UPDATE 1 (2018-2-19): According to the AFP:
The European Central Bank said Monday it has frozen payments by the third-largest bank in tiny Baltic state Latvia, as its finances have deteriorated in the wake of money laundering allegations from Washington.
“Temporarily, and until further notice, a prohibition of all payments by ABLV bank on its financial liabilities has been imposed, and is now in effect,” the ECB said in a statement.
It is the first time the ECB has used its power to impose a moratorium since taking on eurozone-wide banking supervision responsibilities in 2014.
The US Department of the Treasury last week named ABLV “an institution of primary money laundering concern” and accused it of connections to North Korea’s weapons development programme.
ABLV’s financial position, which had previously been stable, has rapidly deteriorated since as it found its access to the financial system cut off, even threatening the bank’s survival.
In late September 2017, the bank’s balance sheet stood at around 3.6 billion euros ($4.5 billion), with 1.0 billion euros of loans and 2.7 billion in deposits.
Just two days before the ECB’s moratorium, Latvian supervisor FCMC issued a statement saying the bank’s capital and liquidity ratios — key indicators of a bank’s financial health — were in good shape.
The ECB decision on Monday comes after Latvian central bank governor Ilmars Rimsevics, who sits on the ECB governing council, was arrested Saturday by the country’s Corruption Prevention Bureau (KNAB).
A source familiar with the case told AFP there was no connection between the ABLV case and the governor’s arrest.
ORIGINAL POST (2018-2-14): According to the FinCEN press release:
FinCEN Finds the Bank Orchestrates Money Laundering Schemes, Obstructs Regulatory Enforcement, and Has Conducted Activity Linked to North Korea
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) today issued a finding and notice of proposed rulemaking (NPRM), pursuant to Section 311 of the USA PATRIOT Act, seeking to prohibit the opening or maintaining of a correspondent account in the United States for, or on behalf of, ABLV Bank. FinCEN is proposing this action based on its finding set out in the NPRM that ABLV is a foreign bank of primary money laundering concern.
“FinCEN will continue to take action against foreign banks that disregard anti-money laundering safeguards and become conduits for widespread illicit activity,” said Steven T. Mnuchin, Secretary of the Treasury. “Deficient practices at banks foster a wide array of illicit conduct, including activity linked to North Korea’s weapons program and corruption connected to Russia and Ukraine. FinCEN is committed to protecting the U.S. financial system from these types of risks.”
As described in the finding, ABLV has institutionalized money laundering as a pillar of the bank’s business practices. ABLV’s management permits the bank and its employees to orchestrate money laundering schemes; solicits high-risk shell company activity that enables the bank and its customers to launder funds; maintains inadequate controls over high-risk shell company accounts; and seeks to obstruct enforcement of Latvian anti-money laundering and combating the financing of terrorism (AML/CFT) rules in order to protect these business practices.
ABLV’s failure to implement, and disregard for, effective AML/CFT and sanctions policies and procedures have made the bank attractive to a range of illicit actors engaged in organized crime, weapons proliferation, corruption, and sanctions evasion. Illicit financial activity at the bank includes transactions for parties connected to UN-designated entities, some of which are involved in North Korea’s procurement or export of ballistic missiles. In addition, ABLV has facilitated transactions for corrupt politically exposed persons and has funneled billions of dollars in public corruption and asset stripping proceeds through shell company accounts. ABLV failed to mitigate the risk stemming from these accounts, which involved large-scale illicit activity connected to Azerbaijan, Russia, and Ukraine.
Section 311 actions alert the U.S. financial sector to foreign institutions, such as ABLV, that are of primary concern and through the public rulemaking process, if necessary, cut them off from the U.S. financial sector.
Here is coverage in the Korea Herald:
Last year, an investigation by the US Federal Bureau of Investigation and Treasury found that five other Latvian banks, which mainly serve nonresident clients, violated the United Nations Security Council’s sanctions against North Korea and rules on anti-money laundering and the financing of terrorism.
Latvia’s Financial and Capital Market Commission confirmed the banks’ illicit activity and assigned it financial penalties totaling 3.5 million euros ($4.3 million).
It is the third time the US government has imposed sanctions against a foreign bank for dealing with North Korea.
In 2005, Macau-based Banco Delta Asia had some $25 million in North Korean funds frozen under US sanctions, as 24 companies including Chinese banks stopped dealing with the North, putting Pyongyang under severe financial strain. The US also blacklisted China’s Bank of Dandong in June last year for laundering money for North Korea.
“We have made clear to countries and companies around the world that they can choose to trade with North Korea or the United States, but not both,” the US Treasury’s Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said in an anti-money laundering and financial crimes conference in New York on Tuesday.
“We will target not only companies that actually know they are being exploited, but also those that should know. We are resolved that anyone who knowingly aids North Korea faces being cut off from the US financial system.”
Read the full story here:
Latvian bank faces US sanctions for dealing with NK
Kim So-hyun
Korea Herald
2018-2-14
