LATVIAN lender Rietumu Banka has been fined €5.85M after it failed to vet its clients for money laundering.
The fine on the bank, which mainly serves non-resident clients, arises from inspections in 2019 and 2020, according to the Latvian financial watchdog.
Latvian news agency LETA reported said Rietumu representatives will give a response once they had had time to look at the regulator’s decision.
“These were minor mistakes and shortcomings, therefore we are very surprised by the size of the fine,” a representative told the news agency.
AML Intelligence has contacted Rietumu for a comment.
Latvia’s Financial and Capital Market Commission (FCMC) carried out an onsite inspection at the bank in 2019, with subsequent inspections carried out to assess the bank’s compliance with AML/CFT regulations.
During these inspections, the FCMC “identified irregularities and deficiencies” relating to the bank’s internal control system and risk management, according to the Baltic Times.
The body concluded that the bank did not appropriately assess the risks associated with the activities of “payment service providers”, and in some cases the level of risks linked to customers was “lower than the actual risk level” presented.
The body concluded that there were “insufficient resources” at the bank dedicated to ML/CFT risks, and there had been a “lack of comprehensive internal audit inspections, incomplete internal regulatory framework in the field of AML/CFT and lack of customer due diligence quality control”.
Similarly, the FCMC identified “significant irregularities” in several customer due diligence and transaction monitoring processes, including a lack of “enhanced due diligence”, “identification of the origin of funds”, “sufficient customer transaction monitoring”, “beneficial ownership identification” and the “identification of shell corporations” to the country’s Financial Intelligence Service, in a timely manner.
The FCMC have also advised Rietumu Bank to alter its business model and reduce “risk exposure rates of high-risk jurisdictions”, develop an action plan, review its internal customer risk assessment scoring system and carry out further audits of its clientele for increased money laundering risks.
Rietumu Banka will also be obliged to “perform an independent assessment of the effectiveness and compliance of the bank’s internal control system” by external auditors.
The bank is no stranger to controversy, after it was fined an eye-watering €80 Million for its failures in its AML framework and alleged tax avoidance by a French court in 2017.
Although the fine was slashed to €20 Million earlier this year, the bank was barred from operating in France for five years.
The bank’s Chairman and President of the Board, Alexandre Pankov was also handed a suspended four-year prison sentence, after a Parisian court ruled the bank had enabled French clients to avoid paying taxes and launder €200 Million.
The bank said it “strongly disagreed” with the court’s decision and vowed to appeal, adding that “we have never been involved in the tax evasion and that neither the bank, nor its president personally had any interest in these actions”.
Rietumu Banka declared €5.6 Million in profits during the first quarter of 2021, down 18.7% on 2020.
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