Thursday, 26 September, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury published a statement withdrawing the draft decision of 16 February 2018 against joint-stock company ABLV Bank. In the statement, FinCEN confirms that its concerns about ABLV Bank in 2018 were justified while concluding that the comprehensive measures taken by the Latvian government and competent authorities to address the threat to the international financial system posed by ABLV Bank’s activities have been effective.
Latvia has taken decisive steps to prevent further or recurrent disruptive effects of ABLV Bank’s activities on Latvia’s national reputation and financial system and to bring to justice those accused of criminal offences. The State has also acted responsibly to prevent the abuse and criminal exploitation of Latvia, its financial market participants and clients by introducing multifaceted, targeted and irreversible reforms in anti-money laundering policy, regulatory requirements and the independence and cooperation capacity of competent authorities.
Latvia is pleased that the FinCEN statement reinforces confidence in Latvia as a country governed by the rule of law, whose responsible authorities prevent the entrenchment of criminal interests in our country, strengthen confidence in the integrity and security of Latvia’s financial system, and promote interest in Latvia among honest investors and international partners, thereby enhancing the country’s competitiveness. We will continue to work with the European Union (EU) and global partners to identify existing and emerging risks early and take action to address their negative impacts.
The FinCEN’s 2018 draft decision was published to address immediate risks to the international financial system, particularly concerning US dollar transactions, by informing the wider public. The publication of the draft decision also triggered a process whereby the identified owners and management of ABLV Bank could respond to the allegations made against it in the draft decision by voluntarily cooperating with FinCEN investigators in obtaining further information, thereby confirming or mitigating the concerns of US authorities about the risks posed by ABLV Bank’s activities.
Following FinCEN’s findings that ABLV Bank’s business practices are a pillar of the commission and facilitation of serious financial crime, the Latvian competent authorities have carried out and continue to carry out independent investigations to establish the facts and obtain evidence. Given the scale, applied methods and international scope of ABLV Bank’s multi-layered money laundering activities through bank accounts, Latvia cooperated with several foreign supervisory authorities, Financial Intelligence Units and law enforcement agencies.
This unprecedented scale and scope of work by Latvian and international competent authorities has resulted in the suspension of ABLV Bank’s activities and the conduct of a controlled self-liquidation process, with the cancellation of the credit institution’s licence on 11 July 2018. In June 2023, based on an independently prepared and filed indictment by the Latvian Prosecutor General’s Office, proceedings were initiated by the Economic Court against the shareholders and management of ABLV Bank for money laundering of €2.1 billion in criminal assets. In parallel, several criminal cases against ABLV Bank employees and creditors (customers) are being tried for money laundering. New charges are being prepared based on successful investigations by Latvian law enforcement authorities.
Irrespective of the work of the competent authorities, the FinCEN draft decision was also one of the stimuli for a critical review of the country’s policy and regulatory framework to align it with Latvia’s security, development and strategic cooperation objectives in the medium and long term. The resulting reform process or “overhaul” not only ensured that Latvia was not included in the FATF (the international standard-setter in the fight against money laundering and terrorist financing) “grey list” but also, through enhanced international cooperation, far-sightedly prevented Russia and other pro-Russian or unfriendly countries from exercising their criminal and corrupting influence by using Latvia and its financial system as a staging ground. The International Monetary Fund estimates that the cost to FATF-listed countries is at least 1.4% of GDP annually in lost investment and increased costs, not including reputational damage.
Latvia has delivered over the last seven years:
- The necessary approximation to international standards in risk management and efficient fight against money laundering and other corruption-related crimes;
- One of the best financial supervisory practices in the EU and the Baltic-Nordic region;
- Strengthening the quality and efficiency of financial intelligence and investigations into economic and corruption crime;
- A new level of dialogue between the supervisory and financial market participants and the introduction of a risk-based approach;
- Reducing the regulatory burden and developing guidelines, recommendations and the collection and publication of good practice examples in cooperation with industry;
- A bank previously focused on servicing foreign clients, changing its business model and introducing risk-appropriate internal control systems;
- The creation of an innovative public-private partnership between the banking sector, financial intelligence, supervisory and law enforcement authorities to share operational information, including on acute risks and crime typologies;
- The readiness of the subjects of the law, including the financial sector, to move immediately to a harmonised EU-level framework without significant capital investments to adapt their activities, given that a substantial part of the EU framework was also modelled on Latvia’s good example.
ABLV Bank’s winding-up has been conducted in a controlled self-liquidation process consistent with international practice. A specially developed creditor screening methodology allowed supervisors to verify the origin of the bank’s funds, if necessary by submitting the information to law enforcement authorities. Based on information obtained during the self-liquidation process, criminal proceedings have also been initiated against ABLV Bank’s senior management and shareholders for money laundering of €2.1 billion. A total of eight people are charged with large-scale money laundering in an organised group. The case is currently being heard.
The FinCEN draft decision was published in February 2018 based on Section 311 of the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act) Act of 2001”, which provides for special measures for jurisdictions, financial institutions or international transactions of primary money laundering concern. Under Special Measure 5 of Section 311 of the Act, the FinCEN draft decision prohibited US financial institutions from directly or indirectly opening and maintaining a correspondent account for the joint-stock company ABLV Bank in the USA.