Financial regulator agrees million-euro fine with Latvia's BlueOrange bank

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Latvia's financial regulator, the Financial and Capital Market Commission (FKTK) announced a substantial fine December 21 against another of the country's banks.

However, rather than being a simple case of enforced penalty followed by payment, FKTK said the fine formed part of "an administrative agreement on setting legal obligations under the scope of the Law on the Prevention of Money Laundering and Terrorism Financing (NILLTFN Law) in order to improve the functioning of the Bank's internal control system. The agreement provides for a fine of 1 246 798 euro on the Bank."

The agreement was reached after violations were detected in 2016 and 2017 during which the bank failed to comply with the NILLTFN Law standards.

Furthermore the bank "has not paid enough and special attention to interconnected transactions that seem to have no economic purpose, and have not ensured timely and quality customer due diligence."

"In the opinion of FKTK, the Bank's violations are considered to be significant, and the Bank has previously been convicted of violations in the NILLTFN area," a FKTK statement said.

In an attempt to show how the punishment has been ramped up in recent years, FKTK also pointed out that in the 11 years from 2003-14, a total of 55 sanctions had been applied, which included fines that totaled just 1.2 million euros.

In contrast, the years 2014-18 have seen 22 sanctions including fines worth nearly 16 million euros.

"Risk reduction has been a priority in the banking supervision process this year. Since the beginning of the year, the situation in the Latvian banking sector has changed dramatically," said FKTK chairman Pēters Putniņš.

Yet just last week, U.S. ambassador Nancy Bikoff Pettit described the sanctions applied so far as "paltry" in a call for Latvia to get tough on corruption, highlighting the huge problems caused by money laundering in the boutique banking sector.

BlueOrange  could in theory have been fined up to 10% of its annual turnover, or 3.69 million euros. 

The bank played down the seriousness of the fine saying on its website: "The discrepancies found by FKTK in no way indicate possible unlawful actions of any customers of the Bank. The main observations made by the FKTK refer to the monitoring of transactions of international clients for the period until 2017, and which were identified during the planned audit conducted by the FCMC last year.

"Over the past year, the Bank has eliminated all major shortcomings," it asserted, even adding that "Over the past year, the Bank has supported the national economy by providing loans worth more than 100 million euros."

Formerly known as Baltikums bank, the bank was fined €35,000 in June 2017 for failures linked to North Korea's missile program as reported by LSM.

It is alleged to have been one of the main banks involved in the so-called Russian Laudromat scheme, along with Trasta bank, ABLV and other Latvian banks.

Baltikums also featured in a scandal involving payments to an Italian MEP by the government of Azerbaijan.

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