ECB Freezes All Payments by Latvia Bank Amid U.S. Probe -- 5th Update
February 19 2018 - 05:18PM
Dow Jones News
By Tom Fairless
The European Central Bank has frozen all payments by a Latvian
bank, following U.S. accusations that the small institution
laundered billions in illicit funds, including for companies
connected to North Korea's banned ballistic-missile program.
The ECB -- which supervises 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 on Monday said it had launched
criminal proceedings against the country's central-bank governor,
Ilmars Rimšēvičs, on suspicion of soliciting and accepting a bribe
of more than EUR100,000 ($124,090).
Mr. Rimšēvičs, who sits on the ECB's 25-member governing
council, was detained by the agency over the weekend. State
television showed him walking free on Monday evening, but he won't
be allowed to continue his previous duties, the antigraft agency
said. A spokeswoman said the case wasn't related to any credit
institution currently operating in Latvia.
In a related development, Latvian state police on Monday said
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. State police announced the probe at a joint
press 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, local news agency Leta
reported. The country's finance minister, Dana Reizniece-Ozola,
made a similar suggestion on 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," the government said, 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, 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 alleged illegal activity also included funneling billions
of dollars in public corruption proceeds from Azerbaijan, Russia
and Ukraine through shell company accounts, 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 on Monday said it had extended a loan of
EUR97.5 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 on Sunday
that the country's National Security Council would review the
situation in the Latvian bank sector this week.
--Samuel Rubenfeld contributed to this article.
Write to Tom Fairless at tom.fairless@wsj.com
(END) Dow Jones Newswires
February 19, 2018 17:03 ET (22:03 GMT)
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