ECB Freezes All Payments by Latvia Bank Amid U.S. Probe -- 3rd Update
February 19 2018 - 10:36AM
Dow Jones News
By Tom Fairless
The European Central Bank has frozen all payments by a Latvian
bank, following accusations by the U.S. administration that the
small bank laundered billions in illicit funds, including for
companies connected to North Korea's banned ballistic-missile
program.
The ECB--which supervises the Latvian lender, ABLV Bank,
directly from Frankfurt--said it had imposed the moratorium
following "a sharp deterioration of the bank's financial position"
since the U.S. proposed sanctioning the lender on Feb. 13.
In a separate blow for the Baltic nation's financial sector,
Latvia's anticorruption agency said Monday it suspected the
country's central-bank governor Ilmars Rimšēvičs of accepting a
bribe of more than EUR100,000.
Mr. Rimšēvičs, who sits on the ECB's 25-member governing
council, was detained by the agency over the weekend, but he is
expected to be released on bail on Monday evening, according to a
spokeswoman for the antigraft agency. She said the case wasn't
related to any credit institution currently operating in
Latvia.
ABLV, Latvia's third-largest lender by assets, is based in Riga
but has an office in Luxembourg and a subsidiary in the U.S. It is
supervised directly by the ECB under a new system of eurozone bank
supervision introduced during the region's recent financial crisis,
under which national authorities remain responsible for enforcing
money-laundering laws.
Latvia's Financial and Capital Markets Commission, which is
responsible for policing corruption in the country's financial
sector, said on Monday it was cooperating with the ECB. In a
statement last week, the supervisor's chairman Pēters Putni š said
it had carried out "significant remedial work" on ABLV over the
last two years, demanding that the bank improve its internal
control systems and imposing large fines for breaching its rules .
Mr. Putnins suggested the current U.S. interest in the bank was
related to a "historical legacy" of problems.
The bank was charged last week by the Treasury Department with
having "institutionalized money laundering as a pillar of the
bank's business practices," according to a government statement,
which proposed preventing the bank from opening an account in the
U.S.
That decision made ABLV a pariah to other financial
institutions, effectively cutting its access to the dollar and
funding flows from the world's most important market.
In proposing the ban on ABLV, the Treasury said the bank managed
transactions for clients connected to several long-sanctioned North
Korean firms. These include North Korea's Foreign Trade Bank, the
institution that manages Pyongyang's foreign-currency earnings,
revenue that U.S. and United Nations officials say go directly to
North Korea's nuclear and missile programs.
ABLV's illegal activity also included funneling billions of
dollars in public corruption proceeds from Azerbaijan, Russia and
Ukraine through shell company accounts, the Treasury said.
On Thursday ABLV said in a statement that the allegations are
based on assumptions and information unavailable to the bank. The
bank said it has contacted officials at the Treasury Department to
start negotiations and provide any information at its disposal to
correct the record.
"We have always been, and always will be, open to cooperation
with U.S. authorities, and are ready to provide any necessary
information and open unlimited access to the bank's information for
the officials of the U.S. Department of the Treasury, including
conducting inspections," the statement said.
Latvia's central bank said Monday it had extended a loan of
EUR97.5 million ($121 million) to ABLV following a request by the
bank. The loan was granted against high-quality securities that
exceeded the amount of the loan, and state resources weren't used,
the central bank said.
Latvia's central bank declined to comment on the investigation
into Mr. Rimsevics but said it wouldn't interfere with the bank's
operations. The ECB declined to comment on Mr. Rimsevics'
detention.
Latvian President Raimonds Vejonis said on Twitter Sunday that
the situation in the Latvian bank sector would be reviewed by the
country's National Security Council this week. Prime Minister Maris
Kucinskis said he would convene an extraordinary cabinet meeting on
Monday to discuss the detention of Mr. Rimsevics.
Samuel Rubenfeld
contributed to this article.
Write to Tom Fairless at tom.fairless@wsj.com
(END) Dow Jones Newswires
February 19, 2018 10:21 ET (15:21 GMT)
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