11 Mar 2018
Latvia will invest more in monitoring banks as it overhauls financial controls, Prime Minister Maris Kucinskis told Reuters, after the United States accused one of its biggest banks of money-laundering and breaching sanctions on North Korea.
He said a levy on financial transactions by shell companies, which often disguise account holders, was one of many options discussed by ministers this week.
Their widespread use and the presence of more than 10 banks that take deposits from customers in Russia and other fellow ex-Soviet states has led the United States and others to accuse euro zone member Latvia of allowing money laundering. Washington has issued repeated warnings to Latvia to reform.
“Our ultimate goal is to eradicate any suspicious transactions. We don’t want the banks who are just using Latvia or its vulnerabilities to make money,” Kucinskis said in an interview.
“This is definitely not the future we have envisaged for ourselves. We definitely do not want to become the Switzerland of the EU. When it comes to shell companies, the dangers outweigh the benefits.”
When Latvia regained its independence in 1991, some banks promoted themselves to Russians as a gateway to western financial markets, promising secrecy surrounding the identity of clients similar to that in Switzerland at the time.
In one television advert of that time, a boy enters a bank branch with a small sack of money, asking the banker if he will “tell his mother”. The banker shakes his head.
Many banks taking foreign deposits did not deal with the customer directly but with shell companies, where it was difficult to prove who the owner was. Latvian bankers say controls are now tighter although critics believe such structures still allow money laundering to take place.
Last month, U.S. authorities alleged that the country’s third-largest bank, ABLV, had engaged in money laundering and broken sanctions on North Korea. The accusations effectively froze ABLV out of U.S. dollar financial markets, prompting its closure and hurting some local peers.
ABLV has denied wrongdoing.
“We have to introduce additional controls,” Kucinskis said in the interview. “This will mean a restructuring and capacity building. We are going to audit the whole system.”
On Thursday, Marshall Billingslea, who leads the Office of Terrorist Financing and Financial Crimes at the U.S. Treasury, will visit Riga for meetings with some top Latvian officials.
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