ECB Freezes All Payments by Latvia Bank Amid U.S. Probe -- 5th Update
February 19 2018 - 3:21PM
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 had launched criminal
proceedings against the country's central-bank governor, Ilmars
Rimsevics, on suspicion of soliciting and accepting a bribe worth
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, but won't be
allowed to continue his previous duties, the anti-graft agency said
in a statement. A spokeswoman said the case wasn't related to any
credit institution currently operating in Latvia.
In a related development, Latvian state police said Monday they
had launched a criminal investigation into a complaint a
high-ranking official in Latvia's financial sector had extorted
bribes from a Russian businessman, Grigory Guselnikov. The Latvian
official wasn't named. The probe was announced by state police at a
joint news conference with the anticorruption agency, where details
of the probe into Mr. Rimšēvičs were revealed.
Mr. Guselnikov is the largest shareholder of AS Norvik Banka, a
Latvian lender that lodged a request for arbitration against Latvia
with a World Bank division in December. The bank complained of
"unfair, arbitrary, improperly motivated and unreasonable
regulatory treatment accorded to the Bank by the Latvian
authorities."
Mr. Rimšēvičs didn't respond to a request for comment.
Prime Minister Maris Kucinskis convened a two-hour meeting of
cabinet ministers on Monday to discuss the two cases. He suggested
after the meeting that Mr. Rimšēvičs should step down, at least
while the investigation is going on, according to local news agency
Leta. The country's finance minister, Dana Reizniece-Ozola, made a
similar suggestion Sunday.
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.
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.
ABLV said on Monday that it is "fully engaged with U.S. and
Latvian regulators," and committed "to address the issues raised in
the proposed order as quickly as possible."
"ABLV believes that the issues outlined in the order are
inaccurate in important respects and looks forward to working
quickly and cooperatively with U.S. regulators to resolve their
concerns," a spokesman said in an emailed statement.
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.
Mr. Rimsevics's duties will be carried out by his deputy in his
absence, the central bank said Sunday. It declined to comment on
the investigation into the governor but said it wouldn't interfere
with the bank's operations. The ECB declined to comment on Mr.
Rimšēvičs' 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.
--
Samuel Rubenfeld
contributed to this article.
Write to Tom Fairless at tom.fairless@wsj.com
(END) Dow Jones Newswires
February 19, 2018 15:06 ET (20:06 GMT)
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