Latvian bank fined €2 million for ‘serious’ anti-money laundering, terror funding breaches
25 Oct 2018

The Financial and Capital Market Commission (FCMC) of Latvia has fined JSC ‘LPB’ Bank 2.2 million euros for breaching anti-money laundering and counter terrorist financing (AML/CFT) rules, after it uncovered a number of significant deficiencies.

The FCMC said it carried out an on-site inspection and off-site target inspections of the bank, examining customer transactions conducted up to 28 August 2018.

“The FCMC has repeatedly found out several breaches indicating to serious deficiencies in the Bank’s internal control system in the AML/CTF field, as they have been detected in the most essential supervisory elements regarding customer due diligence and transaction monitoring,” the regulator explained.

Issues that were of concern included a lack of clarity around beneficial ownership, poor customer due diligence issues and transaction monitoring. The FCMC statement read (direct quote):

“The Bank had failed to set up its internal control system appropriate to operational risks that would ensure efficient compliance with regulatory provisions, for example:

– the Bank failed to document the manner how the beneficiary of customer exercised utmost control over the company and benefitted from the economic activities of the customer;

– the Bank failed to timely obtain documents to verify the origin of the funds in the customer accounts, and whether the transaction volumes were proportionate to the amount of the funds received in the account;

– the Bank failed to timely ensure customer due diligence and documentation of results, as well as conclusions in the customer cases were incomplete;

– the Bank failed to document a reasoned judgement regarding the activities of a group of connected clients, including legal and economic substance of intra-group transactions;
 

– the Bank failed to give sufficient weight to the unusually large, complex, inter-related transactions that have no apparent economic or visible lawful purpose, as well as failed to assess transactions with major cooperation partners and adequately document conclusions of due diligence, failed to timely obtain documents supporting customer business activities, failed to assess compliance of the business activities with the declared activities.”

The FCMC has previously imposed sanctions on the bank, formerly known as ‘Latvijas pasta banka,’ for breaching AML/CFT rules as well as deficiencies in its internal control system.

FCMC Chairman Peters Putnins said: “Of course, it annoys us as a banking regulator that irregularities detected in the Bank have been already identified on several occasions and this has been continuous non-compliance, therefore the penalty is adequate to what we have established.”

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