On February 16, 2018, FinCEN issued a NPRM that set forth FinCEN’s findings of money laundering concern regarding Latvian bank ABLV, which promptly collapsed in the wake of the announcement and has spent the subsequent years undergoing a lengthy and at times controversial liquidation process..
FinCEN deemed ABLV to be a foreign financial institution of primary money laundering concern, but now that it has no banking license and has nearly completed its liquidation process, ABLV "no longer poses a threat to the U.S. financial system," according to text published by the U.S. embassy in Latvia.
Shortly after the Treasury took its action, the European Central Bank (ECB) determined that ABLV—as well as its subsidiary, ABLV Bank Luxembourg—was failing or likely to fail. The ECB subsequently withdrew ABLV’s banking license, and the Luxembourg subsidiary was ordered dissolved.
"The bank is in the advanced stage of an irrevocable liquidation process supervised by the Government of Latvia, which ensures anti-money laundering/countering terrorist financing (AML/CFT) compliance. Furthermore, Latvian authorities have undertaken significant efforts to identify and address past illicit activity facilitated by the bank, resulting in criminal charges against owners of the bank and its senior managers. As a result, FinCEN has determined that ABLV is no longer a financial institution of primary money laundering concern," said the FinCEN announcement.
The collapse of the once high-flying ABLV, which was the largest locally-owned bank in Latvia, had major ramifications and led to a wide-ranging clean-up of the entire financial sector as the urgent necessity of ridding Latvia of its reputation as a money laundering hub – particularly for money from Russia and Belarus – became painfully clear.
FinCEN acknowledged as much in its announcement today, saying:
"In parallel with targeted efforts relating to ABLV, FinCEN recognizes the notable progress made by the Government of Latvia to substantially strengthen its AML/CFT regime through a series of meaningful legal and regulatory reforms of its financial sector. These reforms have resulted in strengthened authorities, institutional capacity, and substantially reduced non-resident deposit activity in Latvia, a principal source of FinCEN’s money laundering concern at the time the NPRM was issued."
The U.S. embassy elaborated, adding:
"FinCEN’s announcement is only possible because of systemic improvements Latvia has made to its anti-money laundering and countering the financing of terrorism (AML/CFT) regime. These improvements have made Latvia’s financial system fundamentally more secure."
"Since 2018, Latvia has enacted far-reaching legal and regulatory reforms that reduced non-resident deposit activity – a principal source of money laundering concern – and strengthened AML/CFT authorities and institutional capacity. Throughout this process, the United States and Latvia have worked closely together, sharing technical assistance and knowledge to enhance the security of Latvia’s financial system."
The full text of the withdrawal can be found here.
