Latvian Banks Warned to Improve Their AML Systems or Face Sanctions

Latvia and its banks have been warned by Finance Minister Dana Reizniece-Ozola, that they are at risk from being sanctioned by the US if they fail to prove their ability to uncover and prevent financial crimes such as money laundering.  These warnings come after US partners expressed to the Latvian government that they strongly believe Latvian Banks are still laundering money even after the collapse of ABLV Bank last month shortly after it was sanctioned by the US.  Reizniece-Ozola stated “If we’re unable to prove, in a short period of time, that we’re able to counter financial crimes-firstly, to identify them, and lead [investigations] to fines and charges…then there may be graver consequences. But I hope it doesn’t come to that.”  

Latvia’s weak compliance systems could be due to the deficiencies of its regulators including the Financial and Capital Markets Commission (FKTK) and the anti-money laundering office, which is currently looking for a new director.  Before being assigned a new director, the FKTK’s work was primarily ineffective but, according to Reizniece-Ozola, a “positive dynamic” was shown over the past 2 years after a new head of the FKTK was appointed.

In a meeting between Reizniece-Ozola and the US Department of Treasury Assistant Secretary for Terrorist Financing, Marshall Billingslea, to discuss Latvia’s cooperation with the US regarding its financial troubles, US partners said that Latvian banks are still carrying out transfers to individuals, companies, and countries which have been sanctioned.  Although no evidence was provided of these claims, Reizniece-Ozola added that it was apparent that these types of problems are still persisting.  At the conclusion of the meeting, Latvia and the US came to the agreement that Latvian banks need to cut down on the amount of services they provide to non-residents. The US partners also expressed their support for the Latvian government and the FKTK to make the necessary adjustments.  While a specific time frame was not given, the changes must be made as soon as possible in order to avoid any further issues.  In order to avoid being sanctioned, Reizniece-Ozola says that regulators need to adhere to stricter policies and that banks must “change their business methods or fold.”


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