversight that had failed to prevent money laundering among its client accounts.
Juris Savickis, a former shareholder in VEF Banka, was quoted in the media as saying that he and other owners sold their stock to a group of Ukrainian businessmen. He refused to divulge the new shareholders' names.
"Now we are rich and happy people," Savickis said.
He told the Telegraf, a Russian language daily, that the stake fetched a good price and the negative affect on the value of the bank by the U.S. Treasury Department's blacklisting was minimal.
Valery Bulany, a Ukrainian citizen, has been appointed to the board of VEF Banka, according to reports. Previously Bulany worked as the executive director of National Standard, a Ukrainian bank.
After the deal, VEF Banka has become the third Latvian bank with Ukrainian capital.
Arvis Freibergs will continue to work as chairman of the board and Marija Kurkulite will also retain her seat, according to reports.
Savickis said that the deal was final and had received approval by the Finance and Capital Market Commission.
He opined that the restrictions on the bank imposed by the U.S. Treasury Financial Crime Enforcement Network could be lifted now that there has been a change of owners at the bank. This, in turn, would allow VEF Banka to renew its accounts with correspondent banks in the United States and other countries.
In April 2005 the U.S. Treasury Department announced that VEF Banka had been identified as a possible source of money laundering. Multibanka, another small Latvian bank, was also implicated in the investigation, and both banks saw their correspondent accounts in the United States promptly closed.
In July of the same year the department cleared Multibanka of money laundering suspicions but prohibited U.S. financial institutions from establishing, maintaining, administering or managing any correspondent account in the United States on behalf of VEF Banka.
VEF Banka's fate was sealed after that announcement, and the largest shareholders immediately began searching for a buyer. Freibergs said last November that a deal could be finalized within weeks.
The affect of the U.S. action on the bank's bottom line was profound. In fact, in the first half of 2007 VEF Banka was the only bank in Latvia to end the period with a loss, according to the Latvian Association of Commercial Banks.
The bank closed the first quarter with 191,700 lats (272,766 euros) in the red.
VEF Banka, with only 9.5 million lats in assets, ranks 22 among Latvia's 24 banks.
Previously the largest shareholders of the bank were Aleksejs Durandins and Savickis. Durandins owned 32.66 percent of the bank stock, while Savickis had 19.26 percent. The bank's registered capital is 4.2 million lats.
