RIGA / Bloomberg
A Latvian lender linked to a string of money-laundering probes was closed by the European Central Bank (ECB).
Trasta Komercbanka AS, the Baltic nation’s 13th-biggest lender by assets, had its license revoked after local regulators slapped restrictions on it in January. Latvia’s Financial and Capital Market Commission, which doesn’t deem the bank systemically important, said the move followed “serious and sustained breaches of regulatory requirements in several areas for a long period.” It’s the first time money laundering is among the reasons for the ECB revoking a license.
Latvia, a haven for cash from the former Soviet Union that’s been racked by years of scandals over illicit funds, is facing growing pressure to improve oversight of its banks from US officials and the Organisation for Economic Cooperation and Development.
Banks in the Baltic country of 2 million people, a European Union and euro-region member, have become embroiled in cases that include bribes by a Scandinavian telecommunications company, a Russian tax fraud and the theft of $1 billion from Moldova.
“This is possibly the first time in Latvian history where we have reacted correctly, on time, and everything has happened correspondingly — not only with the law but the spirit of the law,” Latvian bank regulator Peters Putnins said in an interview.
“We find ourselves in front of significant changes, really a moment of regulatory-control changes,” he pointed out.
Trasta was implicated in 2014 in an investigation by the non-profit Organized Crime and Corruption Reporting Project into illicit transfers of as much as $20 billion from Russia.
It denied it broke any laws. The bank said in December that it was investigating two employees detained on suspicion of money laundering. It also denied wrongdoing in January when a board member who’s since resigned was implicated in illicit trades.
Trasta ignored a series of “warning shots,” the Baltic News Service cited Finance Minister Dana Reizniece-Ozola as saying. “A stable financial sector isn’t just a question of a healthy national economy, but also a question of the state’s international prestige and national security.”
The regulator said it’s seeking court approval for the bank’s liquidation.
Trasta has no comment on the ECB’s decision, and advised all questions be directed to the regulator, spokeswoman Elina Bikulca said by phone. Putnins said a temporary governor had been appointed at the lender and that deposit-insurance payouts of up to 100,000 euros ($110,000) will begin March 16.
Putnins’ predecessor resigned in January, weeks after lawmakers revealed that the US was seeking stricter supervision of transactions from the former Soviet Union. In response, the regulator is expanding its anti-money-laundering department and has brought in two US companies to examine compliance among non-resident banks, which account for more than half of the nation’s deposits, according to Putnins, who said results are due in June.
The traditional banking concept of ‘know your customer’ is out-of-date, he said.
“We’re moving toward ‘know your beneficiary’ — that’s a completely different level of control in the banks, a completely different level of transparency,” Putnins said. “Everyone has to just understand that it will be