Latvia secures US help to clean up its scandal-tainted banks

Bloomberg

Latvia’s financial investigators will receive more US help as the Baltic nation races to emerge from a money-laundering scandal that toppled its third-largest lender.
Finance Minister Dana Reizniece-Ozola has agreed technical assistance from the US Treasury Department for the country’s financial intelligence unit following her meetings with US officials in Washington. She doesn’t expect other Latvian institutions to follow the fate of ABLV Bank AS, which the US Treasury proposed barring from the American financial system in February, and was forced into liquidation by European authorities.
“Our meetings with Treasury officials went well,” Reizniece-Ozola said in an interview on the sidelines of the IMF’s spring meetings in Washington. “We know our homework, we know what needs to be done.”
The downfall of ABLV has exposed how Latvia, a European Union and euro-area nation of 2 million people, has for years attracted cash from the former Soviet Union. It also comes as the government seeks re-election in October. In a bid to salvage its image, Latvia is pushing a law to ban shell companies and forcing lenders to close accounts with risky customers. Foreign Minister Edgars Rinkevics also said last week the Baltic nation is pursuing more leads from the US concerning other institutions, but declined to give any details.

TREASURY’S BAN
ABLV’s demise was sparked by the US Treasury’s proposal in February to bar the bank from the American financial system under the Patriot Act’s section 311. The lender, which denies wrongdoing and is planning its own liquidation, is disputing the Treasury’s findings to avoid the rule becoming permanent.
“We are not expecting another 311 coming — that’s what we are trying to do,” Reizniece-Ozola said. “Even before the law on shell companies is passed, banks are already closing accounts, trying to restructure their operations while other banks beside ABLV see 311 as a red card to their operations.”
ABLV was the third Latvian bank the US has proposed to ban from the American financial system since the Treasury Department was given authority to do so in 2001. Reizniece-Ozola said the clean-up is already paying off as non-resident accounts continue to decline rapidly. “So far the dynamic is satisfactory and we’ve just informed the US on our activities,” she said. “We’re going to have a special finance attorney coming to Latvia so we can have the exact exchange of information, but nevertheless the exchange has already been happening before.”