Meridian Trade Bank fined for credit risk 'internal deficiencies'

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Latvia's financial regulator, the Financial and Capital Market Commission (FKTK) said November 14 it was fining Meridian Trade Bank (formerly known as SMP Bank and before that as Multibanka) nearly 900,000 euros for "deficiencies in its internal control system."

"The Board of the Financial and Capital Market Commission decided to apply a fine of 889 651 euro to the Joint Stock Company "Meridian Trade Bank". The penalty on the JSC "Meridian Trade Bank" was imposed for a failure to ensure adequate internal control functions in the area of credit risk management, identified by FKTK," an announcement of the penalty said.

FKTK took into consideration the fact that the Bank had already undertaken actions to enhance effectiveness of its internal control system, and the fact that it had not been punished before for deficiencies in its internal control system, FKTK said.

In addition to the financial penalty, the regulator said it had "decided to impose legal obligations on the Bank, in order to prevent irregularities of a similar nature in the future and to eliminate deficiencies in the Bank's internal control system in the area of credit risk management."

In future Meridian Trade Bank will be obliged to submit to FKTK an action plan for addressing the infringements and deficiencies identified and to take the measures specified in the plan within the period prescribed, the regulator added.

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In a statement on its website, Meridian Trade Bank said:

"...the Bank has started and continues to take all necessary steps to remedy the deficiencies identified in the short term. The Bank, in compliance with the decision taken by the FCMC, will fulfil the FCMC guidelines to improve the internal control system. The fine imposed by the FCMC does not affect the daily operations of the Bank and customer service."

The action against Meridian is just the latest in a series of efforts to improve the checks and safeguards within Latvia's boutique banking sector, of which Meridian is a part. The regulator is trying to show that Latvia's reputation as an important hub in global money-laundering rackets no longer holds true.

SMP Bank changed to Meridian Trade Bank in 2014 after Russia's SMP sold its stake in the company to a group of Latvia-resident individuals when SMP was added to the US sanctions list. The largest shareholder is Mihail Ganev, owner of the Strek stevedoring company that operates in Riga port, who has a 27% stake in Meridian.

The head office is located in the historic center of Riga directly opposite the Latvian cabinet building. In 2011 the Bank opened a branch in Vilnius and customer service centers in Kaunas and Klaipeda. The Bank has also a representative office in Moscow.

Last week LSM reported on the establishment of a new Baltic chapter of the ACAMS anti-money laundering organization in Riga.

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